“As Is” Property Sales: The Hidden Environmental Risks Brokers, Investors, and Lenders Shouldn’t Ignore

“As is” property sales are becoming more common, especially in deals involving older, foreclosed, or distressed properties. At first glance, these transactions can look like a smart shortcut—closing is quicker, negotiation is simpler, and the parties move forward without the back-and-forth over repairs. But when environmental issues come into play, that streamlined process can hide serious and expensive risks.

In an “as is” sale, the buyer agrees to take the property in its current condition, and the seller typically disclaims any responsibility for future repairs or conditions. However, “as is” doesn’t mean the property is free of problems, and it doesn’t erase legal or financial responsibility for environmental contamination. Issues like leaking underground storage tanks, polluted soil, hazardous building materials, or chemical runoff are often invisible and can remain undetected until long after closing. And once they’re discovered, the burden—financial and legal—almost always lands squarely on the new owner.

One of the most common pitfalls in these transactions is the lack of meaningful disclosure. Sellers may not know about contamination, or they may choose not to investigate environmental conditions before listing the property. Buyers, eager to close quickly or attracted by a lower price tag, sometimes skip thorough due diligence. That’s a risky bet. Environmental problems can trigger cleanups costing hundreds of thousands of dollars. In more serious cases, government agencies can intervene under laws like the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), which can impose liability on current and past property owners, regardless of fault.

The good news is that most of these risks can be managed—if buyers and lenders take the right steps. Environmental due diligence remains essential, even in “as is” deals. A Phase I Environmental Site Assessment (ESA) should be standard practice. This assessment reviews historical use, regulatory records, and site conditions to flag potential issues. If concerns are raised during the Phase I, a Phase II ESA may be necessary to test for contamination in soil, groundwater, or air.

Some buyers assume that “as is” means they have no room to negotiate, but that's not always true. If contamination is suspected or confirmed, buyers can often negotiate terms that shift some of the environmental risk back to the seller. This might include indemnity provisions, where the seller agrees to cover specific costs if contamination is discovered after closing, or escrow arrangements that hold back a portion of the sale proceeds for future environmental expenses. In some cases, buyers may also want the right to access the property after the sale for monitoring or cleanup.

Lenders should also be cautious. Environmental liabilities can impact collateral value and even drag a bank into legal action. Requiring a Phase I ESA as part of underwriting is a low-cost way to avoid potentially massive exposure down the line.

At the end of the day, “as is” should never mean “sight unseen.” Real estate brokers, investors, and lenders all benefit from fast-moving deals, but that speed shouldn’t come at the cost of ignoring environmental risk. The cost of cleanup, regulatory fines, and property value loss can far outweigh the savings of skipping an environmental assessment.

For any deal involving commercial, industrial, or older properties, taking the time to investigate environmental conditions isn’t just good practice—it’s essential risk management. In today’s market, the most successful professionals are those who know how to spot both the opportunity and danger buried just below the surface.