What Does Buying a Home “As-is” Mean?

In a competitive real estate market, you might be tempted to buy a house “as-is.” But is it a good idea and what does it mean? Here's what you should know about this real estate term.

In the case of a sellers’ market and limited inventory, sellers have the upper hand and still may be able to market a property that needs work. If one buyer doesn’t want a project, there will likely be a few others in line that will.

For home buyers, it can be a coin toss to purchase a home as-is. But it may pay off, either as an investment or a place to call home. Before you make a move, let’s take a look at what buying as-is really means, and what you need to consider first.

What Does the Term ‘As-Is’ Mean in Real Estate?

A property with the “as-is” distinction is sold in its current condition and the seller makes no warranties. That means that the buyer is responsible for all necessary repairs down the road.

There can be a few reasons why a seller would opt to go this route. For one, those in debt or threatened with foreclosure might often sell for no more than the outstanding balance on the loan, but in as-is condition. Others might do so because they have a sense of urgency, can’t afford or don’t want to make necessary repairs. Last, some are opportunistic and know that there are enough desperate buyers out there willing to take on the risks.

Speaking of risks, as-is property laws are written at the state level. Although the regulations vary from state to state, some nearly universal rules apply:

• The seller must disclose known defects. For instance, if they know there’s an unseen crack in the foundation, they are obligated to tell the buyer.
• The seller can’t knowingly misrepresent facts about the house.
• The buyer agrees to purchase the house in its visible condition, based on the known defects by the seller.
• It’s best practice that the buyer should request and pay for a home inspection, although the seller has no obligation to make any repairs or improvements. However, the buyer can sign a contract contingent upon inspection results, giving them an out should the inspection reveal any major issues.

Can You Negotiate an As-is Home?

Because of the current state of the American housing market, multiple buyers are often eyeing the same house. As a result, they need some form of leverage, and buying a property as-is can be one means to that end. Many sellers will ask for as-is offers up-front so being flexible with your demands can help make you a more attractive buyer.

Another factor is timing. The question of when to buy a home as-is depends on how fast you need one. If you’re under a time crunch— say you’re relocating your family to a new area — then an as-is purchase might expedite the process. Because since you as the buyer would address any work the property needs, it’s vital to have a thorough property inspection so that you understand the scope and scale of the undertaking.

Pros and Cons of Buying As-is

Given the risky nature of the proposition, there are certainly pluses and minuses to purchasing a home as-is. First, the argument for doing so:

Agreeing to an as-is purchase can mean your dream home is more accessible. This is especially relevant in highly competitive markets like on the coasts, where bidding wars often drive up the asking price.

For real estate investors, the low price can help make the case for an as-is purchase. Investors have to buy low in order to see significant returns on investment.

If you’re a reno pro who’s not afraid of a challenge, buying a home as-is and doing a lot of the renovation work yourself can be smart move. It may also be financially rewarding.

However, there are downsides to buying a house as-is. Among them:

The cost of repairs, which could be considerable. After all, you’re agreeing to take on any and all work the property needs. You have to entertain the possibility of finding hidden defects after closing that run up the cost of repairs. Unless the seller knowingly lied about the condition of the house (and you can furnish proof), the buyer has little legal recourse.

For instance, some examples of major defects that the seller would not have to correct might include: 

• Structural problems
• Leaking or faulty roof
• Chinese drywall
• Active termite infestation or damage
• Non-functioning systems (HVAC, septic system, etc.)
• Mold or mildew problems
• Presence of asbestos or other harmful materials

Tips For Buying a Home As-is

Still, some people weigh the pros and cons and decide they want to take the plunge. That said, here are some tips and considerations to keep in mind before you sign on the dotted line:

Don’t skip the inspection. It’s very important that you have a thorough property inspection so that you understand the amount of work that the home needs and the financial obligations you’ll have to shoulder.

Don’t leave anything to chance. Ask contractors to take a look at the roof, the sewer system, the foundation, and other major systems. You want to make sure you have all of this information at your fingertips so that you can factor any work into your offer price. Make sure there is enough time in the contract to perform thorough inspections. And if a seller refuses to allow inspections, take that as a bad sign.

Work with a real estate agent. Once you’ve signed a contract to purchase as-is, the stakes are now higher. That’s why having an agent you can trust to give you an honest opinion is important. Plus, they should be able to help you understand the disclosures, inspection reports, etc. Remember, with an as-is property, you’re taking on the burden of any work that is being done. This is the time when experience matters.

Have cash or financing ready. In a sellers’ market, buyers need to move fast or risk losing out on one home after another. It’s prudent to have your cash or financing source lined up in advance.

Bottom Line

Keep in mind that buying a home is personal. Only you can decide when features to prioritize based on your needs and price range and which ones carry less weight.

As mentioned above, a real estate agent worth their salt can help you come to the best decision about the property in question. They can help ground you when you might be inclined to let emotion get in the way. You’ll thank yourself (and them) a few years down the road when you’re settled in a home you love.