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As-Is Sale! Is An As-Is Sale Possible In Sales Of Small Businesses?

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Comments & Replies: 3     Views: 2309     Posted By: Broker/Consultant  

Is an As-Is sale of a small business achievable by owners when selling a business? Brokers and agents hear this all the time from sellers when procuring listings. Joel Miller (a Southern California Senior Care Services Intermediary) discusses this topic with others on this BizBen Discussion.

Topics: Buying A Business, Selling A Business     Tags: buying a business, deal structures, for sale by owner, selling a business


Contributor: Broker/Consultant: Elderly Care Services

I was on a listing appointment recently when my Seller declared several times that he wanted all potential Buyers to know that this was an "as-is" sale and that all of my marketing material must state so. The Seller was so emphatic about "as-is" that I started wondering what was wrong with the business or my Sellers interests.

We all understand what the "AS-IS" sticker means when we go to buy a used car. Fortunately California has laws in place to protect the used car Buyer. But after a certain period of time if the car breaks down, the wheels fall off and the paint peels away its my problem not the used car dealer.

Business's are not cars and sometimes I think there are more moving parts in a business than in a car. So, if I was a potential business Buyer and I was told that the business I had an interest in was being sold "as-is" I would wonder if something was wrong with the business and whether the Broker or Seller were being honest with me.

Buyers, make sure you do a very thoughtful and thorough inspection of any business you have an interest in. Ask for the Seller's books, hire a "third party" Appraiser, demand that escrow bulk sale laws and disclosure laws are completed in a timely manner for your review. And most importantly trust your gut.


In a way a buyer does buy a business as-is. All future profits are subject to the new owner's endeavors. I think the seller is anxious that if he/she sells the business, and the new owner does not run it well they may later sue, but I always explain to the seller that any buyer will have to sign off on the books and records and sign a warranty disclaimer which states the buyer has approved the books and records.

The buyer is also supposed to ensure that all equipment is in working condition at the time of close of escrow. Obviously the seller must state all pertinent information, such as if they own a coffee house and know a Starbucks is going to be built around the corner etc, but as long as the seller discloses all information then they have protected themselves. As a broker, you can put in your advertisement that, "broker has not verified information." because the only information we can share with the public is what is given to us by the seller.

I would explain to your seller that if they disclose everything truthfully then they will be protected if a problem later occurs after the new owner has taken possession.


Technically all business sales are "as-is," the buyer is acquiring the business in its current condition, a condition the prudent buyer will verify during the due diligence period. And, the prudent buyer will only buy a business when the seller provides reasonable representations and warranties that "what they see is what they are going to get."

Too often, business sellers emphasize that they are selling a business "as is" because they want to hide or obfuscate relevant, material, and potentially detrimental information. While, of course, sellers cannot (and should not) guarantee how the business may or may not perform in the future, Buyers are appropriately leery of business-for-sale postings using the term "as is;" their immediate reaction is (and should be), "What are they hiding?"


  Helpful Resources To Assist In Selling And Buying California Businesses
Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Joe Ranieri, Business Broker, Orange & LA County Areas

Having owned retail/restaurant businesses for over 20 years, my interest turned to listing and selling businesses rather than owning them. I specialize tend to specialize in Orange County high volume restaurants, fast food independents and chains, bars and liquor stores. Call 714-292-5448.

Bob Baumgarten, Business Broker: Orange, LA Counties

National Business Brokerage is a full service brokerage company that has been serving buyers and sellers of Southern California businesses since 1994. We are dedicated to providing the highest standards of professional service for our clients. Phone Bob direct at 949-588-8727.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Joanne Weber, Broker - Preschool Specialist - Southern California

The Ryan Craig Company is in its 35th year as the recognized expert in Southern California, dealing exclusively in the sale of preschools, Montessori schools, day care centers, and private schools. Our extensive list of references speaks for itself. Phone Joanne at 818-760-3684 for more info.


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