What Does it Mean to Buy a Home “As Is”?

Currently on the search for a new home? You may have across a home being listed “as is,” a not totally uncommon term that’s usually (though not always) paired with a lower listing price. Whether or not it’s worth pursuing the property further depends on a number of factors, including what it means to buy a home “as is” and what sorts of risks—and benefits—you might get in return.

Here’s what you need to know before you buy a home “as is,” plus some helpful tips for making sure that you’re getting a fair deal.

What does it mean to buy a home “as is”?

A seller who lists a home “as is” is telling buyers that no repairs will be made prior to closing. It also means that they are making no guarantees that everything is in peak—or even working—condition.

Normally when you’re purchasing a home you have the opportunity to make repair requests after the home inspection. If you and the seller are unable to come to terms on what will be fixed and who will pay for it, then you have the option to back out of the deal for low or no penalty.

When you buy a home “as is,” on the other hand, the seller is letting you know up front that repair requests aren’t on the negotiation table, even major ones. They’ll still be required to make any mandatory disclosures to you prior to accepting your offer—such as those concerning structural issues, problems with the electrical or plumbing systems, or the presence of mold or pests—but you’re agreeing in advance that you’ll be the one on the hook for taking care of the fix.

Important to note: you can still use the inspection contingency to back out of the deal if the home inspection brings to light issues that you aren’t comfortable dealing with.

Does buying a home “as is” mean there are big problems with it?

There are a few different reasons why a seller might opt to list a home “as is,” and not all of them are indicative of hefty repair needs.

Some other reasons that a home may be listed as “sold as is” include:

• • The seller is in a hurry to sell and doesn’t have time to make repairs.
  • The seller does not have the available funds to pay for repairs, even minor ones.
  • The seller simply wants to avoid negotiations over repair concessions.

  Likewise, in some cases it’s only a portion of the home that’s being sold “as is”—for example, the roof or HVAC system—and any other potential repair needs are still up for negotiation.

  Should you buy a home “as is”? Pros and cons

  When you buy a home “as is” you’re almost always paying less for it than you would otherwise, since the seller is making a concession in advance of your offer instead of later on. This can make it an attractive deal, especially in a high-cost neighborhood.

  Of course, there are some potential trade-offs that you might need to make in return, including some not-so-obvious ones. Here are some of the pros and cons of buying a house “as is” that you’ll want to keep in mind before you put in an offer.

  Pros

  You may be able to snag a good deal. As mentioned, buying a home “as is” could mean paying considerably less for a home than you would otherwise, and leaving you with room in the budget for repairs and upgrades.

  You may close faster. Sellers who list their home “as is” aren’t looking for a drawn out closing process. On the contrary, by skipping back and forth negotiations after a home inspection (as well as the time needed for pre-sale repairs) you’re likely to close on a much tighter timeline.

  Cons

  You may have trouble getting financing. Depending on the condition of the property, there’s a possibility that the home is going to be considered a fixer upper by lenders, and thus less attractive for financing. Sometimes this leads to not great terms, and sometimes it precludes you from getting financing at all, leaving you to pay all cash or walk away.

  You may get stuck with major repairs. A home that’s listed “as is” doesn’t always have serious repair needs, but it’s not uncommon. While the home inspection should provide you with a pretty good overview of what you’ll need to do, these repairs are still something you’ll need to work into your budget—and that may offset any initial savings you get.

  Financing an “as is” home

  Buying a home is as much about figuring out how you’re going to pay for it as it is finding a property that you love. And in the case of deciding to buy a home “as is,” you may be facing a steeper uphill climb when it comes to securing a loan.

  Most traditional mortgages require that a home meet minimum property requirements (MPRs). These vary depending on the specific mortgage type, though they don’t only apply to homes that are completely uninhabitable.

  Your mortgage broker or lender will be able to walk you through the MPRs for the different types of home loans that you qualify for, but it’s important to be aware of the various conditional requirements you might be up against. Some standard MPRs for conventional mortgages include:

  • • Working heat and water systems
    • Access to clean drinking water
    • Structurally-sound foundation and roof
    • Up-to-code electrical systems

    The presence of one or more of these issues in an “as is” home doesn’t mean you can’t or shouldn’t buy it, but it does mean that you might be very limited in your financing options. If the seller’s agent is aware of this up front, they may even have the home listed as “cash offers only” to avoid financing headaches and let any potential buyers know what they should expect.

    Quick tips for buying a home that’s “sold as is”

    Just because a home is being sold “as is” doesn’t mean that you should rule it out, especially when you consider some of the alternate reasons that might be behind the seller’s decision.

    As with any home purchase, you’ll want to do your due diligence before proceeding. Your real estate agent will be able to guide you through this process, but figure that it will include the following essential steps:

    Get a home inspection
    

    Include an inspection contingency
    

    Don’t rush the sale
    

    Ultimately it’s your call whether or not you decide to buy a home “as is”—including whether or not it’s a smart investment for you to make. If you do proceed, just be sure that you know what you’re getting into with repairs, and that you have room in the budget to tackle them.