Buying or Selling A House ‘As-Is’

As a seller, you may not have the resources to completely renovate your home, or even make minor repairs, before listing. As a buyer, you may be looking for a property to flip or you may be willing to purchase a property with flaws at a lower price. For listings that need work, the agent typically characterizes them as ‘fixer-uppers’. On the buying side, a buyer may agree to accept the home in ‘as-is’ condition as a means of getting the home at the lowest possible price. Some homes are in such deteriorated condition they will require an ‘as-is’ contract. For a purchaser to consider an ‘as-is’ purchase, that person will need to have ample liquid assets to purchase the property and make repairs; or must have the ability to obtain specialty financing. 

What is ‘As-Is’?

In short, a property listed as “As-Is” means what you see is what you get. Basically, the seller intends to sell the property in the condition in which it’s listed and does not plan to make repairs or other improvements, not even as part of final negotiations. The buyer can retain the rights to have inspections performed and may retain the right to terminate the contract if the inspections provide evidence of more serious problems than are visible during the buyer’s tour.

From a legal standpoint, it also waives any responsibility on the part of the seller for the home’s condition. While some buyers may purchase an ‘as-is ‘property without inspections, once the closing takes place the seller has no further obligations with regards to the condition of the property. Sellers and purchasers may be well advised to consult their real estate attorney to fully understand the risks associated with purchasing a property ‘as is’.  

Why Buy an ‘As-Is’ Property?

Buying a home is an exciting prospect. Getting a home at an optimally low price can make the purchase even more attractive! While browsing for a place to call your own, you may find several “As-Is” properties that need a little extra love and attention. A common misconception about homes like these is that they’re in a state of disrepair. In some cases, this might be true. In some cases, the condition may require only a cosmetic updating rather than serious structural defects or ‘big ticket’ repairs. An experienced REALTOR® will be able to help you determine if a property is worth examining or if it's one you should pass on. There are both benefits and pitfalls to consider when buying a property ‘as-is’. As indicated above, buying a  property ‘as-is’ may complicate the financing process and may even make it impossible to finance. 

Pros

• Not every home that’s listed ‘As-Is’ will be a money pit. Some properties might need major updates. At other times, it may mean that some specific conditions which are beyond the ability of the seller need attention.
• Usually, properties with ‘As-Is’ caveats are less expensive than other listings.
• The cost of the repair can sometimes be well worth the price of the house.
• Some repairs are simple DIY or low-cost projects.
• There are more opportunities to make an ‘As-Is’ property just the way you like it via renovations.
• ‘As-is’ properties can be great for people looking to flip homes for resale.

Cons

• Sometimes repairs can cost more than originally estimated as costs vary by contractor, materials, size of the house, etc.
• An inspection, even a thorough one, may not reveal every issue.
• Some properties listed ‘As-Is’ may be foreclosures. Depending on their condition,  they may or may not be financeable with a home mortgage loan.
• The buyer accepts all risk post closing, and the seller is no longer responsible for any condition. The only exception would be a condition about which the seller was aware and did not disclose, in which case the buyer would have to have proof the buyer was aware and intentionally refrained from sharing it with the buyer. 

Things to Consider

Should you choose to purchase an ‘As-Is’ property, here are a few important things to keep in mind.

• Get An Inspection - By getting an inspection, you’ll have a better understanding of the true condition of the property.  But, be very aware the inspection is not going to reveal every last detail. Rather,  it will give you information helpful in budgeting and organizing the sequence of the work to be done. 
• Get a Home Warranty - If the major systems of the home are functioning correctly,  consider buying a home warranty. This may help you mitigate home repair costs during the term of the warranty. However, bear in mind the warranty will not cover ‘pre-existing conditions’. Nor will it cover items such as roofs, structure, insulated glass windows, and other major components. 

Why Sell a Property ‘As-Is’?

There are a variety of reasons you, as the seller, may choose to list your property ‘As-Is’. This can include circumstances like:

• A house was inherited from a relative, but you don’t want to invest money in its upkeep.
• You don’t have money for repairs to the current home you’re selling or don’t intend to make them.

What Selling ‘As-Is’ Doesn’t Mean

If you choose to sell a property ‘as- is’, and if you occupy or have occupied the home recently, you are still required to provide a property condition disclosure which will reveal any and all defects about which you are aware. You should also expect to sell the property at a significantly lower price than if it were ‘move-in ready’. Selling ‘as-is’ may mean a value reduction of 20% to 50% depending on the condition. 

Pros

• Costs less than making expensive repairs and you are not ‘guessing’ what the ultimate buyer/owner materials, finishes, or equipment. 
• You may find that the selling process has fewer risks once the contract is in place. The closing may also occur sooner than if it were a  traditional transaction. 

Cons

• Usually, a property will sell for less if listed and sold in an ‘as-is’ condition.
• Potential buyers  will often overestimate the cost of repairs and may build in a steep contingency for unanticipated work. 
• Buyers may be more aggressive when negotiating the price of the property. 

Use a REALTOR® When Buying or Selling an ‘As-Is’ Property

Marx-Bensdorf has years of experience and knowledgeable agents that can help you make the best decisions when purchasing or selling an ‘As-Is’ property. Our expertise in the Greater Memphis area real estate market gives us unique and competitive insight to help you buy and sell with confidence.

Contact an Agent