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 purchase contract of a foreclosed home listing will always involve an AS IS addendum. Most instinctively lean towards foreclosed listings due to their desirable prices, often below market value, but never forget that you’ll be signing an AS IS addendum to close the deal. The added addendum makes your purchase more than final. After you sign your documents you are fully responsible for everything related to your new home no matter if it is a new problem or one that obviously has a history longer than your history of ownership.
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.
It goes without saying that foreclosed homes are generally priced lower than similar, privately owned homes and they can be a great deal, but too many recent home buyers discover too late that the cost of bringing the property up to scratch adds up quickly and leaves them without the deal they were expecting. Jonathan Baer, Montalbano Homes’ Sales & Marketing Manager, concludes that buyers “…might get a good deal on a desirable property, but more often then not they won’t. Instead they’ll get a property that was priced just right or a bit high for the condition it was left in.” Foreclosure shoppers need to be aware that foreclosed properties are often stripped of not just the extras, but with a lot of the necessities as well. Lighting fixtures, ceiling fans, appliances, cabinetry, islands, built in bookcases, railing, molding, and even flooring is often missing from foreclosed properties leaving the new owner with a substantial amount of investment required to make the house livable.
Not only will buyers of foreclosed homes have to spend their hard earned cash after they’ve made the purchase, but just closing on a foreclosed home is more difficult due to drawbacks with the financing. Amerifirst’s Damon Lines offered several reasons why getting financing on a foreclosed home is more difficult than privately or builder owned homes, “…banks are difficult to work with and not only that, but these homes are almost never in good condition. Banks don’t want to finance a property in poor condition. And the FHA’s 90 day seasoning period (requiring previous ownership of at least 90 days before new financing can be approved) stops many deals before they get to the closing table.”
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!