What to Know When Buying a House "As-Is"
Posted by : Admin
In a hot seller’s market, buyers must be willing to make concessions if they want to win the bidding war. Many times, this includes tossing out the negotiation process and accepting a property as-is.
An as-is deal means that the buyer doesn’t expect any updates, repairs or credits from the seller. If a home is in bad shape and needs lots of work, negotiating an as-is sale can save sellers time and money.
Would-be homeowners who are considering an as-is offer need to be aware of the pitfalls of making such a deal. We aren’t saying it’s never a good idea, but being informed about big decisions is always a smart plan.
Why Would I Agree to Buy a Home As-Is?
There are a few good reasons why someone would agree to buy a home as-is. They include:
- Better pricing
Properties that need lots of work may sell for thousands of dollars less than their excellent-condition counterparts. - Faster-moving process
Agreeing to an as-is purchase avoids the back-and-forth of the negotiation stage. It also cuts out waiting for sellers to make the agreed-upon repairs and additions involved in some contracts. Buyers can take ownership of as-is homes weeks or even months sooner than those going through the traditional concession-based process. - Gain the competitive advantage over other buyers
In a hot market, an as-is offer may be viewed as more enticing by the seller than a contract with a long list of requested repairs.
What Do I Need to Know Before Buying a Property As-Is?
Before making an offer on an as-is property, consider these important factors:
- Home inspections are even more crucial.
Hiring a professional home inspector is a smart move whether the home is being sold as-is or not. Inspectors can find big, costly problems within a home that could cause serious damage to a buyer’s budget. An as-is property should be inspected to give the buyer a good idea of the costs they’re facing if they purchase the home. If a seller refuses an inspection, take that as a red flag that they know something serious is wrong with the property. In this case, take a pass. - The “as-is” may not include the entire house.
While a property may be sold as-is, sellers may also designate a specific part of it as-is. For example, they may make concessions about every other area except the fireplace or detached shed. In these cases, the seller will have already taken the item into account in the selling price. - Borrowers should estimate how much the repairs will cost.
If you’re purchasing a home as-is, don’t blindly walk into the deal thinking you can handle all the repairs. Do your research and talk to some contractors about the repairs and renovations the property will need. Get a ballpark figure of the costs before making your final decision.
- It still needs to meet the minimum property requirements (MPR).
If buyers need to get approved for a mortgage loan for an as-is property, the lender has standards the house will need to meet. A licensed appraiser will examine the property and build a report that details if the property meets MPR. If it doesn’t, the lender may not approve the loan. - You should still receive disclosures.
Even if you agree to purchase a property as-is, you’re still entitled to disclosures that state and federal regulations require. While each state differs on the required disclosures, some of them include known mold issues, termites and water damage. If the sellers know about these issues, they must disclose them even in an as-is agreement. - Get a home warranty.
Asking the seller to pay for a home warranty is a good idea if you’re buying a home as-is. It probably won’t cover current issues, but it can save you money if other items break or tear up. If the seller doesn’t agree to purchase it, consider buying it for yourself as a safeguard for down the road.
There are many things to consider when you’re buying a home. If you’re considering an as-is deal for any reason, be sure you understand the details of what it entails, get a home inspection, and closely review the disclosures. Doing all this and calculating the cost of making the necessary repairs to the property will give you a complete picture to guide you in your decision.
