The "as-is" home sale: what it is, and what it isn't.
Many people—sellers, buyers, even agents—are confused by what an "as-is" sale is and isn't. As the market cools, we may see fewer and fewer as-is sales. But as-is will almost certainly never disappear, even if the market slumps, although its use may be more limited.
First, as-is isn't "buyer beware". Even when selling as-is, sellers must disclose any property defects they know or should know. This doesn't mean that sellers have to crawl under the house or bore holes in the stucco to check for termite damage. It does mean that if the roof leaks, they tell buyers about it. And if the roof used to leak, and the sellers "repaired" (never say "fixed") it five years ago and it hasn't leaked since, they tell buyers about that too.
Second, as-is doesn't get a seller off the hook for doing legally-required point-of-sale retrofits or upgrades. I once had a seller's agent balk at my request to strap his client's water heater, a California code requirement, because the sale was as-is. I had to go online, retrieve the pertinent paragraph from the California Code and email it to him before he'd cooperate. Was this agent a cowboy? Yes, and he drove an $80,000 Mercedes.
And third, as-is doesn't mean that the buyer has to accept the house in its present condition if the buyer discovers new information about the home during a contractual property condition contingency. This distinction trips up many seller's agents. Let's say that Seller has had general and pest inspections done and given them to Buyer. Buyer then makes an as-is offer, but with an inspection contingency. Buyer's inspectors prove more thorough than Seller's and discover several defects that will cost thousands of dollars to correct. As the inspection contingency nears its end, Buyer's agent sends Seller's agent a letter outlining this new information and requesting that Seller reduce the sales price by X. Seller's agent, shocked by this apparent lapse in professionalism, reminds Buyer's agent sternly that the sale is as-is. Buyer's agent, not real surprised that Seller's agent doesn't understand as-is, reminds Seller's agent that as-is does not mean "eyes closed walking off a cliff". Buyer made her offer as-is because she was comfortable with the condition of the house as represented by Seller and his inspectors. But Buyer's inspectors uncover defects unknown to Buyer when she made her offer. So now it's a whole new ballgame.
Now we know what as-is isn't. Let's look at what it is.
California is a pro-consumer state and its real estate practices reflect this. Both the real estate contracts used in this area—the PRDS, limited to the mid-Peninsula, and the state-wide CAR preferred in the South Bay and East Bay—are "pro-buyer" contracts. They contractually obligate a seller to transfer his house to the buyer with all the home's operating systems (heating, etc.) in good working order, and without "active pest infestation" (no termites, rot etc.). That's a tall and expensive order for a seller, especially in this area, where most of the housing stock is fifty years old or more.
As-is removes that language from the contract.
Finally, always use—and always read before signing—an As-is Addendum when buying as-is.