|Fall Real Estate 2003
Publication Date: Wednesday, October 8, 2003
Know what you're buying
by Nisha Ramachandran
Julie Nelson-Gal and her family were looking for a place in Palo
Alto, they found a house that needed a new foundation. The estimated
repair cost? $50,000.
They still bid on the property.
While many prospective buyers are wary of houses that are in need
of extensive repairs, Nelson-Gal was looking to renovate. "We
wanted an old, beat-up house that we could fix up," she
said. And since the seller was offering the house "as is," it
was the perfect find for the Nelson-Gals.
In an "as is" transaction, a buyer agrees to purchase
a house in its present condition, relieving the seller of any responsibility
repairs or modifications to the property. But even when it is advantageous
to the buyer
and seller to make such a deal, both parties still need to be cautious
about the terms of the transaction.
"The whole point of an 'as is' sale is that the seller wants nothing to
do with rehabilitation of the home," said Coldwell Banker real estate
agent Zach Trailer.
Although sellers have no obligation to fix defects in an "as is" sale,
they are still obligated to disclose any defects they know about the
"The most important thing to know about 'as is' sales is that it doesn't
mean you get to conceal defects," Palo Alto real estate attorney Peter Brewer
said. "A seller is not relieved from the same requirements of
disclosure required in any other transaction."
According to Brewer, "a buyer who buys 'as is' has legal recourse only if
they can demonstrate that the seller had prior knowledge of the defect." That
means that if a buyer finds something wrong with the property after
the transaction is complete but the seller was not aware of the
hold the seller responsible.
Sellers can protect themselves from lawsuits by releasing any information they
have about the property.
There are fewer problems with "as is" sales "if you provide all
the information and do all the reports up front," said Bob Gerlach, manager
of Alain Pinel Realtors in Palo Alto. "When that isn't done,
then you may have conflicts."
They must also detail any "significant defects/malfunctions" in
areas of the house, such as the foundation, floors or exterior
walls and report other
items such as any neighborhood noise problems or major damage to
the property from fire, earthquake, floods or landslides.
Real-estate agencies usually also supplement the TDS form with additional transfer
disclosure statements. Supplemental transfer disclosure can often address more
specific concerns about a property. Judy Jarvis Ellis, president of the Silicon
Valley Association of Realtors and an agent with Alain Pinel Realtors, said she
often provides an additional environmental hazards disclosure form to cover any
flood or earthquake hazards presented by the property.
In addition to disclosure forms, sellers should also conduct a
home inspection on their property before they list it "as
With a home inspection, sellers can become more informed about
the condition of their property with a house inspection. They can
pass along more
information to buyers who may be hesitant about buying an "as is" property. Buyers
may be deterred from purchasing an "as is" home because
they feel uninformed about the property.
"Get the buyer as much information as possible and then the buyer doesn't
mind 'as is' as much," Gerlach said.
Sellers also have the option of using the information provided
in a house inspection to make some repairs on the house and then
house "as is." In
this case, the "seller is using 'as is' as a tool to say that at some point,
work on the house stops," he said.
Even with disclosure forms and house inspections by the seller,
Realtors and lawyers strongly recommend that buyers conduct their
is" property. "I would not recommend any of my buyers to buy any property
without any inspections," said Anna Salas, an agent with Prudential
Brewer recommends that "as is" buyers have a home or structural inspection
and a pest control inspection, and if needed, conduct additional tests on the
roof, chimney and fireplace. "The buyer's only protection against risk is
adequate inspection by competent professionals," he said.
Buyers should also be aware that if they find something wrong with
is" property during an inspection, a seller doesn't have any obligation
to address the problem. "As a result of inspections (by the buyer), the
buyer cannot go back to seller and say 'we want this repaired,' " Ellis
However, real-estate agents say since the current market is less competitive
than previous years, sellers may be more willing to negotiate with the buyer.
"As is" sales typically occur when there is a buyer who
has extensive renovation plans, wants to demolish the current property
there are multiple bids on a house. In such cases, the seller has the luxury
choosing the offer
that best suits his terms.
"As we're getting into an environment with one or two offers on the property,
the seller is more conducive to working with the buyer," said
Sherry Bucolo, an Alain Pinel Realtors agent.
For Nelson-Gal, the "as is" clause became a way to make the seller
more comfortable with her offer. The family lost their bid on the house with
the foundation repairs but eventually offered to buy a newer home "as is" for
a bid below the asking price.
"It was a way to make the owner more confident that we were going to buy
the house," Nelson-Gal said. "We went in and said we
were going to bid below but after a walk through, we were not going
Nisha Ramachandran is an editorial intern for the Weekly. She can be e-mailed at email@example.com.