In today’s competitive housing market, you may have to make sacrifices for finding and buying your dream home. And for many individuals, this means buying a house as-is.
Whether you’re a first-time homebuyer, eager for a DIY project, or a real estate investor looking for your next rental—it may be worth considering buying a house listed “as-is.”
Let’s go over what that means, in which scenarios you might want to buy a home as-is, and your financing options.
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What does “sold as-is” mean?
Buying a home as-is can come about in one of two ways:
- A seller lists their home for sale as-is (most common).
- A buyer offers to buy a home for sale as-is.
Either way, it means the same thing. With an as-is transaction, no repairs are made before closing. There is no guarantee from the seller of a specific condition.
If you purchase a home as-is, you’re responsible for all repairs and are unable to take any legal action against the seller in the future.
Some additional points of emphasis include:
- As-is sellers must meet minimum federal and state disclosure standards. In other words, they are required to provide potential buyers with a disclosure.
- As-is homes do not necessarily have extensive damage such as structural problems or an improper/outdated electrical system.
Don’t let the term “sold as-is” scare you away. Buying a home as-is is one of the best ways to overcome your competition.Check your mortgage options
Reasons a seller might list a property as-is
A seller doesn’t need a reason to list their home as-is. It’s up to them if they want to go down this path. However, most sellers who take this approach generally do so for one (or more) of the following reasons.
The home may need major repairs. This can include problems such as mold, a cracked foundation or asbestos. There’s a solution to all of these issues, but a seller may not be willing to take on the responsibility.
As a homeowner contends with an increasing debt load, they may begin to search for ways to save money. And that often leads them to sell their home. Doing so as-is allows them to move quickly and without spending much additional money out of pocket.
Inability to fund home renovations
A homeowner may want to fund home renovations, but they don’t have the financial means necessary to do so. So, they don’t want a potential buyer to ask them to make repairs before closing a deal.
If a homeowner is selling as-is, don’t shy away from asking why. Their real estate agent — if they have one — should be able to shed light on the situation.
Biggest misconceptions about purchasing as-is properties
Purchasing a home as-is can add additional stress and anxiety to the process, and that’s especially true if you believe the many myths and misconceptions about this type of transaction. The following are three top misconceptions.
You can’t order a home inspection
As-is doesn’t mean that you are unable to inspect the home before making an offer. It means that the seller is not going to make any repairs.
It’s still in your best interest to hire a professional inspector. This gives you a clear idea of what you may be facing, in regards to condition and repairs.
There’s no disclosure
Even with as-is real estate, a disclosure is required. This is the way for the seller to share everything they know about the property, including material defects.
You don’t need a real estate agent
While not required, purchasing a home without the guidance of a real estate agent, especially with an as-is property, could become cumbersome. Your agent can point out areas of concern and guide you from start to finish should you decide to proceed.
Financing considerations for an as-is purchase
While not always the case, many as-is homes are in a state of disrepair.
This can make it difficult to obtain a mortgage, as most lenders require a property to meet a predetermined standard of livability or minimum property requirements (MPRs).
A licensed home appraiser will perform an appraisal to ensure that the property meets the MPRs set forth by regulators and your lender.
There are however, a few common loan solutions for an as-is purchase, which include:
- FHA loans: These government-backed loans can only be used if the home meets minimum property standards. A home that requires a total renovation won’t qualify for an FHA loan.
- USDA loans: These loans are only available for homes in eligible rural areas of the United States. There are also MPRs, such as a structurally sound foundation, updated electrical system, and a functional HVAC system among others.
- VA loans: You can use a VA loan to purchase an as-is home, but the MPRs are stricter than most other loan types.
- Conventional mortgage: As a loan that’s not guaranteed by the government, a conventional mortgage is often best for an as-is home. While there are still MPRs, they’re much more relaxed. For example, defects such as plumbing leaks, interior wall damage, and missing handrails are acceptable.
Is buying as-is right for you?
If you’re considering an as-is home, here are some of the questions to ask yourself:
- Do you have the funds required to repair the home?
- Can you do some or all of the work yourself?
- Do you have a trusted contractor?
- Do you have a place to live until your new property is ready?
- Do you have a real estate agent with experience helping clients buy as-is homes?
If you answered yes to these questions, you’re in a good position to consider purchasing a home as-is.
The bottom line
Buying an as-is home isn’t the right decision for everyone, but it could be just what you’re looking for. This is even more so the case in a seller’s market.
When you’re ready to begin your search, let Go Mortgage help match you with an uncommonly good loan solution.
With preapproval from Go Mortgage in hand, it’s easier to make your offer stand out in a competitive market.
And when that happens, your chance of “winning” the home greatly improves.Need help? GO Mortgage can help