In today’s competitive seller’s market, it is common to see homes selling “as-is.” But what does this really mean for you as a buyer?
In essence, an “as-is” sale means that the seller has no obligation to fix any existing issues with the home. This often means a (comparatively) low price tag up front, which can be very appealing. But there are potential risks as well, so it pays to be fully aware of the responsibility and expense that such a home might entail.
Buying a home always involves a great deal of thought, of course, but an “as-is” buyer will need to do more research and work to be well-informed. Below are some keys tips that can help smoothly navigate the process.
1. Manage expectations…
Before you make an offer on an “as-is” home, you may need to adjust your expectations. Here are some important questions:
Am I OK with putting work into the home?
How much work am I willing to put into this house?
If you are game for the work such a home will likely require a repair budget so that the cost of improvements and repairs don’t come as a surprise.
Almost all home inspections come back with issues, but it’s up to you to navigate the possibilities and determine personal make-or-break items.
Your inner guided conversation could go something like this…
“Think about your current home. Is there a chipped tile that you’ve learned to live around? How about that fan that makes noise when it’s on the high setting?”
These are items that may come back on the inspection report but don’t ultimately affect the habitability of the home. If you know what is in and out of budget ahead of time, the inspection results won’t feel so overwhelming.
2. Order the right inspections…
Inspections are especially important with an as-is sale, and they will need to be completed during the negotiated inspection period. Prior to going under contract, it may be helpful to do some research on local inspectors, as their findings will weigh heavily on their decision to move forward with the contract.
You will learn who is reputable and who isn’t, and you are in a position to avoid inspectors who may not have the knowledge or expertise to distinguish between a drywall stain and mold.
Once you have settled on a trusted inspector, you can determine the inspections that may need to be done. Aside from a standard inspection, a four-point or septic tank inspection may be in order for insurance purposes.
Remember, the inspection period is the only time during which you can cancel the contract based on conditions you may find, so uncovering everything possible during this time is important.
3. Educate yourself about ‘the lender talk…’
So the inspection came back, and the home needs a new roof. You knew this might be the case; are you OK with tackling this project? The thing is, it’s not only about your feelings on the matter: Is the lender OK with this as well?
Chances are, a lender is going to require the home be safe and sound. Any items that affect safety and structural soundness, like that old roof, may prevent you from obtaining financing on the home.
If the inspection turns up any major concerns, be up front with the lender so that he or she can look for ways to help secure the financing needed to get the home.
Some options include renovation loans and escrow holdbacks, and the sooner you talk to the lender the more time there will be to find a solution.
If the appraisal notes any “lender required repairs,” the seller has the option of declining the repairs or fixing the elements in question — but also increasing the purchase price to offset repair costs.
Buying a home “as-is” may seem daunting for you based on the sheer number of unknowns. But with some additional planning and prepping, you can be better prepared to handle this process.
Focus on asking plenty of questions, and armed with the information, you will find the perfect new home.