Does "As-is" always mean buyer beware?

Dear Ms. Mortgage Maven:I am a first-time home buyer. The property I liked best is listed "as-is". I always thought that "as-is" meant that there was a problem with the property, but this house looks like it has been well maintained and in perfect condition. Why would someone sell their house "as-is" if the house is in perfect condition? Does this mean that there is something wrong with the house that I won't know about until I move in?

Mariella

Dear Mariella,

Every home buyer, not just those buying "as-is" properties, should get a professional home inspection to discover any defects the property may have. Buying a home "as-is" does not mean you cannot have it inspected, it means that the seller is announcing upfront his/her unwillingness to remedy or otherwise compensate the buyer for any defects the buyer or a home inspector may find. It is not necessarily a statement about the condition of the property; it is a statement about the sellers' willingness to correct the property's known defects.

Selling a house "as-is" was common during recent years, when real estate had double-digit appreciation rates and sellers were receiving multiple offers on their properties, often for over the asking price, and buyers were waiving their right to a home inspection and removing the home inspection contingency from the contract. These days, the "as-is" sale is less common. Buyers have increased bargaining power in negotiating the sales price and closing cost concessions, and they can once again submit offers with a home inspection contingency.

There are still times when it is necessary for a house to be sold "as-is," such as when an estate is selling the property of the deceased. In that case, the occupant has died, and the heirs, who may never have lived in the property, cannot be expected to know about possible defects. Government-owned properties or foreclosure properties face a similar situation - the seller does not occupy the property and therefore cannot reasonably be expected to know of any defects.

The laws regarding the sale of "as-is" property are different in Maryland and DC, and since you did not mention where the property is located we will look at how both jurisdictions treat the sale of "as-is" property. I have to warn you though - do not be surprised if it is difficult to understand. To describe the laws regarding "as-is" property as "convoluted" is being quite kind.

"In Maryland, sellers can fill out a property disclaimer (saying they choose to not fill out a disclosure) or a disclosure (a standard form that includes various types of property defects), but if they fill out a disclaimer they are still obligated to disclose known material defects," according to called Larry Kamins, sales manager at Prudential Carruthers Realtors on Capitol Hill.

"It's just that the disclosure form may or may not touch on the material defects of that property. In D.C., if the buyer states that he or she will occupy the property, the seller must fill out a property conditions disclosure. If the seller does not provide the form, the buyer can exit the contract at any time. If the buyer goes to settlement without receiving the form, the buyer waives his or her right to receive it, but the seller still has liability if it is not filled out." (Are you still with me on this?)

"If you are an investor buying a property in D.C., you are not entitled to receive any disclosure documents," continued Kamins. "If you are buying property as an investment you are considered to be a professional and are not the person the law is protecting."

If you are a non-professional buying a home in D.C., it gets even more confusing: the disclosure only has to be accurate as of the date it was signed and not the date it was given to the buyer, and by extension does not have to be accurate on the date of settlement.

Buying a house "as-is" does not necessarily mean you are about to be deceived by the seller and wind up with expensive home repairs. But to protect yourself, hire the best home inspector you can, whether you buy an "as-is" property or one with a full list of disclosures. You can find inspectors in your area by going to the American Society of Home Inspectors Web site at hwww.ashi.org. Unless your real estate agent removed the home inspection contingency from your purchase offer, you can renegotiate with the seller or walk away from the deal altogether depending on what the home inspector discovers. Best of luck,

Jessica White, also known as "Ms. Mortgage Maven," is a mortgage consultant with Tenacity Mortgage. Call or email her to discuss your home purchase or refinancing needs, including FHA loans and loans in "declining markets". She can be reached at 202-607-4449,Jessica@msmortgagemaven.com or jessicawhite@tenacitygroup.com. You can also apply online at www.msmortgagemaven.com.