Can buyers use the inspection contingency to back out on an "As-Is" home contract? The buyers knew the sellers will not repair, credit or negotiate.

Asked by mokshatl, San Francisco, CA Fri Apr 19, 2013

on the sale price going into the contact. Seller disclosed all known defects. What happens to the deposit? would the buyers be entitle to it since the buyers claims that the purpose of the inspections were for their own information about the condition of the property.

Help the community by answering this question:

+ web reference
Web reference:

Answers

10
Rob Regan, Agent, San Francisco, CA
Fri Apr 19, 2013
The As-Is is merely a statement of the Seller's intent and not a binding agreement - as Bill said below.... "read it" and it is pretty clear. Your agent should have told you how this might play out.

When the Seller accepts the Buyer's property inspection contingency it gives them the right to cancel or try to renegotiate. Period end of story. The Seller can say "no" to any demands and cite the As-Is, but it wouldn't be the first time a Seller changed their mind about their "intent" to not negotiate. And the buyer using their contingency has every right to ask.

Also, stating that "all known defects" were disclosed is rather meaningless. First, there may be unknown defects. Second, a known defect may turn out to be far more expensive, or difficult, or time consuming than the buyers assumed when they're able to ask follow up questions of their own inspector or experts. Reading reports from experts is far, far different than seeing it first hand through the eyes of the inspection where you can ask follow up questions. Basically, "known defects" and actually "knowing" what they mean can be very, very different in the mind of buyers so getting ones own inspection often does provide new information.

This is basic stuff for experienced Realtors as you can see from all of the below comments from my colleagues.
Web Reference:  http://www.SFisHOME.com
4 votes
Pam Files, Agent, Gardendale, AL
Tue Apr 23, 2013
Absolutely! Just because you purchased a home on a AS IS contract doesn't mean that you waive your opportunity to have the home inspected....as long as you have the Home inspection clause and are within your time limits. With a written notice, you can step out of the contract and expect your earnest money returned.
3 votes
Fred, If the seller agreed to allowing the buyer the inspection contingency, then the buyer can back out if the inspection reveals any material defects (or however else it may be worded) that make the property unsatisfactory to the buyer. If someone wants to sell a property "as is" they should not accept a contract with an inspection contingency if they are not willing to allow the buyer that option. There is a lot of gray area and misunderstandings with this and I know in my state there needs to be more clarity with regards to the "Inspection Contingency" and what are valid reasons to break a contract and walk away.
Flag Fri Jul 29, 2016
Fred YOU are dead wrong. As-is means that the home is being sold in the condition that it exists, and the seller is not making any promises of repairs or modifications. If the buyer does not have a satisfactory inspection he can back out.
Flag Mon Jun 27, 2016
That's plain wrong. If a buyer purchases the property "as is" - that although they can have the property inspected - they must go through with the purchase. It's absolutely contractictory what Pam stated. The agreement can't be "as is" if there is a home inspection clause which allows the buyer to back out. That's an oxymoron!!!
Flag Wed Oct 30, 2013
Terry Farnsw…, Agent, Lisle, IL
Fri Apr 19, 2013
You would need to check the language in your contract.

If the contract allows for an inspection period, then as long as the buyer is still within this period of time (typically 5-10 days from the time the contract is executed), they may cancel the contract and get their earnest money deposit returned - regardless of if the property is designated "as-is" or not.

If there is no inspection period allowed in the contract, or the buyer is outside of any time periods set for an inspection - then the seller would have remedy to keep the deposit.

Without knowing the exact details of the transaction, and the specific language of the contract, it's hard to answer with absolute certainty. However, if there is an inspection period or contingency outlined in the contract for the buyer - the fact that the defects were disclosed, or that the buyer knew it was "as-is" would not matter.

The reason for this is - although the seller may have claimed to "disclose all defects" - without their own inspection a buyer could never know for sure whether or not there were any latent defects in the property, and specifically what they are. They would essentially only be "taking the sellers word for it" about the condition of the property.

Inspection periods protect the buyer and allow them to make their own determinations on condition before proceeding.

Hope this helps!
2 votes
Cheryl V., Agent, San Francisco, CA
Fri Apr 19, 2013
Hi Home Buying in 94164,

Yes, the buyer can back out of the contract using their inspection contingency even though it's an "As-Is" Sale, as long as the buyer did not remove the inspection contingency.

As long as the inspection contingency is in tact, the buyer is entitled to receive the deposit back. A written mutual agreement releasing the deposit from the title company must be signed by both parties.

Good Luck!
1 vote
Bill Eckler, Agent, Venice, FL
Fri Apr 19, 2013
Read the "AS IS" contract carefully.....many of these documents contain a "kick out" clause allowing the buyer withdraw without penalty should repairs resulting from inspections exceed a specified limit.

So, can a buyer use the inspection to back out of an "AS IS" contract? Possibly, if it is in accordance with the agreement.

Hope this helps.

Bill
1 vote
Gabrielle Da…, Agent, San Francisco, CA
Fri Apr 19, 2013
As long as there is an inspection contingency and the buyer is within the specified time frame for the inspection contingency period, cancelling the contract is fine. However, this answer is general because no one here knows the full contract. Writing the contract 'as-is' simply means that the property is offered without credits, repairs, or further negotiations but this does not preclude the buyer from conducting due diligence.
1 vote
Oggi Kashi, Agent, San Francisco, CA
Fri Apr 19, 2013
If you have a valid inspection contingency, then yes, you may cancel based upon your findings. The deposit will need the agreement of both parties before being released. Please consult your agent for details.
1 vote
Cindy Davis, Agent, San Diego, CA
Fri Apr 19, 2013
If you cancel within your contingency period, you should be fine. If you cancel after you have removed contingencies, you may lose your deposit.

Before cancelling however, I would at least ask if the seller is willing to contribute toward repairs...never hurts to ask!
1 vote
Sally Rosenm…, Agent, San Francisco, CA
Fri Apr 19, 2013
I agree with Lance. And I will add, some Seller(s) will agree to sharing some of the costs even if they originally stated "as-is." If you are the Buyer(s), please be sure to ask for any credits within the allotted time in your contract even if it is the final day to remove the inspection contingency. The Seller(s) do not have to agree to accept any or all of the monetary request. The Buyer(s) can then decide if he/she/they want to move forward with the purchase. I believe Buyers can use the Inspection Contingency to get out for any reason as long as it is done within the time constraints of the contract. I am not an attorney so if you really want to know the legal answer, contact an attorney ASAP.

Good luck,
Sally
Web Reference:  http://www.sallyrosenman.com
1 vote
Lance King, Agent, San Francisco, CA
Fri Apr 19, 2013
If you have an inspection contingency you should be able to cancel without penalty. Additionally, As-Is does not mean you can't ask for credits. It simply means the sellers are stating up front that they don't intend to give any.
1 vote
Furthermore, if the buyers act within the inspection contingency period that is about 10 days, they are entitled to have their earnest money refunded. (I am not a renter but a home buyer)
Flag Mon Jun 29, 2015
@Jerry Manning: If a buyer signs an agreement which stipulates inspection contingency within say, 10 days, then it's perfectly legal for them to back out if they don't like the results. In this case scenario, there are no negotiations re: price or who pays for the repairs. Read your agreement. This might not sound right to you as a seller but this is how it works.
Flag Mon Jun 29, 2015
you "should" ? If the buyers signs an agreement saying they'll buy it as-is, and will request the seller pay for no repairs, where's the wiggle room ? yes, they can inspect it all they want, but if they back out, they defaulted, they lose their earnest money.

Otherwise, contracts mean nothing, and so does earnest money !
Flag Tue Apr 21, 2015
Search Advice
Search
Ask our community a question

Email me when…

Learn more