The Dreams That Die on the "As Is" Hill

By
Real Estate Agent with Long and Foster REALTORS®, Gainesville, VA VA License # 0225089470

The Dreams That Die on the "As Is" Hill

When you hear the words "As-Is," what you hear depends on whether you are a buyer or a seller.  And what a particular client hears may be far from the reality of As-Is.  A property I showed earlier this week was a fantastic example of the dreams that will be crushed for seller and buyer both, thanks to those magic words.

 

SELLER

No seller wants to be bothered fixing up a home prior to putting it on the market.  They fear the money they will put into it, will not equal the money they get out of it.  And in some cases, those sellers may be right.  As a full-time, professional real estate agent in Bristow and Gainesville, I can not tell you how many times I have sat across the table from sellers who will say, "We'll just sell the home as-is."  Somehow, they think that's an easy way out.  Believe me it is not.  

There is a perception with comes with the words "as-is" in the buyer's mind.  At a minimum, if you dump the work of simple fixes like carpet and paint on a buyer, there is what I joking call a pain-in-the-a** tax associated with that.  The buyer doesn't want to do that renovation any more than you do, so the cost associated with doing it goes up in their minds and is deducted from the seller's list price.  Worst case, the home may be in such poor condition that a lender may require certain repairs be made or a loan can't fund, thus they need cash buyers.  And let me tell you, cash buyers are not into paying full price for anything.  They feel they deserve discounts.

The estate sale I viewed on Thursday night may well have been the setting for a haunted house the night before.  Just looking at the pictures before I arrived, I knew there was going to be mounds of crap and likely a ton of deferred maintenance.  We were lucky the lights were working.  The home had spotty sections of mold on the upper level, but was loaded with it in the basement.  MAJOR problem.  There was no central air conditioning, unlike neighborhood comps.  The home was outdated and in bad condition.  In my professional opinion, it would be lucky to get the list price of $250,000.  But in speaking with the listing agent, I was informed that the members of the estate expected a bidding war to burst forth from this low, low price.  Ha!  If they sell for $199,000, they should thank their lucky stars.  Yet, these sellers felt "as-is" would be their saving grace and they could leverage a property close to a park with water rights, as a fantastic location that buyers would fight over.   That's how a seller's dream dies with "as-is."  Expectations of true market value for condition are out of whack.

BUYER

The buyer, meanwhile, was drawn to the property like a moth to a flame.  They had friends that lived in the neighborhood and knew that homes in good condition would sell for $300,000 or more.  They were dealing with a limited budget and wanted the most for their money.  They had very limited funds for down payment, so the entirety of the renovation would have to worked into a renovation loan.  This is where buyers fail to see the concept of  "other people's money" (OPM.)  Over and over I heard things like, "I can just take some bleach and spray the mold till it dies," or, "My buddy can come over and help me do an HVAC installation."  "We can definitely fix this up for under $50,000."

When you are cash poor and using OPM, particularly in the form of a renovation loan, you are going to have to employ licensed, certified renovation contractors.  What YOU or YOUR BUDDY can do is irrelevant.  The mortgage company that is backing your home wants to know renovations were down properly.  Licensed, certified contractors aren't going to do things as cheaply as you or your buddy could or would.  And that's where "as-is" kills the dreams of cash poor buyers.  They truly don't get the concept that there are different requirements for using OPM.

You can hear the train crash coming between these two sets of unrealistic expectations, right?  

It takes some time with cash poor buyers, but most will get the concept over time that that they are not going to buy more house in "as-is" condition and fix it up with a renovation loan for less than they will buy a move-in ready home.  At least with move-in ready, you know what you are getting and how much it costs NOW.  I represented one set of cash poor buyers that purchased a home with a mold problem using a renovation loan about five years ago.  The home is eating them alive with the other repairs that got penciled in for side projects.  All they do is sleep, work, eat and renovate.  They are dumping the home as soon as they can get into a state that is sale-able to another buyer and they will never buy another fixer upper again.

Sellers, on the other hand, usually only learn that "as-is" condition is going to cost them, not bump up the value once they have hired the agent that reinforces their twisted belief that they can cash out near just as high without making a single repair.  

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Tags:
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Rainmaker
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Lottie Kendall
Compass - San Francisco, CA
Serving San Francisco and the Silicon Valley

You've been dealing with a tough situation, Chris Ann. Telling your buyers the truth about the property is something you did well. 

Nov 05, 2018 06:02 PM #29
Rainmaker
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Mike McCann - Nebraska Farm Land Broker
Mike McCann - Broker, Farmland Broker-Auctioneer Serving Rural Nebraska - Kearney, NE
Farm Land For Sale 308-627-3700 or 800-241-3940

Ahhh... the movie Money Pit comes to mind over and over.

That house lost me at that four letter word you used.... MOLD!!!!

I am outta there.  If my buyer would not roll with me...they would be gone as well.

Thanks for sharing!!

Nov 05, 2018 07:20 PM #30
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Matt Brady
Skyline Home Loans - Del Mar, CA
Lending With Competence And Character

Very well written. At least now there are more renovation options including the Fannie Homestyle Reno. It is also important to not only find a lender that offers reno loans but to work with a loan officer that understands construction.

Nov 05, 2018 08:29 PM #31
Rainmaker
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Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

In a hot seller's market, often sellers can get away with demanding market and an AS IS clause. However, in today's market that will work when pigs fly.

Nov 05, 2018 08:52 PM #32
Rainmaker
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

It’s the month thing that people think it’s hard to do the easiest thing for a lot of us love and light and goodness to everyone.

Nov 05, 2018 11:42 PM #33
Rainmaker
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I feel like you’re totally right on this one and can probably take me to town on the next topic as well.

Nov 05, 2018 11:44 PM #34
Rainmaker
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Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

So right on target.  Over the years one of the terms I have come to dislike is "as is" whether uttered by a buyer or seller!

Nov 06, 2018 06:36 AM #35
Rainmaker
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L. Scott Ferguson
Ask4Ferguson - Your House-SOLD Name in Real Estate - West Palm Beach, FL
Sunny Florida Real Estate Professional

Great detailed post!  'As-Is' can be friend or foe! :)

 

Blessings

 

Fergie

Nov 06, 2018 07:57 AM #36
Rainer
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Anita S. Zahn
Advantage Realty 863-840-1420 - Sebring, FL
Highlands County Real Estate Source! I work 4 U!

Good post.  About 99% of the residential contracts written here are AS/IS.  Sellers always need to tell me this, I tell them yes, I will put it in as is, but if we get a contract that works we are not going to kill the deal when the buyer asks for repairs.  Because it always happens, never fails!  I do try to make them aware at the get go.

Same for buyers demanding repairs I state its as is we can ask.

Nov 06, 2018 10:07 AM #37
Rainmaker
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Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

Just call those guys on TV who buy the house cheap and fix it up before the buyers move in!

Problem solved.*

 

 

Nov 06, 2018 10:32 AM #38
Rainmaker
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Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

* I have seen these "renovators" on TV do things in an entirely different way they would be done in real life (even the guy who "makes the house right"), and have written them saying they just taught thousands of people how to do something incorrectly.  Oddly I have never been contacted back.

Once the guy "making the house right" installed a sweeping 6' wide staircase into the basement for an older woman, and he did not have a handrail on either side of the stairs!  HE helped her down the stairs!  I did  write him and he DID NOT get back to me.  But I bet he put in the handrails after the cameras turned off...

Nov 06, 2018 10:36 AM #39
Rainmaker
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Denise Hamlin, Broker/Owner
Cardinal Realty ~ 319-400-0268 - Iowa City, IA
Helping Happy Clients Make Smart Choices

As is. Two very small words that take on a whole different meaning depending on who you talk to. You nailed it with the title too!

Nov 06, 2018 01:05 PM #40
Rainmaker
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Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

Not likely!  The homeowner was an elderly lady who went to the staircase to go down and instinctively reached for a handrail (required by Canadian code).  Not seeing it she looked to the other side - all on TV - and then the "make it right" guy ran up and took her arm to walk her downstairs.  You could tell from the look on his face it was not anticipated.  I've written him, and other of those TV experts, three times, without response.

Nov 07, 2018 02:21 AM #41
Rainmaker
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Michael Eisenberg
eXp Realty - Bellingham, WA
Bellingham Real Estate Guy

I always tell my seller's that tney can say they are selling "as-is", but it really "doesn't hold any water", it is basically they are warning the buyer's they don't want to do any repairs. The buyer's still have a right to ask for any repairs that come up in the inspection report. If they are lucky and the home is priced right, it may actualy sell "as-is"

Nov 07, 2018 11:50 AM #42
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Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Chris Ann, buyers (especially first time buyers) think all they have to do is paint and have the floors refinished.  It can be a complete shock when they get into the project.  

Nov 08, 2018 12:02 PM #43
Rainmaker
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Jerry Murphy, CRS, SRES
Long Realty West Valley - Anthem, AZ
Anthem, Phoenix, and Scottsdale AZ Real Estate

Thanks for telling it like it T-I -is Chris.  The other thing I hear from sellers when I tell them that marketing the home "As-IS" is not a good idea is "well then, we're not going to make any repairs".  Even when the home is listed at market value.  Buyers and sellers seem to be very antagonistic toward one another these days. Thanks for the post.

Nov 08, 2018 03:14 PM #44
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Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

I've known many buyers who had the expertise to do needed renovations, but ran into that brick wall of not being able to get a loan without the repairs being done - or a rehab loan with expensive contractors thrown in.

We did sell quite a few of those with seller-carry contracts, however.

Nov 10, 2018 09:35 PM #45
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Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Hi, Chris Ann!  I included this post in today's "Last Week's Favorites on ActiveRain.

Nov 11, 2018 01:04 PM #46
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Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Chris Ann, I am in the process of selling a house my sister and I inherited. I am selling it as is. I do not intend to spend a dime on it. It is a very well built older home, with lots of deferred maintenance issues. I’ll just have to take what I can get. The problem with trying to rehab it is, where do I stop.

Nov 11, 2018 08:06 PM #47
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Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

AS IS here means-Sellers disclose all issues in the reports. They have no problem pick one out of multiple buyers want to fix or remodel it the way they like. They do not mind paying over asked price if it is in move in condition. 

Nov 13, 2018 02:34 PM #48
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Chris Ann Cleland

Associate Broker, Bristow, VA
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