Wednesday, July 17, 2013 / by Teresa Dipeso
In this new age of foreclosures and short sales, more and more homes are offered as-is. For the prospective homebuyer it is essential to understand what this means. Buying a home as-is sounds like it would be a disadvantage, but it also has a number of benefits that could play to your favor.
First, what does it mean to buy a home as-is? It means that you are buying a home exactly in the condition that it appears, and the sellers aren’t making any warranties about the condition of the property. If there are things wrong with the house, from cosmetic damage to major structural issues, they will be the responsibility of the buyer to repair.
Homes that are in foreclosure and short sales are typically sold as-is. In both cases, the seller is taking a loss on the property and understandably doesn’t want to sink more money into making repairs. In the case of foreclosures, the seller (usually a bank) hasn’t lived in the property and isn’t in a position to know everything that’s wrong with the house. Since foreclosures and short sales frequently occur below market value, it’s understood that the buyer will have to repair any issues at his or her own expense, adding to the costs involved when buying a house as-is.
When houses are considered teardowns or are otherwise in poor condition, it is common to present a purchase offer that is as-is. This communicates to the seller that the buyer is going to invest in the house and expects a lower price because they’re willing to assume full responsibility for everything that’s wrong with the house. For the same reason, it is also common to present an as-is offer when bidding well below the asking price, even if the house being sold is in good condition. In these instances, it indicates that the buyer has fewer hang-ups that may prevent a deal from going through. It also means that there won’t be ugly or expensive surprises for the sellers if issues are uncovered during the inspection period.
Just because a home is offered as-is, it doesn’t mean that the seller can lie outright as to the condition of the property. Regardless of the terms of sale, the seller is obligated to disclose any major issues with the house. Even if you purchase a home as-is, a major undisclosed issue can be found to be the responsibility of the seller, provided he or she knew of them prior to sale.
When a house is being offered as-is, there is always concern on the part of prospective buyers that something is wrong with the house. Once your offer to purchase a home as-is has been accepted, it is still essential to have a full inspection and to use your inspection period wisely. With the inspection report in hand, qualified tradesmen or contractors can come to the property to present you with bids to fix the issues that were uncovered. This will let you know exactly how much repairing your new house will cost and allow you to assess the purchase.
Even if your purchase agreement for a home states that you’re buying the home as-is, there is no reason that you can’t ask the sellers to make repairs. If it’s an older home, you’ll certainly have uncovered things that they failed to disclose and some things that may cause the house to deteriorate if not addressed promptly. Sellers are not obligated to fix these issues. That said, pointing out nicely that they are sticking points in advancing the deal may encourage them to repair a few outstanding issues or provide a credit to you at closing.
Buying a house as-is with right to inspect can be a hornet’s nest, but most contracts are designed with clauses that allow the buyer to exit an agreement if the property proves to be uninhabitable or simply unappealing after the inspection period. Ultimately, this can be a useful approach for getting a great deal on a home. Just be sure to budget carefully and consider all the costs involved when buying a house as is.
Courtesy Realty 101.com