As Is, what does it mean and can I sell house as is?

If you own a house out of town or one with deferred maintenance, you may be asking if you can sell a house “as is”.   It might be a home you inherited, a rental or maybe you just need to move and don’t have the time or the money to make needed repairs on your home.  Maybe you are simply wondering what as is really means?

Selling as is can make it easier for you to sell your home quickly and avoid the hassle of expensive repairs, but it does have some drawbacks.

What does it mean to sell house as is?

As is has different meaning for different people.  Most sellers think that selling a home as is, it means they’re not going to make any repairs.  Not only can this save you money, time and effort, but you can sell your home in it’s current condition.  They can avoid having to paint, replace carpet, fix roofs or plumbing issues.

If you have inherited the home, chances are you have very little idea what may be wrong with the house.  You probably don’t know what repairs it actually needs.  Selling as is frees you from the worry of problems potential buyers may ask you to repair.  It can also  let you receive the money from your inheritance sooner, instead of consuming your time and money on repairs.

Pros and Cons of selling house as is

As already mentioned, selling as is has several benefits.

  • Sell your home in its present condition
  • Potentially save thousands in expensive repairs
  • Avoid drawn out buyer/seller negotiations
  • Avoid the stress of continued bills and property taxes while managing the repair process
  • Sell your home faster.  Fixing and reselling home can take 5 to 6 months from beginning to end.

However, as with everything, there are drawbacks.  Typically, selling a home as is means selling your home for less than if the home was fixed up.  In a seller’s market, this difference will be less than in a buyer’s market where the buyer may want a bigger discount for condition of the home.  If you’re in a buyer’s market, most buyers will expect to purchase the home for a discount equal to or greater than the cost of the repairs.  In a seller’s market, the buyer may be willing to accept a discount of less than the estimated cost of repairs.

How much does it cost to sell house as is?

Depending upon the amount of repairs involved, you can expect to sell your home as is for about 70% to 80% compared to similar homes that have been fixed up and repaired.  Most as is buyers will be cash investors.  If the cash buyer is just bird dogging for a larger investor group who buys “ugly houses”, you can expect to sell your home for about 60% of what the home will sell for after repairs.  You’ll obviously receive more money by selling to a local investor, rather than selling to someone who will just sell or assigns your contract to another buyer for a fee.

How to sell your house as is, step by step

There are several things you can do to sell a house as is and make sure you’re not taken advantage of.

1. Get a home inspection

A home inspection will give you an idea of what repairs are needed for the home.  With the home inspection, also get a pest inspection.  These two reports should run between $400 and $600 total.  Once you have these reports, you can decide if you want to pay to have the items corrected and sell the house for more money or sell the home as is.  You can also provide the home inspection to potential buyers so they can make a realistic offer.

2.  Get estimates for repairs

If you are still considering making the repairs, then your next step is to get estimates for the most needed repairs.  Using your home inspection report, make a list of the critical health and safety issues.  Next, get bids from licensed contractors to complete the repairs.  If you choose to sell the property without making the repairs, you will have written estimates you can give potential buyers.

3.  Price the home appropriately

One of the big mistakes sellers make trying to sell a fixer up is pricing the home incorrectly.  Price it too low, and you can lose money.  Price it too high and you can also lose money paying the mortgage, insurance, and taxes while you wait for the property to sell.  If you want to get a fair estimate of value, you can pay for an appraiser.  For around $450 an appraiser can give you the value of the home based on it’s current condition.

4.  Be willing to negotiate

Your appraised value is just an estimate.  Some buyers may be willing to pay more, but others pay less.  Be willing and ready to negotiate.  Remember, you’re probably going to have to continue paying a mortgage, insurance and property taxes while you wait for your house to sell.  Selling quickly at a slightly reduced price may net you more than if you were firm and continued paying these expenses.

5.  Decide if you want to sell to an investor or through a Realtor®

Now, that you have written estimates from contractors for repairs and have an estimate of it’s current value, you’re ready to sell your home as is.  You can sell your home through a Realtor® and pay real estate commissions, or you can sell your home to an investor.  When selling a home as is, with a lot of repairs, you’ll often receive the same amount of money or more, by selling to an investor as selling through a Realtor®.    The reason, even when selling through a Realtor®, your most likely buyers will still be investors.  Investors are likely to offer you the same price whether you’re selling through a Realtor® or not,  because they’re looking at what the repairs will cost them.  By selling to an investor who buys houses for cash directly, you could save time and paying real estate commissions.

Does as is eliminate disclosures?

Many sellers think that selling something as is means that they don’t have to disclose known problems.  In real estate, selling a home as is has specific meaning, referring to obvious or visible defects.  It does not mean you don’t have to tell potential buyers about problems you are aware of.  When selling a home as is, you still must disclose anything you know to be wrong with the home.   Sellers have an obligation to avoid making misrepresentations about known defects or failing to answer questions truthfully.

Examples of things that must be disclosed if known

  • Mold
  • Asbestos
  • Leaking Roof
  • Pest infestations or damage such as termites
  • Major foundation problems or other structural defects
  • Major plumbing or electrical issues
  • Local neighborhood noise or nuisance problems

In California, if the property is held in a trust, the trustee is not legally required to complete a Transfer Disclosure Statement (TDS).  However, it may be wise to disclose all known issues in writing anyway for your own protection.

“A seller who wishes to ‘as is’ should make a full disclosure of all defects known… and state that additional defects, which the seller is unaware of, may be found.  A seller who is not familiar with the property for any reason (such as occupancy by tenants) should disclose this fact.  Doing so puts the purchaser on notice that he or she cannot rely on the very limited knowledge of the seller.” California Real Estate Law, Fifth Edition, Pivar and Bruss

When selling as is, the buyer should have the opportunity to do their own due diligence and inspections.   If your buyer asks for an inspection period, you can negotiate a shorter inspection period for them to complete their due diligence.

Cash buyers may be best option for as is sale

When selling your home as is, it may be prudent to look for cash buyers.  Cash buyers do not rely on banks that may require rigorous home inspections in order to purchase your home.  Furthermore, experienced cash buyers often buy homes as is.  They can quickly assess needed repairs and perform any inspections.

As mentioned above, many cash buyers are just middlemen.  These middlemen, called bird dogs or wholesales, advertise to buy your house for cash, and then sell your contract to a larger investor group for a fee. If selling your home as is, you will typically get a higher price if you sell to a local investor or cash buyer and avoid the middleman discount.  You should always ask potential buyers if they are buying the home for themselves, or for another buyer.

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