Can I back out of a house purchase after the inspection if the offer stipulates "as is"?

Question

I made an offer on a house in the state of Arkansas, and got a counter offer, and now I am about to accept it. However, there is one thing that bugs me: the counter offer requires me to buy the house “as is”.

I’m not sure: can I back out after the inspection even if the inspector doesn’t find anything catastrophic? Do I have to proceed with the closing? I feel that the reasonable answer is, “No, I don’t have to.” However, in that case, the “as is” clause doesn’t make any sense to me. What’s the purpose of an “as is” clause if I can back out anyway? Okay, I can’t request any follow up fixes. But I presume the seller can also back out if she thinks that my requested follow up fixes are too much, right?

What legally binding responsibilities does the “as is” clause confer upon me?

Answer 1

"As-is" means that no matter what the inspector finds the seller will not delay closing, repair, or provide money/discount to repair. If you want to go this route then yes you need a complete inspection by a trained and certified home inspector. No matter what they find, big or small, you will then have the opportunity to walk away.

If they find small things, then it is up to you. If they find any big things or open ended things then you will likely walk away. Don't let the seller, their agent, or your agent try and talk you out of the inspection.

Despite the claim as "as-is" many jurisdiction also require the seller to disclose all known material defect as a part of the listing and other related documents. So if they spent $5,000 covering up the evidence of the leak that will cost $20,000 they have to tell you. If it is discovered soon after you move in, you still may be able to take them to court. But you will need that inspection report to show that you tried to find all the defects.

Why does the seller go the "as-is" route? Some have something to hide. Others just want to speed the transaction along. If the defects are small, and you are able to handle the repairs yourself, then settlement can proceeded quickly. But if you insist on a new roof, then they have to schedule it and it can delay thing for weeks. Many times the seller is offering the house at a discount already and doesn't want to reduce the money even further.

Answer 2

A counter offer saying "as-is" doesn't mean the seller is trying to hide anything. What it means is that the seller is willing to take the buyer's offer but is not willing to shell out any more money to make the deal work.

The seller knows full well that the buyer would have to be a total idiot to buy the house without an inspection, so there's no incentive to hide anything an inspector might find. Of course there's always incentive to hide stuff the inspector isn't likely to find but those issues won't help the buyer even without the "as-is" clause because those issues won't be discovered until many months or years after the house has been bought.

Here's the reason for including the "as-is" in the counter offer. Most of the time people get their house fixed up before selling because they want to get the maximum price. Thus, upon inspection, usually inspectors only find minor issues of questionable need for repair, which total less than a couple thousand dollars. Usually the buyer then asks to get those repaired in order to save themselves from having to do it on their dime. By this point the seller isn't normally going to back out for a couple thousand dollars so they agree.

In the OP's case, the seller is trying to avoid this because they are already probably waffling on agreeing to the low price. The "as-is" is just letting the buyer know, this is it, take it or leave it at this price because I'm not bending any further. It says absolutely nothing about the condition of the house. It simply says, I'll bend no further on my price.

Also, by signing the counter offer the buyer is only risking their earnest money. They are free to back out all the way up to the point that they sign the multitude of actual sales papers. And they'll probably need to sign every last one of them before the deal actually becomes valid.

Answer 3

"As is" is limited by local law. AFAIK, all jurisdictions exclude anything that would be a immediate lethal hazard known to the seller. But asbestos? I'm not a real estate expert familiar with your jurisdiction, and these things vary.

Obviously, once it's your house you can do any inspections you want, so the counter-offer to allow inspections is of very little value. It just means you can start asking for quotes for all the necessary repairs before the actual transfer of the property. (Getting the keys). considering the implications of the counter-offer, expect high quotes.

So, I'd strongly advise against the counter offer. You might even consider walking away. There is something wrong and the seller is activaly hiding it from you.

Answer 4

Every contract for a house that I've ever signed as said that the purchase is contingent on satisfactory results of an inspection, or something to that effect. I'd be reluctant to sign a contract that didn't have such a clause.

I wouldn't necessarily be surprised or suspicious of an "as is" clause. From the seller's point of view, they want to protect themselves as much as possible. Even if they know of absolutely nothing wrong with the house, who knows what will turn up in an inspection? There may be problems they didn't know about. They don't want to commit themselves to paying the repair cost for anything that might turn up, whether they knew about it or not. I wouldn't either.

As others have said, I'd talk to the realtor and/or a lawyer to see just what you're committing to. If the "as is" clause just says that, once you are satisfied with the results of an inspection and make a firm offer, that you can't then demand they make all sorts of major repairs or upgrades, I'd say sure, no problem. But if the wording says that you are committing to pay $x for this house before you see the results of an inspection, I'd say no way.

Answer 5

Have you asked your Realtor this question? A competent Realtor should be able to read the contract and tell you the answer. No one here can give you a definitive answer since we have not read the contract.

In GA, all of the home purchase contracts that I have read have a "Inspection Contingency". You usually have ~14 days to have the home inspected. If you and the seller do not agree to repairs, you can back out of the purchase. You should look for a similar clause in your counter-offer.

Also, the contract should specify what the penalties are if you fail to fulfill the terms of the contract (i.e. purchase the home). What does the contract say about this.

Answer 6

It's important to be aware of two separate concepts: right to inspect, and as-is/disclosures.

The right to inspect should be specified, but it may also be implicit according to local laws - with such a large purchase as a house you should always get a professional, such as a real estate lawyer, to advise you on your local laws and regulations. Generally speaking, though, you should always always have the right to inspect and cancel the contract if anything is discovered in the inspection that turns off your personal interest in the property. You may or may not need to forfeit "earnest money", if you have any in the property, but this varies by jurisdiction and contract. Often you can walk-away with nothing more than time lost and your personal expense in getting a home inspection, but again you should confirm with a local professional.

The other issue is the implied condition of the property. When you sell a house you have a legal obligation to disclose issues you know it has - if the roof leaks or the furnace has gone out, it's illegal to not say so. A statement of "as-is" has the meaning that the seller disavows all personal knowledge of the property, and further they are saying "even if something is wrong with the property I'm not going to pay to fix it". In a normal sale condition if it turns out the roof is leaking the owner will fix it up as a condition of the sale, and thus the original offer price is still good.

Legally, in most jurisdictions if the seller still knows anything is wrong with the house they still have to say it, and stating as-is does not absolve them of this responsibility - but as-is is basically a statement of "other than what I've disclosed that I know is wrong - if anything - I'm telling you I don't otherwise know nor do I care about any further condition of the property". This situation is most common with banks and properties being sold by non-occupant relatives, who honestly don't know about the property themselves because they don't live there.

So as-is means it's on you to inspect the property and insure it's what you thought and want. But you know what? This is absolutely always the case, and I don't know why anything would think otherwise - you should never trust someone who is trying to sell an expensive item to you simply at your word, you must verify everything. To do otherwise is so naive as to be intolerably foolish - trust nothing, verify everything. A fool and his money are soon parted!

In conclusion, please do verify your local laws and regulations support your right to inspect (at your own cost), and then you can go ahead and accept the offer with a clear mind - and buy yourself a good, thorough home inspection! If everything checks out then you can proceed to sale, and otherwise you can cancel the contract and move on or re-start negotiations.

Answer 7

As long as the sale is contingent on the inspection then yes, you can back out afte the inspection regardless of the as-is clause.

All "as-is" means is that they reserve the right to reject any requests be made for repairs or improvements after the inspection.

In other words, after the inspection the only choices you have are to proceed with the sale as termed in the contract, or walk away. You don't have the right to ask them to correct problems the inspector finds.

You can, of course, still request that they repair or replace things the inspector finds - after all, you might walk away and they might be willing to work with you at that point. But unless there's something so wrong that legally they have to fix it, the contract essentially states there is no expectation that the house will be further upgraded or repaired.

Do NOT accept an "as-is" offer without making the sale contingent on the inspection.

You can, if you choose to, but it's essentially a gamble and if you back out you lose your earnest money. Sometimes, rarely, it's worth it - but it's gambling, and you can probably find better opportunities if you are patient.

Answer 8

If you're having to think about the purchase like this, they my recommendation is not to buy the house. Trust me! I'm currently stuck (8yrs) in my house because i was too quick to buy and happy to be a home owner. Be a picky poo... Tell them you want a home inspection and that you will not sign anything. If the home inspection comes back clean, you should still be in a position to opt out of the purchase.

Dont let the realtor sucker you into thinking this is the time to buy. The time to buy was when the house was built. I fell for all those tricks and now i am upside down $50,000 in my house with hopefully a chance at recovery in about 5 more years.

Dont do it... follow your gut. There are way more homes out there.