Selling Your House As Is – Should You Do It?
What does it really mean to sell your house ‘as-is’? Who will really buy it in its current condition? What limitations do as-is real estate contracts really have?
If you’re thinking of selling your home, going ‘as-is’ could be the smartest and safest move. Failing to do so can be far more expensive than most homeowners imagine. Yet, there can be limitations on the ‘as-is’ umbrella that you should know about before boldly throwing your home on the public market.
The Biggest Struggles in Selling a Home
There are two big struggles in selling a home. The first is obviously getting your home in front of qualified buyers who will find it appealing. Most home sellers can’t afford to risk a lot of money on an HGTV style renovation in a gamble on creating the right design for the right buyer. Even if that could result in more profit on a sale. So, it’s about connecting with buyers who see the potential and are willing to take on any style updates themselves.
The second is surviving the real estate transaction and making it through to closing. This is where selling your house as-is gets really important. It’s normally only after the sales contract is signed and the buyer and all the other parties begin processing the transaction that the bigger and controversial defects are found. Lenders will kick mortgage applications on houses they don’t love. Buyers can discover the repair and updating needs and costs a lot scarier and more expensive than anticipated.
If the contract is subject to repairs and certain qualifications, then everything can fall apart a few weeks in after the appraisal and inspections are done.
No seller wants to start the process over from scratch at that point. Especially without a guarantee they won’t run into the same issues again and again. This is why selling ‘as-is’ in its current condition, without obligation to make any repairs is so important.
Aren’t All Homes Sold As-Is?
No. Over the last decade and a half, more homes have been advertised for sale ‘as-is’. Though many standard Realtor and attorney real estate purchase and sales contracts are not ‘as-is’ contracts. That means as the seller you can be financially liable to pay for the repairs and to make them prior to the closing if any defects are found.
Mortgage lenders and loan programs also have their own requirements. Some are very tedious and meticulous. Lenders and insurers don’t want to risk money on a home that isn’t livable or could have potential issues. They may not loan on some houses at all. Others will demand things are fixed before closing.
The High Cost of NOT Selling As-Is
Besides from the obvious fact that you may simply not have the money to put in new appliances, fix the roof, or replace the septic tank, there are other ways not selling as-is can cost you too.
You could be forced to credit the buyer for repairs needed at closing. That means you’ll walk away with less money.
Or, if the transaction simply fails you can be throw into an infinite loop of finding buyer after buyer who doesn’t work out. All those months can mean a high risk of your home going down in value and all the additional costs of holding and maintaining it in the meantime.
Common & Uncommon Repair Issues
Depending on how you acquired your home and how long you’ve had it, you may or may not be well aware of all the potential repair needs. What you consider a necessary repair or improvement may also be substantially different from what the next end buyer, a professional home inspector or mortgage lender will deem necessary or urgent.
Just some of the things that can come up include:
- Foundation problems
- Air conditioning
- Electrical and plumbing
- Roof leaks
- Hidden mold
- Hazardous materials (drywall, asbestos, and former grow houses or meth labs)
- City and county regulations (handrails, side walks, etc.)
Does Selling As-Is Mean No Inspections?
No. Even in an as-is real estate contract the buyer typically has the right to a professional home inspection. As the seller you must legally disclosure any defects you are aware of. The inspection is used to uncover any additional items that may not be visible or obvious. Even in an as-is contract there will normally be a clause detailing a ceiling on repair costs that the buyer will accept. This may be a dollar amount or percentage of the purchase price. For example; if the repair costs are estimated to be more than 2% of the sales price by an inspector, the buyer may have the right to exit the contract and receive their deposit back or renegotiate.
Selling Your House As-Is for Cash vs. Financed Buyers
Perhaps the biggest difference in selling your home today is whether you choose to sell to an all cash buyer, or try to risk it with a borrower who needs a mortgage loan to buy your home. Aside from all of the other things that can go wrong with a mortgage loan application, lenders can be really picky about property condition. Even when the buyers aren’t. Normally they’ll require those repairs to be made in advance by the seller and a licensed and insured contractor. If you don’t want to have to risk being on the hook for getting rid of termites, fixing the foundations or putting on a new roof, just for the hope the lender will still make the loan, you probably want to stick with a cash buyer.
Serious cash buyers, and especially investor buyers will be willing to truly buy as-is in the current condition. That can apply whether your home just needs a little style makeover or is half burned down or flooded. They get it. They are willing to take on the work. They won’t be delayed by a lender. Plus, they can close far faster, meaning you’ll lose less money on holding the property and avoid risk of any more repairs coming up while you are waiting to close and get your cash in hand.