Buying a House As Is: Good or Bad Move?

By
Real Estate Agent with RE/MAX Executive Realty 91362

What to Know About Buying a Home in As Is Condition

What are the pros and cons of buying a house as is? Many buyers will not have heard of the "buying house as is" concept. In brief, it means that you take a chance of buying a property as it can be seen. When you enter the home, you will often notice that it needs fixing up. That is what you are going to be taking on. More often than not, there will be many projects to complete.

Do you need to have experience when buying a house as is? It is a good idea to have your own personal experience or knowing someone who can help you. Many builders and home contractors often buy a home in this way. They have all of the required expertise to fix the property and know what they are looking at when it comes to repairs.

Many laymen, however, do not possess such strengths. Quite often, homes that are sold in as is condition are the types of properties that a real estate investor will acquire. Real Estate investors specifically look for homes in tough shape so they can fix them up and flip them. House flipping has become a lucrative business in many areas of the country.

What About Finance?

You will find that financing the project is going to be difficult. Banks are not keen to lend on properties that have a significant amount of work, especially if they are safety hazards. Even a favorable home inspection result may not mean a lot to them.

It should be noted that not all properties sold as "buying a house as is" are in bad shape. Some of them are in good condition, and it is up to you to asses what you think about the property. However, financing will be more complicated if the property doesn't meet specific lending standards.

For example, FHA mortgages have condition requirements that have to be met to grant a loan. So does a VA mortgage. If you are using one of these financial vehicles, it will be essential to understand if the property can be financed.

You'll want to know up front who will be doing any repairs. Don't automatically assume that the seller will take care of any deficiencies.

What Matters: Due Diligence and Budgeting

Of course, you should try to avoid buying a money pit. When buying an as-is home, due diligence is critical. You really need to know precisely what you are getting yourself into.

The most important thing that you can do is to set yourself a budget. Be honest with yourself and make sure that you have enough money available.

Take whatever capital you have and split it in two ways. Set a budget for the initial purchase of the home, and then set a budget for how you can afford to spend to fix it up. Be prepared that you may come across a few surprises along the way. It is better to have some flexibility in your budget.

What to Look Out For When Viewing the Property

There are a plethora of things that you need to look out for when you view the property, Before you even enter the house, make sure that you have a pen and paper ready. It is always a good idea to make notes of what you think is wrong with the property.

Start at the top and work your way down. Check out the roof to make sure that there is no daylight coming through and look at any insulation. If you can, access the roof to check the condition externally as well. Replacing the roof can potentially cost you a lot of money.

Also, check all of the walls on the upper floor when the property consists of more than one story. If they are damaged, it could mean the property has a problem with dampness or leaks. This can also be costly. Always look for signs of water when purchasing a home. While water intrusion can be corrected, mold behind walls and ceilings can be an expensive proposition to amend.

Plumbing, heating, and electrical systems should all be checked thoroughly. These are the areas of the home where expenses can really add up quickly. Your idea of a new bathroom suite may be excellent, but replacing a plumbing or sewage system is a costly undertaking nobody wants to deal with.

Lastly, make sure you check out the foundation, supports, and sills. These are the most critical structural components in the home. Having issues with these areas of the house can cost ten's of thousands of dollars to fix.

Ask Questions

Why is the property being sold as is? That is one of the questions that you need to ask yourself and anyone living there. It could just be that the person can't afford to fix up the property and would like to move on as quickly as possible. In that case, it is likely that he will be honest with you and tell you what is wrong with the property.

Many sellers try to sell their property as is because they don't know that there are downsides for doing so. Many real estate agents will tell you that homes marketed "as is" have an automatic negative connotation to them. Quite often, marketing a house "as-is" isn't necessary.

However, if you find that the home is located in an area prone to natural disasters like flooding and earthquakes, you may want to think twice before you spend your money. In that case, you are likely to be buying so much more than just a money pit.

Sellers Think They Don't Have to Disclose Problems

In some circumstances,  a seller will market the home as is because they think it relieves them of the obligation, to be truthful. This is absolutely not the case! Many states have disclosure laws protecting buyers from sellers who do not disclose problems.

Even in Caveat Emptor states, a seller must be completely honest when a buyer asks a specific question about the home. For example, if you ask a seller if the basement takes on water, they cannot lie to you. Selling as is does not mean you are free to be deceitful.

Final Thoughts

Buying a house as is can be a smart move, or it can be a bad one. Each property needs to be assessed to make sure that you are either going to be able to live there or resell the house. If you feel uncertain at all, it is always best to walk away.

After all, on most occasions, you would be risking your own hard earned cash.

Other Helpful Real Estate Resources

Use the above resources to make better decisions when you are going to be buying or selling a home.

 

Posted by

Bill Gassett is a thirty-two year veteran to the real estate industry. He enjoys providing helpful information to buyers, sellers and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, National Association of Realtors, Inman News, Placester, RESAAS, Credit Sesame and others.

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Rainer
403,740
Dan Hopper
Keller Williams Realty Downtown LLC - Denver, CO
Denver Realtor / Author / Advocate/Short Sale

"As-Is"  term is always present in real estate transactions, even new construction.  Good news is, real estate contracts have conditions in them for property inspections, punch lists, etc... to allow for the buyer to perform due diligence, and negotiations to a satisfactory conclusion.  Good explanations,  , in defining what happens when one cannot negotiate the seller to correct any deficiencies.

May 31, 2019 09:11 AM #1
Rainmaker
2,516,336
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

you provide excellent insight into buying homes "as is."  I also agree with Dan Hopper in his #1 comment.  Most real estate contracts have conditions for property inspections, etc.  As long as a capable buyer is aware of what they are getting into, then it depends on whether it is a good or bad move.

May 31, 2019 06:33 PM #2
Rainmaker
1,895,355
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good evening Bill - those who buy houses as is should know what they are buying and have the ability to handle contingencies.

May 31, 2019 08:29 PM #3
Rainmaker
2,751,138
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Something I didn’t mention earlier is that I like to set the intention of getting the thing before I know how I’m going to do it and then have my subconscious help me figure it out. It seems to work well with large projects that seem overwhelming just like this.

Jun 18, 2019 10:56 PM #4
Rainmaker
2,751,138
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Grant Schneider I do know people that have contingencies because they like the place so much or because they need very little to be happy. As long as my clients are safe and the house is in good shape, I’m fine with it. :)

Jun 18, 2019 10:57 PM #5
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Bill Gassett

Metrowest Massachusetts Real Estate
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