What’s an “As Is” Offer and Is It Worth the Risk?

When you see a home listed for sale “as-is” what comes to mind? For many, it’s terms like fixer-upper, disrepair, and money pit. While the risk associated with an “as-is” sale makes these worrisome terms valid, you should also associate an “as-is” home with terms like bargain, opportunity, and investment.

To understand how one term can evoke so many contradictory feelings, you need to know what the term “as-is” really means.

When a property is sold “as-is” or “in its present condition”, the National Association of REALTORS® (NAR) notes the owner is “selling the property without warranties as to the condition and/or the fitness of the property for a particular use.”

That means homebuyers are responsible for all the necessary improvements and repairs. The seller will not negotiate with the buyer for credits or use their own funds to fix any outstanding problems.

Whether or not buying a home “in its present condition” is worth the risk will depend on your individual financial situation and your ability and willingness to make the needed repairs. You should understand and carefully weigh the pros and cons before making your purchase.

Pros of Buying a Home “As-Is”

• Low list price
• Opportunity to buy a home in a neighborhood that would otherwise be unaffordable
• Possibility to fix the home to fit your specific needs

Cons of Buying a Home “As-Is”

• Repairs can be costly
• Repairs can be time-consuming
• The home’s problems may prevent it from qualifying for a mortgage

When a seller is listing a home “as-is” they are still required to disclose all of the property’s issues. Each state has its own disclosure laws that will outline what specifically the seller must share with potential buyers. In bank-owned properties or situations where family members have inherited a property after the owner’s death, the seller may not know what issues lurk behind the walls.

In situations like these, as with any home purchase, it’s essential to include a home inspection contingency in your contract. A home inspection is the only way you can really know whether or not the house is worth the risk. Winston Westbrook, broker and owner of Westbrook Real Estate Co. who specializes in short sales and distressed real estate says, “Yes, you lose out on the cost of the home inspection, but the cost of the home inspection is well worth it, considering the headache you would have had in the future trying to make the house livable.”

An experienced REALTOR® can be incredibly valuable during an “as-is” purchase. REALTORS® understand local disclosure laws and have in-depth knowledge of the home buying process. Working with a trusted agent can help you determine if the home you’re considering is a good value for your specific financial situation.

When it comes to deciding whether or not an “as-is” home is worth the risk, the more you know the better off you are. Schedule inspections, work with a REALTOR®, consider your budget carefully and that fixer-upper may turn into a smart investment.