How to Handle “As-Is” Clauses in Divorce Listing Orders

An “as is” clause stipulating that a property will be sold without repairs can, in some cases, create problems during the sale of a house.

Despite the fact that many divorcing homeowners have limited financial resources and want nothing to do with repair bills for a property they won’t live in, it behooves the divorcing couple to make the types of repairs that increase the value of the home and make it presentable for sale.

For instance, a pool containing six feet of standing water will not pass an appraisal inspection, and a lawn that hasn’t been mowed in two months will make the property look foreclosed, resulting in low offers, if attracting any offers at all. Neither of these scenarios will result in a favorable sale price—or lucrative proceeds check—for the divorcing couple to walk away with.

Further, allowing divorcing clients to believe their home should have no repairs at all can lead to conflicts down the road when a prospective buyer’s lender demands repairs as a prerequisite to funding.

When preparing your clients for the inevitabilities of parting with their family home, here are a few things they need to know about the different types of repairs they could face:

Statutory repairs: State and local ordinances require that all buildings must be up to code before they are sold. These are mandatory requirements and can vary by municipality. A qualified building inspector can help determine which statutory repairs apply to your client’s house.

Lender-required repairs: Mainstream loans contain underwriting guidelines that not only require buyers to qualify, but require that the house qualifies, too. An operable heat source, a working stove, a filled swimming pool with running pump, and many other health and safety items must be present and functional, or the loan could fall through.

Cosmetic repairs: Deep cleaning, carpet steaming, and a manicured lawn are some of the best investments a seller can make. Spending $1,000 on maintenance and cosmetic repairs can result in multiple expedited offers, some coming in $5,000 – $10,000 over the asking price.

Buyer-requested repairs: If a buyer submits a great offer, especially one above list price or with very favorable terms, don’t let a seemingly expensive repair request spoil the deal. Most items can be negotiated through escrow with a credit to the buyer in lieu of actual repairs, which releases your client from paying repair bills up front with money they can’t afford to spend.

The Bottom-Line:  To some degree, repairs are an inevitable element of a property sale. In lieu of a resolute “as-is” clause in your divorce order, try substituting more flexible verbiage to attract the best offers and minimize the financial stress on your divorcing clients:

Sample verbiage: “The property shall be sold with minimum or no repairs, unless required by law, an underwriting guideline, or suggested by the listing agent for the purposes of obtaining a higher offer upon mutual agreement by the parties.”

If you have any specific questions regarding a case, feel free to give me a call. I’m happy to discuss the scenarios you’re facing with your client. And, as always, visit my attorney portal website whenever you need title, recorded documents, or fair market valuations.