What Does “As Is” Mean?
Foreclosure and short-sale properties are all sold "AS IS". But what does "AS IS" really mean?
"AS IS" means that what you see is what you get. Ninety-nine percent of the time, the seller (bank) will not make any repairs to the property (the one percent is FHA financing-post on that coming soon). It also means that the extent of the seller's obligation with respect to title will be to provide insurable title to the purchaser.
Here's an excerpt from an "AS IS" clause from Freddie Mac:
"Purchaser understands that the seller obtained the property by foreclosure, deed in lieu or foreclosure, forfeiture or similar process and consequently, seller has little or no direct knowledge regarding the condition of the property. Purchaser accepts the Property in "AS IS" condition at the date of the Contract of Sale, including, without limitation, any defects or environmental conditions affecting the Property, known or unknown.
Purchaser acknowledges that neither the seller nor its agents have made any warranties, implied or expressed, relating to the condition of the Property."
Here's an excerpt from an "AS IS" clause from IndyMac Bank:
"Buyer acknowledges and understands that the Property is being purchased and sold as-is, where-is and with all faults. Buyer further acknolwedges and understands that the Property was acquired by Seller through a foreclosure or other similar action and therefore, Seller is not an owner-occupant and Seller's information concerning the Property and its condition is extremely limited. Accordingly, Buyer acknowledges and understands that, except as otherwise disclosed in writing to Buyer, Seller is unaware of any latent defects in the Property or any appurtenant systems including, without limitation, plumbing, heating, air conditioning and electrical systems, fixtures, appliances, roof, sewers, septic, soil conditions, foundation, structural integrity, environmental condition, pool or related equipment. Seller makes no representations or warranties as to (i) the condition of the Property or any of the Property's systems or improvements, or (ii) the serviceability or fitness for a particular use of the Property or any component of the Property."
As you can see, "AS IS" clauses are also a huge C.Y.A. for the banks. As a buyer, you must understand that the property is sold "AS IS" and that you'll need cash and/or sweat equity of your own to fix it up.
For those of you that have the cash and/or sweat equity to perform the repairs, there are some great bank-owned deals out there, especially from Fannie Mae and Freddie Mac. For those who don't have the cash or sweat equity to invest in a foreclosure property, don't worry…there are great deals on foreclosures that require very little work, as well as on traditional resales.
NOTE: This is not meant as legal advice nor should it be taken as such. For guidance on any and all "AS IS" clauses and contracts in general, contact an attorney.