Here is a very informative article written by Ashley Sutphin for Realty Times.
If you’re looking for a new home, you might see some listings being marketed with the term “as-is.” When a home is sold as-is, it’s appealing from the seller’s perspective because they don’t have to put time or money into fixing certain things. If they want to sell quickly, it’s a good option.
For buyers, the homes are usually lower priced than similar properties.
While there can be advantages of buying a home as-is, particularly in the competitive housing market much of the country is in right now, you also need to understand the implications fully.
What Does As-Is Mean?
When sellers list their home as-is, they will not make any repairs before closing on it. A seller has no guarantees that everything is in good shape or even working. You’re also not required to provide a Seller’s Disclosure.
If you buy a property marketed as being as-is and later discover a major issue, it’s up to you to fix it.
An as-is seller still needs to meet minimum state and federal disclosure standards. These tell you about conditions such as lead paint.
As-is doesn’t inherently mean a home is damaged beyond repair. There could be minor or no issues, and a home is still listed as-is.
This can happen if a seller is in debt, or maybe they’re in a rush and don’t have the time to wait for contractors to do even cosmetic work.
What Factors Should You Consider Before Buying An As-Is House?
If you’re thinking about buying something as-is, you need to consider a few things.First, it’s possible the home isn’t livable in its current state. You might be willing to make the needed repairs, but is your lender going to be okay with this?
Many types of loans require properties to meet certain livability standards. These standards are known as minimum property requirements or MPRs. Appraisers will assess a property to ensure it meets these MPRs.
If you’re getting a conventional loan, it’s not insured or guaranteed by the federal government. Many conventional loans are also conforming to meet the criteria set by Fannie Mae and Freddie Mac. Homes can be purchased under Fannie Mae and Freddie Mac standards if there are only minor problems. The house still has to be safe, and structural issues need to be due to normal wear and tear.
Acceptable issues that would still allow you to get a conforming loan for an as-is property might include plumbing leaks, damage to interior walls, or missing light fixtures, for example.
For government-backed loans, like a VA loan, the MPRs are stricter than other types of loans.
Getting a Home Inspection
If you’re interested in buying a home as-is, you have to get an inspection. The inspector can help you understand more about the issues, and then you’ll know what you might end up paying to fix them.
An inspection is not an appraisal and usually isn’t required.Appraisals determine the value of a property, and a lender usually requires this. A home inspection is something optional you might decide to do.
A seller can refuse a home inspection for an as-is property, a big red flag.
Partial As-Is Homes
Just because a home is being sold as-is doesn’t mean the entire thing is. For example, a seller can list a property as-is but only be referencing certain parts. Sheds and garages, as well as broken pools, are frequently partial as-is features.You need to ask the seller exactly what they’re referring to when they say as-is.
Finally, you’re not waiving your right to disclosures when you buy an as-is home. Again, state and federal guidelines and regulations determine what sellers have to tell you about issues with the house.
Every state has its own laws of disclosure. For example, some states have regulations for mold, termites, and water damage disclosures.
If a seller doesn’t let you know about a known problem required in your state, you may be able to sue for the repair costs or damages.The only federal disclosure requirement currently is for lead paint. If you’re buying a home built before 1978, the seller has to tell you if it’s ever had lead paint.
Finally, working with a great agent can be an important asset if you’re thinking about buying a home as-is. A good agent understands disclosure laws and can help you understand the specific implications of buying as-is in your situation.
They can help you feel more confident in your decision or decide when it’s best not to buy.