Most people view an “as-is” real estate sale with some caution and pragmatism. There is definitely a “buyer beware” attitude about as-is sales because buyers are left wondering why the property can’t be sold in a traditional manner. This is true for any as-is property, including those categorized as a receivership property.
Understanding the nuances and requirements of as-is sales in receivership can help buyers know what to expect before, during, and after the process.
What Is an As-Is Property Sale?
An as-is property sale is any real estate transaction where the property is sold in its current condition, without the seller having to make any repairs or provide any warranties as a condition of the sale.
These are the commonalities in most as-is property sales:
- The seller is not obligated to make any repairs to the property before the sale
- The seller provides no warranties or guarantees about the condition of the home or anything inside it
- The buyer accepts full responsibility for inspecting and evaluating the property’s condition
- Any repairs discovered during the inspection or after the purchase are the buyer’s responsibility to fix
- The seller must disclose any known material defects
- The contract includes an “as-is” clause that explicitly states that the buyer accepts the property’s current condition
California Health & Safety Code 17980.7 gives the courts the authority to appoint a receiver to take control of a nuisance property if:
- The owner, after given a reasonable opportunity to comply, has failed to comply with notices
- Appointment of a qualified receiver is deemed necessary by a Court
A receiver can take all the necessary steps to rehabilitate the property, at no cost to taxpayers. They may also have permission to sell the receivership property, in accordance with California Civil Code 568.5. If the court approves the sale, the receiver may opt to repair the property or sell it as-is.
Common Health & Safety Concerns at As-Is Properties
Health and safety concerns are often a major part of why a property would be sold as-is. Nuisance properties are sold to buyers who are willing to take on the risk of an as-is property because they want to tackle a major renovation project or invest in the land even if the building needs to be demolished.
Nuisance properties are those that have become distressed due to neglect or abandonment. These properties tend to collect health and safety code violations, and they are of concern to their community because of the increased risk of crime, injury, and fire.
Signs of a nuisance property may include:
- Abandonment
- Severe disrepair
- Dilapidation
- Safety code violations
- Criminal activity
Although some as-is properties have minimal issues, you may encounter any number of problems at these properties, including:
- Hoarding
- Fire damage
- Water damage
- Graffiti
- Vandalism
- Animal waste
- Abandoned personal property
- Damage to structures
- Broken appliances
- Roof damage
- Crawl space damage
- Unfixed code violations
- Unfinished renovations
Is Buying an As-Is Property Always a Risky Decision?
Not all as-is properties are risky. Although you may find the above issues in any property, some as-is properties are solid, well-built, and relatively well-maintained.
Perhaps the owner passed away without any heirs. Maybe the house was illegally occupied but still cared for. Someone with a hoarding disorder may have filled the house with possessions without damaging the building.
When a health and safety receiver is involved, the property may be sold as-is because of many reasons other than a need for major repairs and renovations.
As-Is Property Sales in Receivership
In some instances, a property can lack the equity to support a full or partial rehab by the receiver. As a neutral third party, the receiver can either sell the property in its current state or perform an exterior and interior clean-out and then look for buyers who would be willing and able to submit a rehab plan for the court’s approval.
Receivership as-is sales require court approval of a rehabilitation plan by the buyer, which the court-appointed receiver monitors for a particular duration before they’re legally discharged.
What Are the Considerations for Selling a Receivership Property As-Is?
A health and safety receiver may choose to sell the property as-is for several reasons, including:
- Cost savings: The receiver’s goal is often to maximize the return for stakeholders, and selling as-is avoids incurring additional costs of renovation and legal fees associated with obtaining court approval for multiple phases, which sometimes occur with properties that require a complete renovation
- Transparency: Selling as-is gives full transparency to the buyers about the condition of the property
- Time constraints and market conditions: Receivers always aim for efficiency, and renovations can delay the sale timeline. Depending on market conditions, an as-is sale may be the most prudent path
Buyer Agreements for an As-Is Receivership Sale
When purchasing an as-is property through a receiver, buyers will need to enter into a compliance agreement with the city or county, wherein the buyer submits a rehab plan and agrees to adhere to a timeline for addressing the nuisance property’s conditions. Inspections are scheduled with city or county officials to ensure any code violations are properly brought back into compliance.
If the receiver is the primary person responsible for addressing the problems at the receivership property, the buyer can be a secondary responsible party, reporting to the receiver until rehabilitation is complete. The buyer and the receiver work together on a rehab plan and a timeline for completion, and the receiver monitors the buyer’s progress, offering guidance along the way and ensuring legal compliance.
Learn More About Health & Safety Receiverships and As-Is Property Sales
Richardson “Red” Griswold of Griswold Law has served as a court-appointed receiver hundreds of times in California. Most of these cases have involved distressed, abandoned, and nuisance properties.
Our team at Griswold Law has the necessary experience to oversee as-is sales in a way that is fair and beneficial to all parties involved, which includes the property owner, stakeholders, buyers, and the court.
To learn more about distressed property receiverships, download our case study about how we addressed the blight and nuisance concerns at the Americana Lodge.
