Friday, July 31, 2020 / by Vanessa Saunders
By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate.
The consequences of having a sellers market during a severe housing shortage has caused some crazy things to happen in the world of real estate. Yesterday, I had a client offer to buy a property "As Is." The buyer did it to strengthen his offer without raising his offer price. I had to explain the ramifications of such a decision.
Buying "As is" means, obviously, that whatever may be wrong with a house, the buyer is willing to accept the house without it being contingent on a good inspection. "As is" homes are increasingly popping up for sale on the market. Often, they are priced lower than other similar properties and as such, are tempting targets for buyers looking for a unicorn - a perfectly good house being sold at a bargain price. Like unicorns, the existence of such homes is mostly fantasy.
When sellers list their homes "As is," there's usually a reason. It could be that the property was owned by a little old lady who has retired to Pasadena and the family just want the property sold. Or the seller knows of problems and can't be bothered or can't afford to deal with them. Or, the seller may be trying to execute a short sale to avoid foreclosure. In nearly all cases, "As Is" means there are problems somewhere.
"As is" sellers still need to meet federal and New York State minimum disclosure standards. Under today’s law, a New York home seller could be found liable to a buyer for having failed to disclose certain property conditions, or defects, in the course of the sale. New York law requires the seller to give a buyer a disclosure statement before the buyer signs the purchase contract. This comes from the Property Condition Disclosure Act (the PCDA, N.Y. Real Prop. Law § § 460-467.) The law also requires that the parties attach the disclosure statement to the purchase contract. Very often, a seller will give a buyer $500 off the agreed upon selling price at closing instead of a disclosure statement.
If a seller gives a buyer a disclosure statement but didn’t mention a known defect, the seller may still be liable for actual damages under the PCDA. But the trick for getting damages relies on the buyer's ability to prove that the seller had actual knowledge of the defect and did something to prevent the buyer from finding out.
If you are sincerely interested in an "As is" property, here are some tips to help you avoid a money pit.
Hope for the best but expect the worst.
There has to be a reason the property is being sold like damaged goods. Keep a skeptical eye and have a good inspector.
Do the paper-work first.
Before even go looking at a prime purchase prospect, buyers should ask their title company to pull reports. Look for zoning issues, tax or historic districts, verify the property is not in a flood zone or industrial area, or — if it’s outside a sewer district — that it is in an area that will support a well or septic system
Don't waive the inspection
Tell your inspector before he see it that the property is being sold "As is."
Attend the walk-through with your inspector.
Inspectors can point out flaws and defects and explain their seriousness during the course of his examination of the property. Be sure to dress appropriately for it - as if your going on a cross country hike. Wear sturdy clothes, gloves, flat shoes or boots and social distancing gear. And be sure your tetanus shots are up to date.
Follow your nose
Many of the as-is listings you visit will have a funky odor. Best case, the house smells like it’s been closed up for decades. Worst case, the odor is a mix of dry rot, termites, cigarette smoke, animal droppings and rotted food. Pay special attention if you find termite infestation. It can be structurally damaging and expensive to repair. Cat urine is another subject altogether. Mold is also especially dangerous, and can hide behind dry-wall, in ceilings and anywhere moisture lurks. Look for signs of damp or water incursions.
Listen to your inspector
You inspector is trained in New York State construction codes. He can point out any problems caused by badly done or poorly advised alterations that have compromised the structure. He will also look for evidence of past fires, floods or cracks that indicate foundation problems. A bad roof seldom offers sky views, but water will visibly stain ceilings.
Low priced fixer-uppers can be irresistibly tempting, so don't let your good senses be compromised by the thrill of a good deal. "As is" properties are a case where "buyer beware" has never been more important.
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