Everything Buyers Need to Know About "As Is" Home Sales

Home Buying

Everything Buyers Need to Know About "As Is" Home Sales

May 30, 2019 | by Clever Real Estate

At A Glance

“As is” homes can be attractive to buyers because of their low cost. But are they worth the risk? Find out what “as is” actually means, potential drawbacks you may not have considered, and tips for buying one.

Everything Buyers Need to Know About "As Is" Home Sales

At a Glance: 

 

Meta Description:

You go to a clothing store and score a killer deal on “as is” designer jeans with a missing belt loop. Simple fix and you can still afford that fancy latte. Sweet!

Buying an “as is” home is similar — except instead of having to sew on a new belt loop, you may need to put on a new roof, fix foundation issues, or remove an old pool. Ehh... not so sweet. And while you may be proficient at figuring out a defect in some “as is” jeans, when buying an “as is” home, you might not know what you’re dealing with until you take possession.

“As is” properties aren’t for everyone — they can sometimes work out in your favor, and they can sometimes be like throwing your hard-earned cash in a dumpster fire. Here’s everything you need to know about buying a home “as is.”

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What Does Buying a House “As Is” Mean?

When you see the term “as is” in a real estate listing, you can assume the house needs some major repairs and rehab work. The extent to which the property is distressed can vary and you can’t assign a dollar amount to the repairs needed until you see it in person.

In its most literal sense, “as is” properties are sold just as they sound, in the current condition with the seller agreeing to no repairs. However, this doesn’t mean the seller is exempt from completing a seller disclosure form and listing out any known defects. The seller may also agree to allow you to inspect the property on your own, but for informational purposes. You’ll be bound to the contract regardless of what you find, so navigate those waters carefully.

Specific “As Is” Components

Sellers may also stipulate certain parts of the home “as is.” For example, they may know the roof leaks but aren’t willing to spring for the $10,000 bill to fix it. So, they’ll list the roof “as is.” Same could go for a chimney that needs work or a non-functional swimming pool.

These may be negotiation points when landing on an agreed upon sale price, but keep in mind that the seller likely already took these “as is” components into consideration when determining the listing price, so they may not be willing to go much lower.

Home Inspections for “As Is” Properties

Occasionally, a seller may agree to a full home inspection with the option of backing out of the deal depending on what the inspector finds. Here, the “as is” designation is letting the buyer know not to ask for any repairs from the seller — as is common during a traditional buyer/seller negotiation — because they won’t agree to them. Whatever your terms, work with your real estate agent to include them in writing in your offer. Not in writing? Doesn’t count.

Mortgages for “As Is” Properties

You must make sure that your lender will approve your loan when it applies to an “as is” property. FHA or VA loans require any major repairs completed before closing and won’t like an “as is” property. Even traditional loans through a bank may reject the loan if there are major issues that could cause an insecure investment for them, like a shaky foundation. If you have a lot of money to throw down for a down payment, you may still secure a mortgage for an “as is” property, but ask your lender before making any offers.

Tips for Buying An “As Is” Home

Typically, “as is” properties are best for those experienced in rehabs, like real estate flippers or investors. If you don’t fall into this category and you want to buy one any way, make sure you know what you’re getting yourself into. There will likely be big ticket issues that come up you were unaware of prior to moving in, so you’ll want to make sure you have the time and money to cover them if you’re looking to live in the home right away.

While you can typically score an “as is” home at a deep discount, you must weigh the potential benefits with the potential risk of costly repairs. It’s attractive to buy a home on the cheap, but an “as is” home could end up costing you more in the long run, and cause additional headaches.

When buying an “as is” home, work with an experienced, local real estate agent who can help lead you through the entire process and make sure you stipulated everything in writing to the seller. They can also help you consult with an attorney, perform a title search, and include a provision for a whole home, termite, or structural inspection.

Besides helping you uncover additional cost-savings opportunities, Clever Partner Agents also offer on-demand showings — sometimes in less than an hour — so you know you won’t miss out on a good deal or “as is” property. Plus, you’re eligible for a $1,000 buyer’s rebate on any home you purchase for more than $150,000 (in 40 states).

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