The typical AS IS addendum will specify that the buyer is not to rely on the seller or seller’s agent regarding the condition or safety of the property being sold. This declaration of total ignorance includes all portions of the property and any improvements. It encompasses electrical, heating, sewage, plumbing, the roof, the AC, the foundation, the lot size, the appliances, the soil and even the basic geology of the land the property sits on. But take note that the exclusions aren’t limited to the items listed specifically in the document. It will go on further to state that the seller and seller’s agent are also not responsible for the compliance of any of the above mentioned items to City, County, State and/or Federal statutes, codes and/or ordinances. If you’ve never taken the time to read through a full AS IS Addendum before you should take a minute (or an hour depending on the sheer length of the document) to give one a once over. We’ve only brushed the tip of the iceberg here.
The AS IS addendum is for use when transferring ownership of a foreclosed home. So when you run across one of those fabulous deals on the system showing prices far below the comps because they’re bank owned remember that you’ll be signing an AS IS addendum as part of the deal. No matter what comes out after that fact, the purchase is final. You are responsible for anything that happens (or is discovered) after you sign.
We’ve all heard horror stories about home purchases; some are ridiculous, some are rare and some are pretty common. But when it comes to a foreclosed home purchase you’ve got to take into consideration that the ridiculous, the rare and the common are all included in the AS IS exclusion. It doesn’t matter who created the problem initially. It doesn’t matter who was aware of the problem. The fact of the matter is that you agreed to purchase the home in its current condition and the sale stands even if the bank was aware that the inspector missed the fact that the concrete tile used for the roof must have been a defective batch resulting in an unexpected roof replacement within a week of moving into your new purchase. The sale stands even if both air conditioning units suddenly stop working 2 days after you move in resulting in $30,000 replacement cost.
Maybe you are positive that the seller knew the negative situation you are just discovering about the house now that you’ve closed and moved in to the property. Maybe you know for a fact that it was the previous owner that did a horrible DIY job hiding termite damage that only made the state of the supporting beams more unstable. Maybe your AC man tells you that the AC was rigged to run even though it was obviously only going to work for a couple months before giving up the ghost. These hidden or “missed” issues don’t change the fact that you purchased the home with the AS IS addendum making everything about it including the problems ALL yours no matter who did or didn’t know about them prior to the sale.
So if you’re one of the many buyers who are thanking their lucky stars that there are so many foreclosures available for great prices…think again. There are many in the same situation who regret their purchase immediately afterwards and for years to come. Only after spending big chunks of cash and even bigger chunks of time fixing problems do they admit that experts in the industry were saying over and over that the foreclosed homes were almost always over-used, abused and neglected. They harbor too many negative surprises to keep a hold of the greater value their lower price seems to offer.
Foreclosed homes can be a smacking good deal, but too many new residents receive a big smack in the face when the costs of making the home livable start to add up. Jonathan Baer, Sales and Marketing Manager of Montalbano Homes, summed up the opportunities presented by foreclosure listings when he said, “You might end up with a great deal on a great property, but the chances are just as good (or better) that you’ll end up with a property that was appropriately priced for the condition that it’s in.” Home buyers looking at foreclosures have to consider that foreclosed homes are often stripped of the “extras” and often some of the necessities before they consider the “good deal” portion of the package.
And in addition to the cost buyers will face after the sale is done, financing a foreclosed home is more difficult than the financing of a privately owned listing. Damon Lines with Mesa, AZ’s Amerifirst, offered a few reasons why it is more difficult to get a foreclosed property financed in comparison to a privately or builder owned home. “One, the banks are difficult. That’s a blanket statement, but there aren’t many who would argue. Two, the homes are almost always stripped. Banks won’t finance homes that are in poor condition. Three, the FHA 90 day seasoning period. It requires previous ownership of at least 90 days before new FHA financing can be established for a new buyer.”
Knowing all the relevant facts and information makes being pleased with your new purchase more likely. But no matter how much you think you know, foreclosures just have a higher chance of blowing up in your face after you’ve made the deal. And with a foreclosed home…there’s no “after” the deal. the deal is done and there’s nothing left to be said. That’s what the AS IS addendum was for!
Author: Preston JohnThis author has published 1 articles so far.