What Does It Mean To Buy a House ‘As Is’?

If you scan your local real estate listings, you may see the term “as is” frequently pop up. In a red-hot market where there’s currently a shortage of available homes, expect to see more and more homes being sold “as is.”

These types of listings are more common now, explains Wendy Watkins, a Realtor with Corcoran Global Living in the San Francisco Bay Area.

“Because it’s a sellers’ market and inventory is limited, sellers have more power and can pass along a property that needs work,” says Watkins. “If one buyer doesn’t want to deal with the work, there will likely be a few others in line that will.”

For home buyers, it’s a gamble to purchase a home as is. But it may pay off, either as an investment or as your next home-sweet-home. Before you decide to take the plunge, let’s take a look at what buying as is really means, and what you need to consider first.

What Does the Term ‘As-Is’ Mean in Real Estate?

Houston-based Marina Vaamonde, a real estate investor and founder of HouseCashin, says an as is house is sold “in its current condition and the seller makes no warranties.” That means that the buyer is responsible for all necessary repairs.

She adds that distressed sellers — those in debt or threatened with foreclosure — “might often sell for no more than the balance owed on the mortgage,” but in as is condition. Other sellers simply sell as is because they need to sell quickly; can’t afford or don’t want to make needed repairs; or simply know there are enough desperate buyers out there willing to take on the risks.

“As is property laws are written at the state level,” says Vaamonde. Although they vary from state to state, some nearly universal rules apply:

• The seller must disclose known defects. So if they know there’s an unseen crack in the foundation, they are obligated to tell the buyer.
• The seller can’t knowingly misrepresent facts about the house — say, stating the addition they made was properly permitted and up to local building code when it wasn’t.
• The buyer agrees to purchase the house in its visible condition, based on the known defects disclosed by the seller.
• The buyer should request and pay for a home inspection, although the seller has no obligation to make remediations. But the buyer can sign a contract contingent upon inspection results, leaving them an out should the inspection turn up major, costly problems.

When To Buy a Home As Is

Because the current housing market in the U.S. is so constricted, multiple buyers are often competing for the same property. When you offer to buy a property as is, Watkins says “this might strengthen your offer so that you can rise above the pack.” Many sellers will ask for as is offers up-front, she says, “so you must comply if you want a shot at the home.”

So the question of when to buy a home as is depends on how fast you need one. If the pressure’s on to move — say you’re relocating your family to a new area — then an as is purchase might get you there sooner. Because the buyer is taking on any/all work the property needs, it’s vital to have a thorough property inspection so that you understand exactly what you’re getting into — the work needed, and the associated costs.

Pros and Cons of Buying As-Is

Given the risks, there are certainly pluses and minuses to purchasing a home as is. First, the good stuff:

• Agreeing to an as-is purchase “gives you a better shot of getting your dream home,” Watkins says. This is especially relevant in highly competitive markets like the Bay Area, where bidding wars often drive up the asking price.
• For real estate investors, says Vaamonde, the upside is the low price. “Investors have to buy low in order to make their desired profits,” she says.
• If you’re a skilled DIYer who’s not afraid to take on big projects, buying a home as is and doing a lot of the renovation work yourself can be a gratifying experience. It may also be financially rewarding, whether it’s a quick fix-and-flip or if you plan to sell the house sometime down the road.

Just as every yin has a yang, there are downsides to buying a house as is. Among them:

• The cost of repairs, which could be considerable. “You are taking on any work the home needs, as well as the bill for this work,” says Watkins.
• A big risk, says Vaamonde, “is the possibility of finding hidden defects after closing that run up the cost of repairs.” Unless the seller knowingly lied about the condition of the house (and you can prove it), the buyer has little legal recourse.
• Your DIY ambitions might exceed your skills. While we at Family Handyman are always ready to encourage our readers to try new projects and acquire new skills, a do-it-yourself home renovation can quickly turn into a nightmare if you lack the right tools, skills or budget to finish.

Tips When Buying a Home As Is

Here are some tips and things to keep in mind before you wade into the as is market:

• Don’t skip the inspection. “Because the buyer is taking on any and all work the property needs,” says Watkins, “it’s very important that you have a thorough property inspection so that you understand the amount of work that the home needs and the cost you will incur.” Ask contractors to take a look at the roof, the sewer system, the foundation and other major systems. “You want to make sure you have all of this information so that you can factor any work into your offer price.” Vaamonde concurs. “Make sure there is enough time in the contract to perform thorough inspections,” she says. “And if a seller refuses to allow inspections, walk away.”
• Work with a real estate agent. Once you’ve signed a contract to purchase as is, there’s no turning back. “It’s super important to have a good agent that can help you understand the disclosures, inspection reports, etc.,” says Watkins. “When buying a property as is, you are taking on the burden of any work that is being done. You need a good agent in your corner to help you navigate this.”
• Have cash or financing ready. In a sellers’ market, buyers need to move fast or risk losing out on one home after another. Vaamonde says it’s essential to “have your cash or financing source lined up in advance of making an offer.”