By Karen D. Freidman | 09.28.20
Before we dive into how the term As Is applies in real estate, let’s talk about what this means as a basic concept.
When you buy an item As Is, it means to purchase something in the current physical condition. A seller can sell any item As Is.
There is an understanding that no improvements will be made to the item. What you see, is what you get.
This is common among low to mid-level transactions, such as garage sales or used car sales.
In real estate, the term As Is applies to the purchase of a home but with some added provisions. The Residential Purchase Agreement (RPA), has clauses within it that protect the buyer.
We’re going to discuss these sections to better understand why they are in the contract.
The Residential Purchase Agreement (RPA)
First, let’s circle back to the general description of purchasing an item in its current physical condition.
This would apply at a yard sale for example. You may purchase something and the item sells As Is.
There is no implied warranty for that item. That means you pick it up, pay for it, and it’s yours. Done deal.
Did you know that when you initially put in an offer to buy a home and it’s accepted, you’re purchasing the property As Is? This is technically true. To understand this, let’s look at the verbiage in the contract.
RPA Section 11
In the RPA, section 11 states, “CONDITION OF PROPERTY: Unless otherwise agreed in writing: (i) the Property is sold (a) “AS-IS” in its PRESENT physical condition as of the date of Acceptance…”
This means that the buyer will receive the property in the same condition, or better, before escrow closes.
So, what exactly does this mean?
Let’s say during escrow, the seller accidentally spills something on the carpet causing damage, the seller must replace it before escrow closes leaving it in the same condition, or in this case, better because of the new carpet.
This is an example of how the As Is clause protects the buyer and why it’s in the contract.
Without it, there would be no legal ramifications of a seller delivering the property to a buyer in a damaged or altered state.
Although, some buyers are concerned that the As Is clause means that they won’t ask the seller to make improvements or repairs.
This is not the case.
The clause doesn’t mean buyers can’t protect themselves before the sale of the home is final.
Buyer Protection with Section 14B
That is what Section 14B of the RPA is for. Within that section of the contract, it allows the buyer many protections before the deal closes.
The concept is very similar to buying a used car.
Before you pull the trigger, you can hire a mechanic to check out the vehicle from top to bottom to make sure it’s in good physical condition. This preventative measure protects your investment and ensures you are going to be happy with your purchase.
You can use the same approach in real estate and purchasing a property.
In the case of purchasing a home, Section 14B allows the buyer an opportunity to fully investigate the property within a certain amount of time.
This gives the buyer the right to perform inspections, review reports and all disclosures to make sure there isn’t anything negative that might impact their decision to proceed with sale.
Section 14B and its Subsection Items
Let’s review some of the subsection items of protection built into Section 14B of the RPA to highlight their purpose:
SECTION 14B (1)
Most notably would be the time frame of 17 days after acceptance to conduct the Buyer investigation. The Buyer also has the capability of specifying a longer timeframe if needed, depending on the circumstance.
SECTION 14B (2)
Within the time specified in paragraph 14B (1), Buyer may request that Seller make repairs if necessary, due to the outcome of this investigation.
SECTION 14B (3)
If at the end of the specified timeframe outlined in section 14B (1), if disclosures and reports are not delivered to the Buyer or the Seller chooses not to do repairs, the Buyer has the option to cancel.
As you can see, section 14B (2) addresses the issue of being able to ask the seller to make repairs.
This element is important to the buyer and crucial if the findings would prevent the buyer from wanting to continue with the sale.
To be clear, the seller is under no obligation to agree to or respond to Buyer’s requests which makes Section 14B (3) so vital.
The buyer can cancel the deal based on the findings or if they did not receive the reports in the specified time frame allowing for full investigation of the property.
Final Thoughts on “As Is” in Real Estate
So now you understand that buying a home “as is” really means with added provisions and protection for the buyer.
These buyer protections would not be possible without Sections 11 and 14B of the Residential Purchase Agreement.
Section 11 guarantees that the buyer will receive the property in the same physical condition at the close of escrow as when the offer was accepted. Section 14B allows the buyer to fully inspect the property and the right to ask the seller to make repairs.