Know the potential risks of buying an as-is property
An “as-is” house means that the seller doesn’t have the obligation to make any repairs before the buyer moves in.
The biggest benefit of buying an as-is house is the lower price and more room for negotiation.
Have a home inspection done to stay informed of the necessary repairs.
Buyers may encounter “as-is” properties while on the hunt for their future home. These properties often have necessary repairs that the owner is not willing to fix before selling. While this may seem like a drawback, it can also come with benefits. Discover the pros and cons of as-is homes to decide if it’s the right move for you.
Buying a house “as-is” means that the seller doesn’t have the responsibility of doing repairs or fixing problems throughout the home. They have no obligation to guarantee that everything is working in the home, and are essentially telling the buyers to “take it or leave it.” As-is may refer to certain parts of the home or the property as a whole.
A person may be listing a home as-is for a variety of reasons, such as foreclosure, inheritance, or debt. The damages to the home may range from minor to major, and the seller does not have to correct them. This may include anything from paint chips to broken appliances, mold, or a faulty roof. It’s important to have a home inspection conducted prior to closing, to ensure you have an overview of any damage to the home. The seller, however, does have to meet minimum disclosure requirements and warn of any potentially harmful issues such as lead paint or asbestos.
While buying a home as-is may sound unattractive to some, there are many potential benefits. The biggest benefit is that the price often reflects the condition. As-is homes are often priced to sell, and much less expensive due to the repairs needed. There is more room to negotiate the price with the seller, as the owner is often very motivated to sell.
Depending on the condition of the home, you may end up saving more money in the long run. If there are only minor repairs that need to be made, you may find that the value of the home quickly rises above what you bought it for once they are fixed. Buyers will also find that there is less competition for the home due to the need for repairs or renovations.
While there are major benefits to buying an as-is home, there can also be some downfalls. An as-is home may have major hidden problems that can cost you a pretty penny to fix. These major issues may include a roof that needs replacing or cracks in the foundation.
When buying an as-is home, you may find it harder to obtain a mortgage. FHA and VA mortgages require certain repairs to be completed before the transaction is complete. These repairs include major plumbing issues, pest infestations, rotting outbuildings, foundation defects, and broken fencing. This poses a challenge as the seller is unwilling to complete these repairs or changes. Many buyers will purchase as-is homes with cash due to the challenges they face getting a mortgage.
| Common As-Is Repairs | Cost |
|---|---|
| Roof Leaks | $360 – $1550 |
| Asbestos Removal | $450 – $6,000 |
| Water Damage | $1,300 – $5,900 |
| Fence Repairs | $300 – $900 |
| Termite Damage | $250 – $37,500 |
It’s important to stay informed about the issues that may arise within the home you’re buying. Don’t be afraid to ask questions about the home and get an overview of the potential repairs. Find a trusted home inspector near you and have an inspection done on the property. Adding a home inspection contingency clause to your offer will give you the option to back out if major issues are uncovered. You will have to cover the home inspection cost, which ranges between $280 to $400, but buying a house as-is with an inspection can save you a lot of money in the long run.
Once you receive the home inspection report and are aware of the repairs that are needed, get an idea of the investment you’ll need to fix them. It’s recommended to put away 10 to 25% of your budget when buying an as-is home to put towards the repairs. This ensures you have more money available for renovations once the transaction is complete. Staying prepared keeps you from getting stuck between a rock and a hard place when purchasing your future home.
