As is real estate contracts can be a very potent recipe for a disaster, unless you know exactly what they mean what you are getting in to. Those two simple words actually make a lot of difference and ignorance is usually the main reason why people lose money over as is contracts. Let's first explain […]
As is real estate contracts can be a very potent recipe for a disaster, unless you know exactly what they mean what you are getting in to. Those two simple words actually make a lot of difference and ignorance is usually the main reason why people lose money over as is contracts.
Let's first explain what the term 'as is' on any legal contract stands for. The term 'as is' when used as a legal term signifies that the property that is being referred to in the contract or the document is being sold / purchased in the exact condition it is and no further amends, repairs or additions will made to the Property by the seller. So once the property is sold, the seller is absolved of all responsibilities and no claims can be made based on defects, damages, etc.
So, as we all know all to well by now, the main risk in buying an 'as is' property is the potential loss from having to make too many repairs. Properties that are sold as is sold that way for a reason. There are usually damages and problems caused by many factors like neglect and old age, which need to be repaired. When a buyer is signing in to the purchase, there is no turning back.
So the steps that need to be take should be taken in advance when the 'as is' contract is being made. The buyer should ask the lawyer to include a clause or a condition through which the contract may be terminated during an inspection period. This period is also referred to as the option period and in some states, the buyer can legally return out of the deal at any time without having to show any reason at all provided that the provision was already there in the original contract.
The seller does not lose anything here either, because a non-refundable option money is paid for this period that will not be returned if the buyer decides to terminate the contract. However, if earnest money has been paid then that amount will be returned to the buyer. During this period, the buyer is free to inspect the home as he pleases. If the buyer chooses to cancel, it has to be done within the inspection / option period, beyond which the contract can not be gotten out of that easily.
Another related aspect here is the home inspector who is often hired to give an opinion about the state the home is in. Sadly, many have lost a lot of money due to fraudulent individuals claiming to be professionals. So do not always trust a home inspector and make sure that you get someone who has at least some reputation and training to show. Another important thing to remember is to get a competent lawyer who has had ample experience in the field. And make sure you read the contract thoroughly and understand it fully before signing it.