A real estate transaction is not typically as easy and straightforward as submitting an offer and buying a property. There can be negotiations and contingencies, all of which can complicate the closing process. However, with “as-is” real estate, properties are sold exactly how they are listed, and surprisingly enough, can offer some interesting benefits for both buyers and sellers.
Selling a house “as-is” means that the buyer will purchase and take ownership of the property in the exact condition it is in currently, warts and all. The seller is stating that they will not make any repairs or home improvements. If a buyer requests that repairs are made, they will be typically be denied and the sale price will not be adjusted through further negotiations after a home inspection.
The expert team at Windermere Real Estate has put this guide together to teach you how to navigate “as-is” real estate to help you decide if this is the right solution for you, whether you are buying or selling.
What Is “As-Is” In Real Estate?
“As-Is” in real estate means the property is being sold in its existing condition, with zero responsibility on the seller to repair anything on the property beforehand. With “as-is”, buyers will also not receive any credits from the sellers, even if improvements are necessary. “As-Is” properties are rarely in perfect condition and often require significant repairs. However, they can also represent a lucrative opportunity for real estate investors or first time buyers with the ability to make the repairs themselves.
Please note that selling your home “As-Is” does NOT mean that you can lie about the condition of the home or property. You cannot and should not intentionally hide or misrepresent defects or other important information to buyers that might cause them to not buy your home. In fact, many states still require you to provide seller disclosures about the condition of your home no matter what the terms or sale price is.
Intentionally hiding or misrepresenting home defects when you sell your house can result in serious legal action against you or your real estate agent if they were involved.
What Does “As-Is” Real Estate Mean To Sellers?
Selling a home “as-is” may sound like a promising opportunity, but the process is actually more complicated than you might think. It is a common misconception that if sellers add “as-is” to a listing, they will not have to participate in closing. This is not the case.
Even “as-is” properties go through a closing process where the sellers are required to participate. As stated above, sellers must disclose if they are aware of any problems with the house, as they are not allowed to misrepresent the property. This can make these properties more difficult to market but there will always be buyers interested in the deal they may get from an “as-is” property.
Sellers who are looking to simply sell their property fast may find this particularly attractive, as there will be no projects to complete before closing.
Pros of Selling a House “As-Is”
Selling “as-is” means you are selling your home fast and in its current state without needing to spend time or money on repairs. Pricing “below market” value due to necessary repairs needed may attract “flippers” and other cash buyers looking to invest, rehab and sell a house at a profit. Cutting out the finance company means they can close on deals faster with less paperwork and red tape. This is a serious benefit when you sell a property “as-is” and is the main reason most people who sell this way choose this option.
Whether due to finances, time restrictions, or simply a desire to avoid the headache of dealing with home improvements, repairs and contractors, selling “as-is” leaves all that to the new buyers.
Cons of Selling a House “As-Is”
“As-Is” properties attract a certain type of buyer. Selling your home “as-is” does two things; it disqualifies buyers looking for “move in ready” properties, thus reducing your potential reach and base of prospective buyers. It also attracts a certain type of buyer: generally, those looking to make an offer that makes sense for their wallet, but not necessarily your bank account. But this is typically a trade off when you sell a property “as-is” that you need to be fully aware of.
Although negotiation is often part of any real estate sale, expect to deal with more of this when selling “as-is”. Houses sold as-is, often attract real estate investors, rehabbers and “flippers” who are looking to scoop up a property as cheaply as possible. This creates an environment ripe for “haggling” at the lowest price possible. If you are using a real estate agent, they will be able to negotiate on your behalf but if you are selling by owner, you will be responsible for these negotiations. Those buying “as-is” are typically adept at negotiating, so an experienced real estate agent could be a great asset to have on your side.
What Does “As-Is” Real Estate Mean To Buyers?
Buyers often interpret “as-is” properties as severely damaged or far from move-in ready. However, given the right circumstances, they should not necessarily be disregarded right off the bat.
It may be true that “as-is” homes require significant repairs or upgrades, but they are often sold for a lower price. This means savvy buyers can make a great deal on a home that they may have otherwise not been able to afford.
The key to buying an “as-is” property is understanding that sellers are still subject to a home inspection. This can act as a safeguard against any repairs buyers may not be equipped to deal with—providing an opportunity to back out of the deal if the property becomes more costly than expected.
In short, buyers should be prepared to make a few significant fixes, but they should never move forward with a deal that does not make financial sense.
Pros of Buying “As-Is”
Perhaps the most attractive benefit of buying an “as-is” home is the chance to secure a lower price. “As-Is” properties are often listed at highly competitive prices, and sellers may even be willing to take a lower priced offer than that in a difficult market. Real estate investors in particular may find this appealing as they can secure good deals properties to rehab.
That being said, another benefit of buying “as-is” properties is the potential land value. If the lot is in a good area, it may make a good candidate for either a fix and flip or new construction project.
Cons of Buying “As-Is”
Though there are several benefits of buying an “as-is” property, buyers should be careful to consider the potential cons. Most notably, “as-is” homes can come with a few surprises. For one, there is no guarantee that all issues with the property will be disclosed. After all, it is entirely possible for there to be problems that even the seller is unaware of. For buyers, this could mean costly repairs and time consuming work. The best way to avoid this issue is to hire a professional home inspector to sign off on the property before purchasing.
The Truth About “As-Is” Real Estate
“As-Is” real estate is not always going to be the right strategy for every investor. Even the most experienced real estate investors can be surprised by a structural problem on an “as-is” home. The truth is, with any piece of real estate, you will not know you are making a sound decision until you have all of the information.
The best thing you can do upon finding an “as-is” property is to approach the situation with caution. Get an inspection, estimate renovation costs, and then go from there.
With the right tools, you may just find yourself at the hands of a great deal.
Find the Right Agent
Before marketing your home in “as-is” conditions, make sure you fully understand what comes with selling your home “as-is.” You are inadvertently sending a message to the buying public that you may or may not want to send. Selling your home “as-is” limits your buying pool and attracts a certain buyer.
If you want to stand firm on not doing home inspection repairs and your house is in average to good condition, telling buyers your house is being sold “as-is” may not be the way to go. When it comes time to sell your home “as-is,” being transparent upfront will go a long way in buyers writing good offers on your “as-is” home.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002