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In a highly competitive housing market, you may be tempted by properties that are being sold “as-is.” They’re often cheaper than others listed, but when a home is listed “as-is,” the seller won’t guarantee the condition of the property, make any repairs before closing, or credit the buyer for defects that need repair. They also don’t have to provide a seller’s disclosure listing specific problems with the home, though they do have to disclose issues required by federal and state laws, like lead paint, mold, water damage, and deaths on the property.
This sounds risky for buyers, and it can be. While an as-is home may be cheaper upfront, it can cost a lot to fix up, and you may not know exactly what you’re getting into until after the sale is done. As-is sales often make more sense for buyers who are flipping or investing in properties than for homeowners who need something that’s move-in ready.
Note, though, that “as-is” doesn’t always indicate that the property is in bad shape—in some cases, there may actually be little to nothing wrong with the home. Sellers may list as-is because they can’t afford renovations upfront, are in a rush to move before repairs are complete, or simply don’t want to deal with any remodeling themselves. Before you jump into an as-is sale, you should ask a few important questions.
Which part of the property is being sold “as-is”?
“As-is” can apply to a listing in a few different ways. In some cases, the whole property is being sold as-is, and the seller won’t make any concessions or be required to repair defects they could otherwise be responsible for in a typical sale. That list includes:
- Structural defects, including a leaky or damaged roof
- Termite infestations or damage
- Broken HVAC or septic systems
- Mold and mildew
- Asbestos and toxic materials
- Chinese drywall
In other cases, certain parts of the home or property are sold as-is, so the seller won’t be held responsible for the condition or functioning of things like fireplaces, detached structures (garages and sheds), appliances, swimming pools, and hot tubs.
Obviously, the latter can be less risky, as it’s much easier and cheaper to remove a broken hot tub or replace a refrigerator than it is to address major structural damage.
Has the house been inspected and appraised?
An as-is sale does not preclude inspection and appraisal—it simply means that the seller isn’t committed to offering any credit or making repairs if the inspection uncovers significant flaws. You should absolutely get an appraisal (usually required if you’re applying for a mortgage) and an inspection for an as-is home to get an idea of what needs to be repaired and how much that’ll cost on top of the purchase price.
As the buyer, you’ll have to pay for the home inspection, but this is well worth the few hundred dollars to know what you’re getting into. If the seller doesn’t allow an inspection, it’s likely they suspect or know that there’s something wrong and don’t want what’s uncovered to affect the home’s value. This is a red flag—either get clarification or run away.
It’s a good idea to have an inspection done prior to going under contract, but you can also include a home inspection contingency in your offer, which allows you to back out based on the inspection results.
How much will repairs cost (and can I afford it)?
Again, a thorough inspection is crucial for knowing what repairs may be needed and calculating how much it will cost you to make your home safe and comfortable. Make a list of the work you expect to have to do and prioritize it in order of urgency, then get quotes from several contractors to determine a budget. Make sure you can comfortably afford this on top of the sale price.
Do I have alternative living arrangements just in case?
If an as-is home is found to have minimal issues and is move-in ready, great. But if the property is in significant disrepair, there’s a chance you won’t be able to move in as expected, or you may have to leave if the home is found to be unsafe or uninhabitable. Finding another place to live will likely require time and money, so it’s helpful to have a backup plan just in case.
Have I done my due diligence?
You should be thorough with any home purchase, but there are a few additional best practices for as-is sales:
- Review any documentation related to the property, including title, deed, and land records
- Schedule a termite inspection
- Hire a licensed contractor to evaluate structural issues
- Communicate regularly with an attorney and your real estate agent
An as-is home can be either a worthwhile investment or a major mistake. Find out as much as possible about what you’re buying before you sign.
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