What to Know About Buying a Home "As-Is"
While sifting through property listings, you might encounter a lot of surprisingly affordable property. You might be equal parts suspicious and thrilled, but then you notice that the property is being sold "as-is". Since buying a home does not happen every day, it makes sense to do your research and find out everything there is to know about buying a home "as-is". Luckily, we are here to clarify everything you should consider before taking steps to purchase such a home.
Explore your options before you buy an "as-is" home.
Most home buyers are absolutely terrified of this word as it implies there must be some hidden caveat to this term. Indeed, many sellers of as-is homes specifically target contractors or investors that can invest time and money toward a comprehensive rehaul of the property. Yet, in some cases, these homes can be highly comfortable, functional spaces. There are several reasons why a home seller might list a home for sale, disrepair being only one of them. Furthermore, even if the house requires a few renovations, other characteristics such as location might make up for its faults. The Lewisville and Clemmons areas would be an example of that.
Well, how can you then make sure that the property sold as-is doesn’t turn into a money pit? Read on to find out. But first…
What does buying a home ‘as-is’ actually mean?
The expression ‘as-is’ simply means that the seller wants to clarify that they are selling the home without the intention to repair it. They also inform you they don’t offer any credits for parts of the house that might be faulty or worn. For example, say you purchase a home as-is and a home inspection locates leaks in the roof. In that case, you cannot expect the seller to account for it financially if you decide to follow through with the purchase.
Note that this label can only apply to some regions of the home or specific home elements. For instance, it could be that just the pool area, garage, basement, fireplace, or appliances are sold ‘as-is’. This means that just this element is sold as you see it, making you accountable for the necessary repairs. However, the seller might offer compensation for other issues or items in the home that are not labeled as-is.
One thing to consider though, is even when a seller says they are selling the home "as-is", there still may be some room for negotiations during the "Due Diligence" period (North Carolina has a Due Diligence period, but all states do not). However, more often than not in this HOT sellers market, that is not the case. Some sellers may have sympathy for the buyer if it is a safety issue, such as high radon test results, or structural issues, but not always.
What you see is what you get when you are buying a home as-is.
You have legal rights
Obviously, purchasing as-is carries a fair amount of risk with it. And if anything, this uncertainty tends to breed misconception. The most widespread misconception? It’s that the buyer does not have any legal rights that will protect them if they decide to go along with the purchase. One protective measure you can count on is the seller’s Real Property Disclosure. More precisely, the seller is legally obligated to disclose the home’s condition issues.
So, the seller has to inform the buyer that the home has a leaky roof, mold, or similar structural issues. And they need to do that before the buyer agrees to purchase the home. However, the legal binding the seller is subject to might differ from state to state. In North Carolina, it is common for a seller to choose "No Representation", if they have never lived in the home. "Rehab and flip" or estate properties are commonly represented by the seller in this manner. Hence, it helps to have a good real estate buyer's agent or lawyer on your side to know what you are getting yourself into.
You should hire a home inspector
The second misconception about buying as-is homes is that you cannot have a home inspection before the purchase. Interestingly enough, it is quite the opposite - hiring a home inspector to perform a home inspections are strongly encouraged. A thorough inspection will enable you to make an informed decision as you will know what needs to be repaired and how much money you will need to invest down the line.
However, if you have your doubts and depending on your state, we advise you to include an inspection contingency into the purchase agreement. This legal stipulation allows you to back out of the purchase. This comes in pretty handy if the home inspector finds that the home requires more repairs than what you bargained for.
In North Carolina, an "inspection contingency" is generally not necessary if you are buying a home that is listed for sale with a real estate agent. In NC, home buyers have a "Due Diligence" period that allows them to do their inspections, have their appraisal completed, as well as getting their loan approval. During the Due Diligence period, a home buyer may walk away and terminate the contract for any reason. However, there is normally a "Due Diligence" fee, which is paid directly to the seller when the buyer's offer is accepted. This fee is applied to the purchase price, but it is non-refundable. So even though the buyer can terminate the contract during the Due Diligence period for any reason, the Due Diligence fee is lost.
Buying a home as-is can be a great investment
Understandably, buying a home as-is comes with its own set of challenges and considerations you need to take into account. The potential expenses and risks are simply not worth the hassle for some. However, one overarching advantage of as-is homes is that they are considerably cheaper than comparable newly-built properties.
In addition, many people decide to invest in an as-is home when they like the neighborhood or when the property carries the potential to become attractive to investors and home buyers a couple of years down the line.
Home warranty as a measure of protection
Buying a home warranty could be a good course of action. It covers the repairs and replacements of appliances and home systems such as refrigerators, furnaces, ovens, and the like. It’s different from a home insurance policy since it covers damages and issues due to the wear and tear of appliances. Essentially, this might be the best solution for homebuyers who plan to invest in a comprehensive remodel of an as-is home. Securing a home warranty stops future spending. This, in turn, makes it easier to finance the necessary updates you have to introduce to the newly purchased as-is home.
You should find a top buyer real estate agent
The most important thing to know about buying a home as-is is? A great real estate agent makes a world of difference in this endeavor. Namely, an experienced and committed buyer agent will ensure that you find the most suitable as-is properties on the market. They will also put you through their network of real estate attorneys, quality contractors, and quality home inspectors. In short, an excellent real estate agent is an invaluable asset if you plan to purchase a home as-is. They are there to arrange and monitor every single step of the buying process closely.