Understanding “as is” in the Hilton Head area real estate market.
I think consumers watch way too much HGTV. TV is NOT reality and a good agent will explain to you the laws in your state and practices in your market. Real estate is truly local. For example, in the Hilton Head area market, we have a different purchase contract than the rest of the state. In Section 8. It clearly states:
“8. CONDITION OF PROPERTY. At Closing, all appliances and systems referenced in Section 4, including heating, air conditioning, electric and plumbing systems, fireplace/chimney, irrigation, pool and spa, shall be in good working order, and their physical condition shall be subject to reasonable wear and tear regardless of age. Further, the structure shall be reasonably sound and the roof free of leaks at Closing.”
This is very important to note to sellers who have a property that is a little older or perhaps has some maintenance issues to address.
Also of note is that this area of the contract also does address what buyers expectations should be:
“Other than the Property condition requirements set forth in this Section, the Property shall be conveyed in its present condition “As Is”. “As is” means the Property shall be conveyed in the condition existing on the Effective Date, subject to the terms of this Contract. The Property is a resale property. It is not new construction. Normal wear and tear is to be expected. For example, fogged windows, appliance rust, overgrown or dead landscaping, tile or countertop cracks, missing or torn screens, and uneven walkways or driveways are considered normal wear and tear and are not subject to repair unless otherwise required by this Contract. Seller shall not be obligated to make the Property comply with current building codes if the Property was constructed in compliance with the then applicable building codes. The Property shall be habitable, and Seller must repair deficiencies which render the Property uninhabitable as determined by licensed professionals.”
This is certainly a lot different than what you see on TV, right? In a hot selling market sellers still need to make sure things are in working order. And even in a hot buying market, buyers can’t expect a home to be perfect. I like this clear definition in our contracts, but not enough agents take the time to clearly explain it to their clients.
Also of note, is that Sellers can not expect an “as is” clause to relieve them of the responsibility to disclose any material fact affecting the habitability of the home. They still MUST be honest and truthful when filling out the mandatory Property Disclosure. This even applies to every FSBO (for sale by owner) sale. It also does not remove the buyers right to inspect the property.
Furthermore, we as agents need to explain how lending affects the sale of the property. Especially in the case of FHA/VA loans, the government wants to ensure that property is habitable and in good working order. They won’t grant the loan otherwise. For example, if the roof is more than 20 years old (sometimes as little as 15 years!) they won’t grant a loan unless it is replaced. This can be done in two ways, with the seller doing it during the inspection repair period, or WITH APPROVAL, an escrow for the roof (or repairs) to be done by after closing. The funds are often requested from the sellers proceeds.
In fact these days, I’m often seeing this same request from conventional lenders as well. A bank doesn’t want to grant a loan on a property that could potentially be damaged by negligent maintenance. Understandable right?
Well a lot of sellers still think that they can mark their home in the MLS for sale that they will accept financing (FHA,VA, & Conventional) but then sell it “as is.” Yeah, no. Especially, if your definition of “as is” is to do nothing.
And agents, if you are marking your homes in the MLS that you are accepting financing and you know that your seller won’t fulfill such requirements, you are MISREPRESENTING! Such listings should be marked Cash Only. Sellers should be warned that this practice can severely limit their pool of buyers and can actually cost them more money as the home lingers on the market, than simply repairing items to make the home “habitable’ and in “good working order.” It also will definitely affect the amount buyers will be willing to offer, as well as appraisals.
Agents, you may also want to consult with an attorney about using an entirely different contract than the standard one in our Hilton Head area market if your seller insists on a bare bones “as is” sale, because the transaction won’t match the language in ours.
If any of you, even my fellow agents, have any questions about this, I’m happy to help. I’m not posting this as sour grapes, I am truly posting to help everyone get the deal done. I love my job and I love helping people sell and buy homes, but we all have to understand the process to accomplish that.
Best Wishes !