"As-Is" Clauses in Real Estate Purchase Contracts

Reaching an agreement on much of anything in a contested divorce case can sometimes feel like passing an act of Congress, including when it comes to listing the house.

After an exhaustive round of negotiations or arguments, your client says, “Fine. I’ll agree to list it, but I’m not lifting one finger or putting a dime into this property. I’ll only sell it as-is.”  And that’s what makes it into the order: “The property located at 123 Main Street shall be listed for sale forthwith. The property shall be sold as-is and no repairs shall be made.”

Then, the clients make their way into my office, along with the order, and are sure to point out that the order says they do not have to pay a dime or lift a finger —they say, “It’s to be sold ‘as-is’!’”  We can certainly sell a house as-is. In fact, outside of any statutory guidelines, a buyer actually can’t force a seller to make repairs to the house. But this will absolutely affect the value of the home and its salability.

As a Certified Divorce Real Estate Expert (CDRE), my job is to maximize value and equity in a house. The cosmetic condition (e.g., cleanliness, condition of paint and carpet, landscaping, decor) substantially influences the desirability of the home, the number of showings, the number of offers received, and the quality of those offers.

There can also be property conditions that are not obvious to an untrained observer, but may be discovered by a property inspection (e.g., damaged roof, sewer lines, ducting, wood-rot, termites, electrical system issues). When such conditions are discovered, we may see buyers either requesting repairs or credits for the cost of such repairs through sales proceeds. Sometimes, buyers ask for a price reduction.  If no agreement is reached concerning such requests, the buyer can cancel and the house is placed back on the market.

The state of the real estate market directly affects how these concerns are handled.  When we are in a multiple-offer / bidding-war type of market, buyers will do anything just to get an offer accepted, including waiving inspections and appraisals. If the buyer’s offer isn’t competitive, it won't be accepted, because sellers have a whole stack of other offers to accept. Dare a buyer make repair requests while under contract? The seller often cancels and moves on to the next buyer.

But we aren’t in that kind of market right now. Values are holding steady for the most part, meaning: Buyers are paying at or close to list price. However, the trends now are such that buyers are not waiving inspections and are demanding that significant issues get fixed, credited, or taken off of the sales price. If a seller does not oblige and the house has to go back on the market, keep in mind that the former buyer’s home inspection becomes a new disclosure item for the next buyer.

This brings me back to the “as-is” clause in the court order: clients are infuriated that they may have to forego tens of thousands of dollars in their asking price or as a result of a credit because they agreed to sell it “as-is.”  But, as former President Bill Clinton famously said, “It depends on what the meaning of the word ‘is’ is.”

While sellers don’t necessarily have to cough up money out of their pocket to preemptively repair their house, here’s the reality: The value of the house is substantially affected by its condition. And it is more common than not that houses of divorce are not maintained in their optimal condition. Deferred maintenance and damage are common — and there’s a price to be paid for that, whether on the front end (before the house is listed) or the back end (as a credit to the buyer).

Bottom Line: Don’t rely on an estimated net proceeds figure until the sale is complete.

Rest assured, I’m committed to maximizing the value and equity in the home. I’m a  phone call away for any questions or cases that you may have involving the listing and sale of real property in your cases.