Saturday, September 16, 2023 / by Teresa DiPeso
We've all heard the phrase "Sold As-Is" but what exactly does selling a home "as is" mean? It means that instead of investing a significant amount of time and money into improving your home's condition, you choose not to make any changes and present it in its current state, flaws and all, hoping that someone might be interested in a project or see the potential value.
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Many potential home-buyers actively seek out these "handyman specials" because they offer a lower price point for the type of house they want. These home-buyers typically have contracting experience or know someone who does, and As-Is homes are very highly sought after in a market with elevated prices from robust demand.
Numerous reasons might lead sellers to take this route. Perhaps they've inherited an old property and want to sell it quickly, or maybe their own residence requires repairs, and they don't want to live amidst construction work. In some cases, it might just come down to a preference for convenience.
Here's what you should know about the process and its potential downsides, so that you can determine whether it's the right choice for you and ensure a smooth sale.
Listing a Home "As Is"
When listing your home, it's essential to clearly state in the description that it is being sold "as is." This not only attracts buyers looking for a project but also filters out those who aren't interested in a fixer-upper, saving you time. Since "as is" homes require buyers to invest more time and money to get them in shape, your asking price should reflect this. For instance, if your roof needs replacing at a cost of $20,000 and your outdated kitchen requires a $30,000 update, you should lower your asking price by $50,000 compared to similar homes in your neighborhood.
Disclosure Requirements for an "As Is" Home
Selling a house "as is" doesn't exempt you from disclosing known defects once you receive an offer; in fact, you are legally obligated to do so. The term "known" is crucial here. If you've inherited a property and are unaware of its condition, you might be exempt from providing a property disclosure. However, intentionally withholding information about known issues could lead to legal consequences if problems arise later. It's important to note that you don't need to point out every minor flaw, but rather significant issues like lead paint, sinkholes, or flooding. Your realtor will assist you in ensuring that all necessary disclosures are made.
Home Inspections for "As Is" Homes
Although selling "as is" means the seller won't be responsible for fixing anything, the buyer may still want to conduct a home inspection to assess the property's condition. If the inspection reveals significant issues, the buyer can back out of the deal with their deposit intact. If a buyer backs out due to inspection findings, you are legally required to disclose this information to future buyers. It's worth noting that while stating your intentions as "as is" can be helpful, buyers may still request repairs or compensation after an inspection, and your willingness to agree may impact the sale. Everything about a real estate transaction is negotiable. Just because you say you won't make repairs doesn't mean buyers won't ask for them. If you're set on not making any repairs, your agent will inform the buyer's agent and the deal will either proceed or dissolve.
Lenders and "As Is" Homes
If the buyer is obtaining a mortgage, their lender may require an additional contract contingency known as a home appraisal. This is to ensure that the loan amount aligns with the property's value and condition. If the appraiser determines that the house is worth less than the buyer's offer, it could lead to complications. The buyer may need to cover the difference, or the lender might demand repairs. If you refuse, the buyer can once again back out of the deal.
Ensuring a Smooth Sale
While home inspections and appraisals can pose challenges when selling an "as is" home, there are steps you can take to mitigate issues.
If you're unfamiliar with the property's flaws and renovation needs, seek your realtor's opinion or consider hiring a home inspector to avoid surprises later.
Set a relatively short time limit for contingencies, typically lasting anywhere from 10 to 45 days. A shorter period gives buyers less time to inspect and appraise the home and back out of the deal.