I know what you’re thinking… real estate is confusing. What do all of these terms mean? What is an “as-is” property?! How do I purchase an as is (frequently called fixer-uppers or “flippers”) property? Am I making the right decision financially? If you have no idea, you have come to the right place. Our articles help make sense of the world of real estate, and aid in the process of finding your perfect home. In this particular article, we explore the world of as-is properties; what they are, how to get them, and what you should know about them.
With many items (furniture, clothing, homes) as-is denotes that the seller is selling, and the buyer is buying an item in whatever condition it presently exists, and that the buyer is accepting the item “with all faults”, whether or not immediately apparent. This is the classic buyer beware situation, where the careful buyer should take the time to examine the item before accepting it, or, in a housing situation, obtain expert advice. Though this is the definition of “as is” in its simplest terms, knowing the definition is not enough- especially when dealing with homes. It’s important for homebuyers to understand what an as is property entails. There are many probing questions that buyers will have about buying an as-is property. This article will help guide the questions you should be asking.
This Oxbow home has some fantastic mid-century charm. Though it has had some updates, you'll want to know what questions to ask because this property is sold "as-is" "where is".
- 1. Has there been a professional inspection?
Having a professional inspection before the purchase of any home extremely important on its own terms. However, it is absolutely vital in the case of as is properties. Typically, an inspection will run $200-$500 and is a relatively small price to pay to prevent spending an arm and a leg down the road. If an inspection has not been done on the home, it is in your best interest to talk to your Realtor about hiring one. The inspector will help provide a report of the damages and recommended maintenance on the home. This will help you best decide to either go through with making an offer on the home or reconsider the offer based on the severity of damages or cost of repairs. It is also very wise to include a home inspection contingency in the purchase contract. A home inspection contingency gives the homebuyer an opportunity to back out of the the sale based on the results of the home inspection.
This as-is home is currently on the San Antonio market. Because there are no pictures of the interior of the home, you could assume it is in bad shape. However, even if it looks great (or horrible), you should leave it up to an inspector to tell you what is going on that the untrained eye won't see.
- 2. Have you calculated the cost of repairs?
Once you have the results of the inspection- which may be a little or may be a lot- you will have a good idea of what you are in for. Your inspection report should include many aspects of the home, from the property’s electrical and heating systems, to the condition of the roof, foundation and other structural aspects of the home. If the inspection report comes back with something minor like a small roof repair, you may be more apt to continue with the purchase than if the inspection report comes back with something major like a crack in the foundation. If the inspection comes back stating there are multiple major repairs that you weren't prepared for, you may want to re-evaluate the interest and potential offer on this specific home. Ask yourself, is this the deal for you? Of course, this will be something to discuss with your Realtor.
While this home has some adorable curb appeal, it needs some major TLC. Of course you will be footing the bill for those repairs, so if the fact that the home is only $64k entices you, and you have the funds to transform this as-is property, it just might be for you.
- 3. Are you prepared financially?
When buying an as-is property, being prepared financially is your strongest asset. A lot of times, homes like these will be sold for cash because they are bank owned and the and the bank is ready to get it off their books. If this is the case, make sure you have cash ready and proof of your funding.
Also, when buying an as-is home, ARV (After Repair Value) costs should be expected. There will be some repairs that will seem minor and fly under the radar, until the time comes around to replace the plumbing or repaint the kitchen will turn into a costly bill. It is safe to set aside at least $5,000 dollars to be prepared for these ARV costs so you are not blindsided.
The backyard of this as-is home boasts a large deck along with a hot tub. If you are willing to fork out the cash for some TLC, this may be the property for you.
- 4. Have you called your insurance agent and ask to review the Comprehensive Loss Underwriting Exchange (CLUE) report on the home?
Comprehensive Loss Underwriting Exchange (CLUE) is the report on the home to determine if an insurance claim has been made. They are used to look at the claims history to see if the person applying for insurance hasn't disclosed a certain condition or indicator of how the property is being maintained. CLUE reports can serve buyers in unexpected ways-possibly saving you from making a bad purchasing decision. If there’s been serious damage or repair to the house, you can let your home inspector know what to look for.
This as-is property is an estate sale that is currently on the market. Though dated, someone with vision could certainly restore it or make it their own.
- 5. Have you asked the neighbors about the home?
If you are set on the home, yet skeptical about things like damages, it is advised that you ask the neighbors some questions about anything they may have noticed. If the neighbors live close enough to the home, they may notice things like when maintenance has been made to the home and how long ago. Neighbors are a good way to try to find out whether there are any known problems or issues that the property has.
Sometimes, purchasing an as is home can mean scoring a great deal on a home you may not have otherwise been able to afford. This 2,400+, Geogian Estates home comes as is, but it is priced far lower than other houses nearby.
- 6. Have you hired the correct Realtor for this kind of home?
When buying any home, it is EXTREMELY important to hire a qualified Realtor who is very knowledgeable of the city as well as its market condition. Purchasing an as is home, can be quite confusing, so it is crucial to have a Realtor by your side who can help you ease over the obstacles. A good Realtor will know professional inspectors, trustworthy contractors, how to make a clean offer, and ultimately, how to make your buying experience go as smoothly as possible.
Ultimately, making the choice to make an offer on an as-is home is up to you and your needs. Your Realtor is there to help you with this decision and help you decide whether an “as is” property is the right move for you and your family. Along with our Realtors, there are wonderful home lenders that can help you prequalify and aid in the more difficult financial decisions.