What does as-is mean? And is buying an as-is home a good idea, or is it a huge risk? We break it all down so you can buy the right home for you. —-
You’ll see the term as-is when shopping for a house, but what exactly does as-is mean? Does it mean you’re about to walk into a home where the roof is falling in, or one that is occupied by a rogue family of raccoons? It can — but as-is doesn’t necessarily mean a home is unlivable or unsafe.
There are a few different types of as-is designations, and what as-is really means varies by designation. If you understand what as-is means with regard to a specific home, you’ll be able to decide if that particular as-is home contains compromises you can live with or have the budget to fix. If so, you could end up with a great deal on your new as-is home!
So what does it all mean, and how do you decide if an as-is home will work for you? We talked to a real estate agent and a home service provider, both of whom have worked with dozens of as-is homes in their careers, researched different ways to learn about a home’s history and possible problems so you can walk into any as-is deals with eyes wide open, and compiled the following guide to help you understand whether that as-is home is your dream home or a disaster to avoid.
What does as-is mean: An entire property
When an entire property is listed as-is, it means that what you see is very much what you get, so look carefully before deciding to buy. The seller likely isn’t going to make any repairs or offer credits for any issues you find, so you need to be comfortable with the work involved in this particular home.
Those issues can include pests, foundation leaks or cracks, roof problems, systemic failures (electrical, plumbing, and so on), mold or water damage, presence of harmful materials … you name it!
However, as Ryan Rodenbeck, a foreclosure property specialist in Austin, Texas, explains, as-is can also refer to small cosmetic changes that the seller doesn’t want to bother with, especially in a strong seller’s market:
“Sellers don’t want to do repairs in a strong market.”
If you’re considering buying an as-is property, you’ll want to budget both time and money for repairs to be made. Consider which repairs could delay your move-in date and which ones you can live with happening around the property while you’re in residence.
Add the cost of repairs into your overall budget when figuring out an offer. Some repairs won’t cost much — but others could run into the tens of thousands of dollars and impact your lifestyle while you are paying for them.
What does as-is mean: Certain property components
An as-is home doesn’t always mean that the entire property needs repairs. Sometimes it’s just certain components, which will generally be flagged as the as-is part of the sale. These components are often due for an upgrade or repair, but the seller would rather pass the responsibility on to the buyer rather than deal with it themselves.
This can be a good thing as it gives you the ability to choose how you would like to make these repairs or upgrades, especially if they are smaller ones.
Certain detached structures, like garages or sheds, may be labeled as-is. These might need a new roof or siding. Or you could choose to tear them down completely if you prefer not to repair them.
Specific appliances and systems, such as dishwashers or ovens, or even entire HVAC systems, might be due for an upgrade. This can be an opportunity for you to choose a more eco-friendly option or simply something that better suits your preferences, such as a side-by-side fridge and freezer instead of a stacked unit.
Swimming pools, hot tubs, and spas may need cosmetic changes or a complete overhaul. Either way, you likely won’t need to rush these repairs as such amenities are rarely used daily.
Fireplaces and chimneys could need cosmetic or structural changes. As with swimming pools, hot tubs, and spas, these repairs could be delayed as long as necessary as long as the fireplace isn’t the only source of heat. A fireplace or chimney could also simply be sealed up and retained as a decorative feature.
Is it a good idea to buy a house as-is?
By buying a house as-is, you may get a bit of a discount off the purchase price … but it could potentially contain enormous issues, so you’ll want to build some protections into the contract. Your agent will help you figure out what protections you need for the specific as-is situation of your purchase.
Rick Hoskins, founder of Filter King, who works with many as-is homes, recommends that potential buyers “Pay attention to the seller. They might be selling the home as-is because they need money fast, more than because there’s something wrong with the place. If you get the chance to meet them, ask why they’re selling.” You can also ask your agent to talk to the listing agent about the seller’s reasons for wanting to move now.
Your lender may require the house to meet certain livability standards, so you might not be able to get financing for an as-is home. This can be a big deal if you don’t have cash to buy a house!
What can you do to protect yourself if you buy an as-is house?
If you love a home and it’s listed as-is, there are still things you can do to protect yourself from the worst-case scenarios.
Carefully research the home’s location
As with any real estate purchase, when you’re buying a home as-is you’ll want to pay special attention to where the property is located and maybe do some extra research. Here are some things to consider:
It’s in a flood zone
If your potential home is in a flood zone, find out its flooding risk level by visiting the FEMA Flood Map Service Center and entering the home address. Some zones flood as infrequently as once every 100 years, and others flood every few years.
If your house is in a flood zone, then you’ll need to have a plan for your basement or crawl space flooding and may be required to secure flood insurance. And if your house is close to a flood zone, but not technically in a flood zone, it’s wise to talk to your insurance agents about purchasing supplemental flood insurance … just in case!
It’s not zoned for its use
It’s possible for the zoning rules to change after construction, or even for mistakes to happen, such as the builder constructing a duplex in a neighborhood where duplexes are not allowed.
In either case, it’s worth checking for local precedent to show that there are other houses of the same type in the zone, which reduces the odds of legal headaches later.
There are deed covenants on the property
A covenant deed is less comprehensive than a warranty deed. It will still convey title (you’ll still own the house), but it may contain restrictive covenants that will prohibit you from using the property in certain ways.
This can be anything from barring the use of aluminum siding on any buildings on the property to limiting who you’re allowed to sell your home to in the future. While racial restrictive deed covenants are now illegal, they still are still technically included in deeds in some places.
Rodenbeck advises his clients that:
“If there is a deed restriction, you need to check with the title company to see if there’s any precedent on it, and whether they will insure the home against that restriction.”
Breaking deed covenants could result in losing your home, especially if your insurance won’t cover that restriction, so check for them before buying.
It’s in a historic zone (or it isn’t!)
Houses in historic zones often have restrictions regarding changes that can be made to them. You may not be able to make certain upgrades, or may be required to repaint with a specific color every few years to maintain the historic look and feel.
If your house isn’t a historic zone, you may not have access to the tax breaks nearby homes in historic zones do. Houses in historic zones tend to appreciate faster than homes that aren’t, so buying in a historic zone can be a good investment even if you have to jump through some additional hoops when it comes to home maintenance.
Airport flyover zone
Homes located in an airport flyover zone are sometimes cheaper due to the noise pollution; you’ll want to check out the flight schedule for that airport and potentially consider looking at the flight maps to see how many times per day you can expect a plane overhead.
If you have small children, they might love seeing planes; frequent travelers might also find proximity to the airport very convenient. However, if you’re a light sleeper, or simply sensitive to loud noise, planes overhead could be a problem.
Everything from earthquake fault lines, hillsides, soil, water, and other naturally occurring environmental forces can impact the value of the home you’re thinking about buying.
Any increased odds of landslides and wildfires may decrease the cost of the house, but you’ll need to factor in spending more on insurance to cover those events, as well as the mental load of being prepared for evacuation when a fire or landslide threatens your community.
A title defect is any potential threat to the current homeowner’s full claim or right to sell the property. This could include any publicly recorded issue, such as a lien, mortgage, or judgement that grants another person or business some type of claim to the property.
A title defect could lead to legal headaches down the road if it isn’t cleared up as quickly as possible.
Eminent domain or right-of-way/easement seizure by government
Is the local or federal government likely to force you to sell your home in the future? Consider the likelihood of this when buying an “as-is, where-is” property, as these situations often leave homeowners scrambling to find another house and move at a time and speed that is less than ideal.
Pay attention to title review
Mitigate the potential for any nasty surprises later by keeping tabs on the title review before closing. You’ll be able to make a better decision if you are aware of any title defects and exactly what they are. (And you should also strongly consider purchasing your own title insurance from the title company in case something emerges after closing that could compromise your ownership.)
Get an inspection before you make an offer
While your seller might not be dishonest, they may not be fully aware of all the issues with the home. Get an inspection before you make an offer so you can factor in the time and expense of making any repairs.
Check the CLUE report
The Comprehensive Loss Underwriting Exchange (C.L.U.E. Inc.) report will show whether any claims have been made on the property in the past. It’s a good way to learn about any undisclosed condition the owner may be trying to hide or may not be aware of from before they owned the house.
Look at deed and land records for red flags
Check the property records to verify that everything, from historical tax payments to assessed land value, appears to be in order.
Add an inspection contingency
This will allow you to cancel the contract if major issues are discovered during the inspection. You may not necessarily be able to renegotiate the sales price, but you’ll be able to back out of the deal without any penalty if the property needs more work than you are willing or able to take on.
Ask a contractor to inspect the house
If the property has known issues (a roof that needs repairs, a high risk of flooding, cracks in the foundation, and so on), ask a specialized contractor to inspect the house and give you the details of the damage and what it will cost in time and money to repair. Ask for both best-case and worst-case scenario scopes so you can make an educated decision about what you’ll need.
Factor these details into your decision to purchase and your offer.
Talk to your agent about seller disclosures in your state
Your agent will be able to tell you what a seller is legally required to disclose in your state as part of a home sale. As-is does not mean the seller can withhold what they know about the house’s problems.
As-is might just mean part of a house, or it might mean the whole building, so it will really depend on the property and your situation. The best way to find out is by asking lots of questions and doing a thorough inspection for anything the seller might have missed.
A good agent can help you decide whether to pursue the as-is property on your radar or whether it’s a better idea to keep looking. They’ll be able to provide recommendations to contractors for estimates and insights around how repairs for their other clients have gone.
Whether you decide to go forward or keep looking, a good agent will be there to help. HomeLight agents are all vetted and highly respected. Find the right agent for your search with HomeLight.
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