If you have been browsing Phoenix real estate offerings in the Multiple Listing Service (MLS) on Realtor, you have probably seen these real estate terms quite often: “Sold AS-IS, no SPDS or CLUE given”. This is standard selling procedure on almost all short sales and bank-owned (foreclosed or REO properties) listings today. So what does it mean?
AS-IS means just that: the home is being sold as you see it now, with no representations, warranties or repairs likely from the seller. Given that buyers have the option of purchasing a home warranty for the property on their own. Rates and plans will vary of course, but you can figure about $400-$500 for a 1-year policy plus about $50 per-trip charges for item repairs, so this may not seem like such a big deal. But note that the home warranty policy only covers issues that arise from after closing, so if the hot water heater or A/C units were already broken at move-in, you will not be covered. However, this is a nice peace-of-mind for most buyers so they can avoid unexpected items needing costly repair within a year of close of escrow.
SPDS (Sellers Property Disclosure Statement) is the 6-page document, provided by the seller to the buyer, listing all known issues about the subject property. A sample of a blank SPDS form is here. With a standard seller, this is usually provided to the buyer to assist in disclosing any known defects or damage to the home that occurred while the seller was in possession. Of course with a short sale or foreclosure, the seller may not even be in the home any more and the lender obviously cannot comment about the condition of a property for which they know nothing about.
CLUE (Comprehensive Loss Underwriting Exchange) is a report from the seller providing a 5-year insurance claim/inquiry history for specific property address. If this information indicates the current homeowner has not sustained an insurance loss within the past 5 years, then typically a buyer will feel comfortable that no adverse prior claim issues will impact the availability or reasonable policy pricing of homeowners insurance. Again, as with a SPDS, this loss history is usually not known for foreclosed and short sale homes. Learn how to read a CLUE report.
Proceeding to purchase without a SPDS or CLUE report does not mean you are buying a bad quality home or one with a bad history. It simply means the disclosures for known defects/issues and loss history is unavailable for the given property. That is something to consider in the offer price when contemplating purchasing a foreclosure or making an offer on a short sale. Homes with fully reported histories may command a premium over homes without one. That being said, a licensed home inspector should be used in all real estate transactions, regardless of any seller documents provided.
