Bob Nelson Blogcast – As Is

Thanks so much for checking out the Real Estate Today podcast. Let’s discuss “as is”.

Bob Nelson: I’m Bob Nelson, Eugene commercial real estate investment broker with Pacwest Real Estate Investments.

Marcia Edwards: I’m Marcia Edwards, residential broker with Windermere Real Estate. We’ve been talking about some of the key elements in a real estate transaction that you will generally see and how to interpret those and discuss the edges. Let’s talk to today about the “as is” clause. In the sales agreement that’s standard, fairly standard, for the state of Oregon residential real estate, there’s something that says that this property’s being sold in “as is” condition, that it’s not going to be modified by the seller at the seller’s expense or effort prior to close of escrow.

Bob Nelson: It’s an interesting clause, and most of the earnest moneys have that … Excuse me. I used the term earnest money. I want to say purchase and sale agreement have that clause in them. If that’s your intention, that’s fine, but the seller needs to understand this is the nature of the offer. The buyer’s the one that really needs to understand. It’s interesting. I make this offer based on its “as is” condition. Am I stuck with that? Not really. I better be asked to do the same thing, accept it as “as is” condition after the inspections are made. That’s when it really counts.

Marcia Edwards: The way that offer’s written is you’ve got that it is “as is”, that the seller’s made no promises forward. It also has, in that same offer, is a condition that the buyer will have experts inspect the property to understand what “as is” is. If “as is” is in lesser condition than they anticipated, they didn’t know they’d need a roof when they offered $300,000, now they’re going to have this $7500 bill that’s going to land them in the next year if they have to replace the roof, so given the new information they have, they have conditions in the offer woven in there in a timely manner for them to approach the seller and say, “You know what? Now that I know what the condition is actually, I’m concerned that my offer is inappropriate at this time. I need to either adjust the condition of the house or the offering price.”

Bob Nelson: Exactly. This happens in commercial real estate as well as residential real estate, your specialty. It’s a real touchy situation because as a seller, you really want to keep in mind anything not disclosed to the buyer as a potential trap that allows the buyer to exit the transaction on discovery.

Marcia Edwards: Discovery earlier and often in wide open from the seller’s perspective is appropriate. The seller should make sure the buyer knows what the “as is” condition actually is. If you’re aware of something, put it forward so your home’s not off the market for the wrong terms to the wrong buyer and will not succeed late in the transaction, which would be more expensive to you. I’m Marcia Edwards, Windermere Real Estate.

Bob Nelson: I’m Bob Nelson, Eugene commercial real estate investment broker with Pacwest Real Estate Investments.