The Facts About As-Is Home Purchase Contracts

As-Is home purchase contracts differ depending on who drafts them. A Realtor's contract may be significantly different from one an attorney writes. However, the as-is provisions are likely very similar. The majority of as-Is contracts favor the seller by shifting the entire responsibility for paying some fees and potential costs to the buyer. Does this mean a buyer should refuse to submit an as-Is contract if requested by the seller?


The answer to that question is "it depends." If it's a seller's market with few available listings, sellers can make any demand they wish. No matter what conditions they set, there will be a host of potential buyers lining up to make an offer. People have to live somewhere, and if there's not much to choose from, they will take what they can get.


A buyer's market has the opposite dynamics. When there's a large inventory of available homes, buyers call the shots. If they don't like a particular seller's demands, they can move on. Sellers know this and may not be as willing to require an as-is offer.


The most significant difference between the two contracts involves determining which party pays for repairs and building permits. Repairs might include items such as replacing appliances or fixing a broken window. There may also be a separate section covering the cost of repairs for damage caused by wood-destroying organisms such as termites. In an As-Is contract, the buyer pays for both types of repairs and the cost of opening and closing permits. A standard contract allows the buyer to include a seller-paid maximum dollar amount or percentage of the estimated costs to resolve repair and permit issues. Of course, anything is negotiable. The seller can present a counteroffer with a lesser amount for stated repairs, including $0.00 in seller contributions.


One common misconception among buyers is that an as-is contract doesn't allow home inspections. This shouldn't be true. If it is, find another attorney if you're using a customized document and not a Realtor form. As-is buyers should be entitled to have a home inspection and to cancel the offer for any reason within a specified timeframe. An as-is offer shouldn't bind them to purchase a house that needs repairs. It should state that if repairs are necessary, they are the buyer's responsibility.


Don't be afraid of signing an as-is contract. In fact, you should expect that requirement in a seller's market. Offer a price that takes into account the amount that you'd expect to pay for repairs after your initial visit. If the home inspection uncovers unexpected expensive damage, let the seller know, and you might be able to work something out. If not, cancel the contract within the allowable timeframe.