Education and news for smart DIY landlords!
Sold “As-Is”. You’ve probably wondered what it means as you browsed online property listing sites or your local housing authority’s bulletin board. While the term itself immediately tells you that what you see is what you get, there’s more to it than meets the eye when it comes to the negotiation process.
In this article, you’ll gain a deeper understanding of what a home listed “as-is” means to a buyer and the seller. You’ll also learn the pros and cons of buying one and the various strategies you can employ to increase the chances of it working.
A house that’s listed “As-Is” means that the owner is selling the home in its current condition. As a buyer, you can expect that the seller will not make any improvements or repairs to the home prior to the sale. It also means that the seller will not negotiate with you to fund the repairs.
This type of deal is rarely attached to homes that are in perfect condition and ready to be moved into and is commonly found in properties that are in disrepair. One reason for such a case is that the property owner or seller lacks the fund to do the repairs.
Sometimes, the property has been through a foreclosure and is owned by a bank or those with the rights to sell the house have no idea what needs to be done but still need to sell. Shortly speaking, the seller of an as-is home just wants to dispose of the property and move on.
Most as-is properties aren’t livable or have a lot of major damages. You can either present an offer of paying just for the land because the home is basically a heap of trash or you can hire a home inspector to calculate the needed repairs so you can ask for a discount based on the estimated repair costs.
If the house’s worth is equal to a pile of rubble, you just completely demolish it and construct a new home in the area according to your own design. What matters here is your ability to afford such a project.
In some rare cases, the house sold as-is might just require a few major repairs and maintenance. It can be a great investment opportunity if you’re looking to flip, in a partnership with good contractors, or are good with the hammer yourself.
As mentioned, most as-is homes aren’t livable and most lenders don’t want to loan you money to buy something that’s hardly considered a house. Worse, as-is home sellers and their agents would only accept cash offers.
Whatever problems the property has, they are all yours to take care of. You might find a sinkhole in the backyard or a methane deposit underground which could be a hazard later on. The good thing is, the seller is still obligated to disclose problems (varies by state) and you can sue them if damages are incurred because they didn’t tell you anything.
There might be a specific reason other than not having the money for repairs or the inability to pay the mortgage that the seller is listing the property as-is. Mostly it’s about the local market or neighborhood. And they won’t tell you about it because it would lower the property value.
Buying a house with an as-is tag is high-risk/high-reward. From the perspectives of an ordinary homeowner and real estate investor, you could end up throwing your money into a black hole if you don’t study the property and the area well.
But if the property does end up being worth more than the closing price or if you can buy it with a huge discount, you’ll save a lot of money and stretch your profit margin as much as you can when the time comes for you to sell the house.
I strongly recommend that you avail the services of a home inspector and real estate agent or realtor, particularly those who specialize in as-is deals. This is to help you get a good deal and make a solid decision on whether to buy the as-is property or back out to avoid loss.
Read more blog posts about buying a house here!