A typical real estate transaction is never as simple 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, this isn’t the case. These properties are sold exactly how they are listed, and surprisingly enough, can offer some interesting benefits for both buyers and sellers.
Read this guide to learn how to navigate real estate “as is”.
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 the property beforehand. With “as is” in real estate, 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.
Selling a home “as is” may sound like a promising opportunity, but the process is actually more intricate 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. Sellers must also 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, though there are buyers who may be interested.
What this means, is selling property “as is” may not be as simple as signing on the dotted line after an offer is made, though there are some benefits involved that sellers should be aware of. For example, while sellers must disclose any known problems with they property, they are not required to fix the issues if they are able to find buyers who want to go through with the sale.
Sellers who are looking to simply get a property off their hands may find this particularly attractive, as there will be no projects to complete before closing.
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, they should not rule these homes out completely.
It may be true that “as is” homes require significant repairs or upgrades, but also, they are often sold for a lower price. This means savvy buyers have the potential to secure 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 to understand 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 doesn’t make financial sense.
Pros And Cons 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! 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 — even if it isn’t in great condition — it may make a good candidate for either a fix and flip or new construction project.
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.
Tips For Buying A Home “As Is”
Luckily, there are several things buyers can do to protect themselves from a bad deal if they are interested in an “as is” home.
The best place to start is by familiarizing yourself with the most common issues that must be disclosed about a property. Many states have requirements in place that legally require real estate agents and sellers to mention specific problems. These include termite damage, significant noise levels and major plumbing issues.
If you do find an “as is” home you are interested in buying, get a thorough home inspection to protect yourself from unwanted surprises. An inspection will confirm any existing issues and reveal anything the sellers were not aware of. If the inspection reveals problems that are worse than anticipated, for example foundational problems or a mold infestation, you can still walk away from the deal.
Before you submit a final offer on an “as is” property, carefully weigh the potential costs of renovations and upgrades. It may sound obvious, but it is crucial to anticipate how these costs will impact your monthly finances. Buying a house is a big investment on its own, but buying an “as is” property comes with the added responsibility of renovations.
[If you are interested in learning how to finance significant home repairs, read this article about renovation loans.]
What Does “As Is” Mean In Real Estate Contracts?
When you see “as is” in a real estate contract, it is simply the seller stating they do not want to be held responsible for any contingencies. A real estate contingency is essentially a condition applied to a real estate deal that must be completed before the property is sold. By writing that the property is being sold “as is”, sellers are attempting to prevent buyers from adding any additional requests to the sale, whether they are repairs or credits.
Buyers should understand that even when a property is being sold “as is” there is still an opportunity to add an inspection contingency to the contract. As previously mentioned, requiring a home inspection allows you to back out of the deal in the event any additional problems are uncovered.
Despite the “as is” phrasing, if a home requires more repairs than anticipated, buyers can still attempt to negotiate a lower sale price. While your counter offer may not be accepted, the option is available.
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 blindsided 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.
While you will have to pay for the inspection, it can save you from getting into a potentially harmful deal. You may not be inclined to actively search for “as is” real estate, but be open to the opportunity if it ever arises.
With the right tools, you may just find yourself at the hands of a great deal.
When asking, “what is ‘as is’ in real estate” the answer is complicated. For sellers, “as is” properties represent the chance to quickly sell an unwanted property. Buyers, on the other hand, may look at “as is” properties as an opportunity to secure a lucrative real estate deal.
No matter which end of the transaction you are on, weigh each of the pros and cons before buying or selling “as is” real estate.
Have you ever wondered what is an “as is” home sale? Better yet, have you ever purchased an “as is” property? Share your experience in the comments below, we look forward to hearing from you.