The Risks of Buying “As-Is”

When you buy a house “as-is”, that’s exactly what you get. While this may be a good opportunity to fix up a home just the way you want it, it can also mean big problems. Dean Graziosi sites the economy as one reason for many houses being sold just as they are. If you are planning to make such a purchase, it is very important you know what you’re getting into beforehand.

 

When a home is listed “as-is”, the seller is released from any liability or responsibility for the property’s condition. While buying one could mean you get the home of your dreams, the situation could very quickly turn into an all-out nightmare.

 

Before purchasing a home “as-is”, be sure to have it inspected. It is extremely important you know what you’re getting into before you ever make an offer and later sign for your new purchase. When choosing an inspector, make sure the person has been in business for many years and his or her reputation is top-rate. Otherwise, you might wind up getting the wrong information and making a bad decision as a result.

 

Knowing how the home is being sold will also help you make a decision on whether or not you should purchase it “as-is”. For example, If the sale is a real estate owned property, or REO as it is often called, this means it is a property that is owned by a bank after foreclosure has occurred. In the case of a REO, you might have a good chance of negotiating repairs. This may especially work in your favor if safety is an issue.

 

A short sale occurs when a home owner’s mortgage balance exceeds the property value. It isn’t likely repairs will be required. This is because the owner is selling it in this case and will probably need to make the sale as soon as possible and won’t have money to facilitate any repairs.

 

Often times, buyers will walk away from an “as-is” property because the work involved will be too costly. According to Dean Graziosi, “This is a smart decision, if you discover that the home is in worse condition than you originally anticipated.”

 

Once the “as-is” home has been inspected, you’ll have a better idea of any costs associated with fixing it up. You may get lucky and won’t need to do very much, but odds are, anything listed “as-is” will need quite a bit of work. If this is the case, you’ll need to make a decision. If you do not have the money or means to do the work yourself, purchasing “as-is” would definitely not be the way to go no matter how much you really want the house. On the other hand, if you have the money to hire someone to do the work for you, or if you are able to do it yourself and can afford the materials, an “as-is” property might just be right for you. Check Dean Graziosi’s website for more information on purchasing “as-is”.

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.