The Risks and Rewards of Buying a House “As Is”

Traditionally homes that are being sold as a foreclosure or a short sale are being sold “as is” which means that the buyer will not be able to ask for any fixes before closing. This means that if there are any issues with the property the buyer will be required to fix them on their own. Sometimes that can be a good thing and sometimes that can be a bad thing.

One of the biggest rewards to buying a home “as is” will be the fact that these homes are usually far below the real value of the property. Sellers know that they are selling a “risky” venture to the buyers and know they must price the home to sell. The lower price means that the buyer is often able to use some of the cash they have to make the home their own.

Another reward to the home being below the actual value of the home often means the bank may be willing to add a construction loan into the mortgage. This will allow the buyer the ability to make the home in their own style without having the put a lot of cash into the project right away. Construction loans are harder and harder to get due to the ever changing real estate market.

One of the risks to buying a home “as is” would be the fact that the buyer will often have to do a lot of things to the home to get it into good shape. “As is” houses often are in rather bad shape because they are usually foreclosures or short sales. Often times when a house is foreclosed upon the previous owners will purposely make the house hard to sell by damaging walls, counters, toilets, and other parts of the house.

Another risk with buying a house “as is” would be the fact that some lenders will not fund a loan for an as is house. People using an FHA loan will not be allowed to even put an offer in on an “as is” house because of the risk of serious issues.

With all the above said it is important to get the house inspected before an offer is put on the table. Just because the house is being sold in its current condition doesn’t take away the potential buyer’s right to understand what they are getting into. The only risk with having the home inspected before the offer is written is the house may end up selling to someone else before the inspection can be completed.

If a buyer chooses to make an offer before an inspection it is advised that they make the offer contingent on an inspection being performed and setting some parameters on what would allow the offer to be rescinded. It is very rare that a sell of an “as is” home will allow this, but it never hurts to ask.

A buyer should never purchase a home without a home inspection being performed. This is as true for houses being sold “as is” as it is for houses that seem to be in good condition. Inspections are there to protect the buyer from unforeseen issues and should never be ignored.

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