As-is Sales and what they actually mean

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As-is Sales and what they actually mean

Tony Freeman
Real Estate Agent · Chicago, IL · Member since 2021 · 27 posts · 39 votes

As a new investor, especially in the world of multi-units, I'm sure you have come across a ton of buildings that are being sold "as-is" and are required to write that into the offer that you send over. Although it seems pretty straight forward that when you agree to an as-is sale, you are taking it in whatever condition you get it in and won't get any credits or repairs, but its not always that black and white. In fact, a lot of the as-is deals that I've been apart of on the buy side, we were able to get some form of credit still. 

Now, this doesn't mean that after your inspection, you send out a long laundry list of things to the sell side and expect them to accommodate everything because that 10 times out of 10 just won't happen. In fact, you have to be fully prepared to potentially not walk away with any repair or credit no matter how extensive it is but every seller is different. However, the things you can usually ask credits for while under an as-is sale, are typically things that can be potentially hazardous that you wouldn't have seen or known about until you got through the inspection. 

The most common credits I see people ask for are when it is as-is has to do with the roof, the foundation, or a deck(if the property has one.) Even when an issue with those things come up during the inspection, you still have to be mindful that you are under an as-is sale. Any kind of credit you can receive would be good step but I never recommend going in and asking for the full price of the repair or replacement or at least if you do, don't keep your hopes too high that they will give the full credit. 

Lastly, please do not be bullied into feeling like because you signed the as-is that you have no leg to stand on when asking for a credit or repair. A lot of sellers and listing agents will try to make it feel that way but as long as you have a great attorney and agent that can explain things to the opposing side and they can paint the picture to them, you have a higher chance of walking away with something. 

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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
Originally posted by @Tony Freeman:

As a new investor, especially in the world of multi-units, I'm sure you have come across a ton of buildings that are being sold "as-is" and are required to write that into the offer that you send over. Although it seems pretty straight forward that when you agree to an as-is sale, you are taking it in whatever condition you get it in and won't get any credits or repairs, but its not always that black and white. In fact, a lot of the as-is deals that I've been apart of on the buy side, we were able to get some form of credit still. 

Now, this doesn't mean that after your inspection, you send out a long laundry list of things to the sell side and expect them to accommodate everything because that 10 times out of 10 just won't happen. In fact, you have to be fully prepared to potentially not walk away with any repair or credit no matter how extensive it is but every seller is different. However, the things you can usually ask credits for while under an as-is sale, are typically things that can be potentially hazardous that you wouldn't have seen or known about until you got through the inspection. 

The most common credits I see people ask for are when it is as-is has to do with the roof, the foundation, or a deck(if the property has one.) Even when an issue with those things come up during the inspection, you still have to be mindful that you are under an as-is sale. Any kind of credit you can receive would be good step but I never recommend going in and asking for the full price of the repair or replacement or at least if you do, don't keep your hopes too high that they will give the full credit. 

Lastly, please do not be bullied into feeling like because you signed the as-is that you have no leg to stand on when asking for a credit or repair. A lot of sellers and listing agents will try to make it feel that way but as long as you have a great attorney and agent that can explain things to the opposing side and they can paint the picture to them, you have a higher chance of walking away with something. 

 I am not sure how you consider it bullying when you sign a contract "as-is" and then someone asks you to honor the contract? Buyers should not sign "as-is" contracts if they plan to try to negotiate later. That is the entire purpose of sellers offering a property as-is. They want best and final offer up front, not a buyer that plays games. You should have your buyers spend more time inspecting the property, so they are considering that in their offer price. It is kind of crappy to the seller because they could have found a different buyer who was willing to abide by the terms of the contract. 

Your job is to advise buyers up front "as-is" means no concession. If you are setting the wrong expectation up front, you are creating this conflict. Any contract can be renegotiated with both parties approving the changes, but the idea that a seller should be happy when you are backing out of a contractual agreement is unreasonable. Your perceived bullying is really just a natural response to bad faith contract negotiation on the buyers part. If anything, you are bullying the sellers by holding them hostage with threatening to breach the contract. What you are recommending here is not a good business practice and it is bound to get you a bad reputation with other realtors.

If there is an extreme deficiency found or some type of problem covered up, I am on board with opening a renegotiation. This should be the exception and not the rule.

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y
    Originally posted by @Tony Freeman:

    As a new investor, especially in the world of multi-units, I'm sure you have come across a ton of buildings that are being sold "as-is" and are required to write that into the offer that you send over. Although it seems pretty straight forward that when you agree to an as-is sale, you are taking it in whatever condition you get it in and won't get any credits or repairs, but its not always that black and white. In fact, a lot of the as-is deals that I've been apart of on the buy side, we were able to get some form of credit still. 

    Now, this doesn't mean that after your inspection, you send out a long laundry list of things to the sell side and expect them to accommodate everything because that 10 times out of 10 just won't happen. In fact, you have to be fully prepared to potentially not walk away with any repair or credit no matter how extensive it is but every seller is different. However, the things you can usually ask credits for while under an as-is sale, are typically things that can be potentially hazardous that you wouldn't have seen or known about until you got through the inspection. 

    The most common credits I see people ask for are when it is as-is has to do with the roof, the foundation, or a deck(if the property has one.) Even when an issue with those things come up during the inspection, you still have to be mindful that you are under an as-is sale. Any kind of credit you can receive would be good step but I never recommend going in and asking for the full price of the repair or replacement or at least if you do, don't keep your hopes too high that they will give the full credit. 

    Lastly, please do not be bullied into feeling like because you signed the as-is that you have no leg to stand on when asking for a credit or repair. A lot of sellers and listing agents will try to make it feel that way but as long as you have a great attorney and agent that can explain things to the opposing side and they can paint the picture to them, you have a higher chance of walking away with something. 

     I am not sure how you consider it bullying when you sign a contract "as-is" and then someone asks you to honor the contract? Buyers should not sign "as-is" contracts if they plan to try to negotiate later. That is the entire purpose of sellers offering a property as-is. They want best and final offer up front, not a buyer that plays games. You should have your buyers spend more time inspecting the property, so they are considering that in their offer price. It is kind of crappy to the seller because they could have found a different buyer who was willing to abide by the terms of the contract. 

    Your job is to advise buyers up front "as-is" means no concession. If you are setting the wrong expectation up front, you are creating this conflict. Any contract can be renegotiated with both parties approving the changes, but the idea that a seller should be happy when you are backing out of a contractual agreement is unreasonable. Your perceived bullying is really just a natural response to bad faith contract negotiation on the buyers part. If anything, you are bullying the sellers by holding them hostage with threatening to breach the contract. What you are recommending here is not a good business practice and it is bound to get you a bad reputation with other realtors.

    If there is an extreme deficiency found or some type of problem covered up, I am on board with opening a renegotiation. This should be the exception and not the rule.

    5Reply
  • Tony Freeman
    OP
    Real Estate Agent · Chicago, IL · Member since 2021 · 27 posts · 39 votes
    5y

    This is why I put a very limited set of scenarios. No one said the seller is obligated to give a credit for these in fact if you read the entire post you would see that I mentioned that as a buyer you should be prepared to not walk away with anything because of the as-is sale. No buyer and no real estate agent during an initial showing is going to know that there are shingles or punctures in the roof, that there are higher than normal moisture levels signaling that it could be problems with a roof, that a deck is not up to today’s current code, that there are cracks found in the sewer scope, etc. 

    These are all things that can present major problems and if you are an investor that is looking for something mor turn key, a first time investor/owner occupant, these are things it wouldn’t hurt to ask for a credit for during A/I. 

    If you are flipping a place or looking to do a gut rehab job, it doesn’t really make sense to ask for these kinds of credits. Because I advise my clients on what to ask for and what not, this has always led to me being able to come to some resolution with the opposing side even with some of the most difficult sellers and buyers. 

    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    5y

    @Tony Freeman  UMM a lot of writing but you are 100% off, ALL do respect. As is mean just that AS IS, ( I have done about 500 deals in my market , yes 500, everyone of them is AS IS, I GET ZERO credits ) you get nothing, Sure if you want to negotiate a higher price as the seller will do the repairs, sure, but AS IS , IS just that, 

    Good luck 

    2Reply
  • Tony Freeman
    OP
    Real Estate Agent · Chicago, IL · Member since 2021 · 27 posts · 39 votes
    5y

    Well, with all do respect, if that was the case I would not have completed a single sale this year as all of the sales I’ve done have been as-is from completely gutted $300K multi-units to $1M+ new construction multi-units, I’ve gotten to some sort of resolution with the other side if we needed to ask for something additional(which is never my first choice.) But that’s the perks of working with an amazing agent such as myself. 

    God Bless

    1Reply
  • Lucas MartinezBusiness Member
    Developer · Santa Barbara, CA · Member since 2021 · 81 posts · 48 votes
    5y

    I mean, realistically speaking "as-is" doesn't really mean anything in terms of the sales contract. I agree with the OP here. If the buyer decides to ask for a credit because they discovered something they had no way of knowing before their due diligence & inspections, the seller needs to decide if it makes more sense for them to find a new buyer (and have to disclose whatever it is that the first buyer discovered up front to any new prospective buyers), or just suck it up and give the credit. In my experience most sellers choose the latter. 

    2Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    5y

    @Tony Freeman  cool, but I never use an agent, all my deals are off market, But 99.9999% of the time, as is , is just that,. But I am also in one of the most competitive markets for investors in the country so, sellers dictate , all the best 

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y
    Originally posted by @Tony Freeman:

    Well, with all do respect, if that was the case I would not have completed a single sale this year as all of the sales I’ve done have been as-is from completely gutted $300K multi-units to $1M+ new construction multi-units, I’ve gotten to some sort of resolution with the other side if we needed to ask for something additional(which is never my first choice.) But that’s the perks of working with an amazing agent such as myself. 

    God Bless

     This is market dependent. In my market when a property is listed as-is, that means distressed and the seller will not make concessions. We don't have attorneys involved, so one realtor asks another and they will just say "no, the offer was as-is". Only exception may be something that was missed on a disclosure form or a gross defect that was not visible. Chicago is a different market and different mentality, lots of interesting and even corrupt business practices. Maybe you are just playing the game like everyone else in your market which seems to be the case. I am just saying that won't work in every market. Maybe the real message here is that "as-is" has different expectations in different markets. 

    0Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    When I sell as-is I just point back to the 'as-is' clause in the contract and ask if they want to proceed with the contract or cancel.  When I put in as-is in it is usually because the price is set an a low enough amount that I did not leave money for repairs.  Now if they want to increase the price we can dicker over repairs.  I think that is is disrespectful to ask for concessions when the price was not set to allow for them.

    3Reply
  • Lucas MartinezBusiness Member
    Developer · Santa Barbara, CA · Member since 2021 · 81 posts · 48 votes
    5y
    Originally posted by @Lynnette E.:

    When I sell as-is I just point back to the 'as-is' clause in the contract and ask if they want to proceed with the contract or cancel.  When I put in as-is in it is usually because the price is set an a low enough amount that I did not leave money for repairs.  Now if they want to increase the price we can dicker over repairs.  I think that is is disrespectful to ask for concessions when the price was not set to allow for them.

    I don’t see how it’s disrespectful…at the end of the day the market dictates the price. A seller can set the price wherever they want, whether or not it’s reasonable. If the seller has multiple offers, or think they can go back on the market and sell it quickly, good for them - they have all the leverage they need to deny any request for credit. If they have no other offers and no other prospects, the buyer has the leverage. I don’t think “respect” comes into it at all. It’s the beauty of the free market. 

    0Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    5y

    The varying interpretations of what "as-is" actually means is part of the reason that waiving inspection on "as-is" listings is becoming more common in highly competitive markets. 

    Technically the OP is correct in that "as-is" is just a general term that attempts to waive any kind of warranty on a property, but doesn't really hold any water legally. It sates that the seller expects the buyer to accept the property in its current condition, but doesn't require them to do this contractually. Just because a property is being listed "as-is" doesn't mean the buyer can't have an inspection or ask for repairs, or that the contract can't be modified later if the parties agree. So it doesn't mean what many think it does because technically the buyer is still free to renegotiate the terms of the deal if the condition is worse than they originally thought, basically at their discretion assuming all inspection contingencies are included in the contract. That's the big problem with the term, because buyers (and their agents) have different levels of skill in determining property condition during initial showings, as well as varying degrees of what will be acceptable to them in terms of defects. 

    "As-is" transactions can easily end up in bad faith because buyers often automatically think something is wrong with the property that is being hidden. Sellers often get upset when a buyer attempts to re-trade because their expectation was that there would be no agreement to make repairs or price concessions based on condition. The trust level can easily be impacted simply by buyer and seller having different interpretations of what "as-is" actually means. 

    To avoid this, buyer's agents should help their clients determine the true property condition prior to making an offer. Listing agents should help weed out buyers who may be looking to leverage the inspection results by finding out the buyer's experience level and also by countering any offers with language in the contract to the effect of "Buyer understands property is being conveyed as-is", or only accepting offers with no contingencies. 

    A good middle ground that is becoming common in my market is offers that waive the inspection objection, but not inspection termination. This gives the buyer the option to terminate based on inspection results (if something major and unexpected arises during inspection), but not to renegotiate. 

    1Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    5y
    Originally posted by @Tony Freeman:

    As a new investor, especially in the world of multi-units, I'm sure you have come across a ton of buildings that are being sold "as-is" and are required to write that into the offer that you send over. Although it seems pretty straight forward that when you agree to an as-is sale, you are taking it in whatever condition you get it in and won't get any credits or repairs, but its not always that black and white. In fact, a lot of the as-is deals that I've been apart of on the buy side, we were able to get some form of credit still. 

    Now, this doesn't mean that after your inspection, you send out a long laundry list of things to the sell side and expect them to accommodate everything because that 10 times out of 10 just won't happen. In fact, you have to be fully prepared to potentially not walk away with any repair or credit no matter how extensive it is but every seller is different. However, the things you can usually ask credits for while under an as-is sale, are typically things that can be potentially hazardous that you wouldn't have seen or known about until you got through the inspection. 

    The most common credits I see people ask for are when it is as-is has to do with the roof, the foundation, or a deck(if the property has one.) Even when an issue with those things come up during the inspection, you still have to be mindful that you are under an as-is sale. Any kind of credit you can receive would be good step but I never recommend going in and asking for the full price of the repair or replacement or at least if you do, don't keep your hopes too high that they will give the full credit. 

    Lastly, please do not be bullied into feeling like because you signed the as-is that you have no leg to stand on when asking for a credit or repair. A lot of sellers and listing agents will try to make it feel that way but as long as you have a great attorney and agent that can explain things to the opposing side and they can paint the picture to them, you have a higher chance of walking away with something. 

    I'd never do business with someone who doesn't honor a contract. What is the value of a contract otherwise? There are too many other honest people that do honor a contract to work with.

    1Reply
  • Teri Feeney Styers
    Real Estate Agent · Grand Junction, CO · Member since 2015 · 1k+ posts · 736 votes
    5y

    Below is the language I use when writing "as is" offers for my buyers. Both buyers and sellers understand it. They can see bad roofs, worn flooring, ancient furnaces when we tour the house. I can always tell the listing agent "look, we were prepared to fix A,B and C - but we couldn't see the bad plumbing in the crawlspace until the inspector pointed it out and that's just more than my buyer can budget for. We are going to have to terminate" and there have been occasions where the seller, reluctant to let the deal go, will ask - "what does it take" to keep the offer in play. But in general, I expect my buyers to honor the terms of the contract. If a listing states "as is" then you better be prepared to accept it "as is" or walk... 

    BUYER IS ACCEPTING PROPERTY “AS IS“ AND WILL NOT REQUEST REPAIRS OR FURTHER PRICE DISCOUNTS; BUT WILL CONDUCT AN INSPECTION AND DOES NOT WAIVE THE RIGHT TO TERMINATE BASED ON THAT INSPECTION

    2Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    5y
    Originally posted by @Lucas Martinez:
    Originally posted by @Lynnette E.:

    When I sell as-is I just point back to the 'as-is' clause in the contract and ask if they want to proceed with the contract or cancel.  When I put in as-is in it is usually because the price is set an a low enough amount that I did not leave money for repairs.  Now if they want to increase the price we can dicker over repairs.  I think that is is disrespectful to ask for concessions when the price was not set to allow for them.

    I don’t see how it’s disrespectful…at the end of the day the market dictates the price. A seller can set the price wherever they want, whether or not it’s reasonable. If the seller has multiple offers, or think they can go back on the market and sell it quickly, good for them - they have all the leverage they need to deny any request for credit. If they have no other offers and no other prospects, the buyer has the leverage. I don’t think “respect” comes into it at all. It’s the beauty of the free market. 

     I will respectfully disagree.  If you sign a contract that says as-is that is what your contract says.  To then ask for something is CHANGING that particular contract.  If the contract did not have that term, it generally has a process laid out with a time frame to negotiate changes in the term of the contract based on the inspection.  

    To go into a contract knowing, expecting, to change the terms is disrespectful IMO.  It is not treating the other person with respect.  The other person entered into the contract with expectation that it would be followed.  In entering the contract the seller balanced many variables and one in that contract was the price was firm without concessions.

    0Reply
  • Lucas MartinezBusiness Member
    Developer · Santa Barbara, CA · Member since 2021 · 81 posts · 48 votes
    5y
    Originally posted by @Lynnette E.:
    Originally posted by @Lucas Martinez:
    Originally posted by @Lynnette E.:

    When I sell as-is I just point back to the 'as-is' clause in the contract and ask if they want to proceed with the contract or cancel.  When I put in as-is in it is usually because the price is set an a low enough amount that I did not leave money for repairs.  Now if they want to increase the price we can dicker over repairs.  I think that is is disrespectful to ask for concessions when the price was not set to allow for them.

    I don’t see how it’s disrespectful…at the end of the day the market dictates the price. A seller can set the price wherever they want, whether or not it’s reasonable. If the seller has multiple offers, or think they can go back on the market and sell it quickly, good for them - they have all the leverage they need to deny any request for credit. If they have no other offers and no other prospects, the buyer has the leverage. I don’t think “respect” comes into it at all. It’s the beauty of the free market. 

     I will respectfully disagree.  If you sign a contract that says as-is that is what your contract says.  To then ask for something is CHANGING that particular contract.  If the contract did not have that term, it generally has a process laid out with a time frame to negotiate changes in the term of the contract based on the inspection.  

    To go into a contract knowing, expecting, to change the terms is disrespectful IMO.  It is not treating the other person with respect.  The other person entered into the contract with expectation that it would be followed.  In entering the contract the seller balanced many variables and one in that contract was the price was firm without concessions.

    I agree with you that a buyer shouldn’t submit an as-is offer if they expect to ask for credits. They should intend to honor the contract. But that’s all the as-is clause is…an intention. Assuming that no inspections or disclosures are provided by the seller, the buyer could potentially find out all manner of things about the property after submitting the offer. If they discover a huge amount of foundation damage that neither buyer or seller was aware of, or they discover that the home is in desperate need of French drains, you’re saying that the buyer should just honor the contract or walk away? That doesn’t provide for any flexibility for the buyer and seller to work out a deal acceptable to both parties, which at the end of the day is the goal.

    My point is that the entire process is a function of the market supply and demand. If the buyer feels like they need a credit in order to make the deal work for them, and the seller decides that their best course of action is to throw out the as-is clause and issue the credit because they’re not sure if they’ll find a better deal back on the open market, what’s wrong with that?

    0Reply
  • Cameron Braig
    Atlanta, GA · Member since 2021 · 493 posts · 162 votes
    4y

    @Tony Freeman

    Thanks for the detailed post. Found it insightful and helpful. 

    0Reply
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