In today’s competitive seller’s market, it is common to see homes selling “as-is.” But what does this really mean for a buyer and you as a real estate agent?
In essence, an as-is sale means that the seller has no obligation to fix any existing issues with the home. This often means a (comparatively) low price tag up front, which can be very appealing. But there are potential risks as well, so it pays to be fully aware of the responsibility and expense that such a home might entail.
Buying a home always involves a great deal of thought, of course, but an as-is buyer will need to do more research and work to be well-informed. Below are some keys tips that can help smoothly navigate the process.
1. Manage expectations
Before your buyer makes an offer on an as-is home, you may need to nudge him or her to adjust expectations. Encourage reflection on important questions:
- Am I OK with putting work into the home?
- How much work am I willing to put into this house?
If your buyer is game for the work such a home will likely require, suggest that he or she establish a repair budget so that the cost of improvements and repairs don’t come as a surprise.
Almost all home inspections come back with issues, but it’s up to you to help a buyer navigate the possibilities and determine personal make-or-break items.
The guided conversation could go something like this:
“Think about your current home. Is there a chipped tile that you’ve learned to live around? How about that fan that makes noise when it’s on the high setting?”
These are items that may come back on the inspection report but don’t ultimately affect the habitability of the home. If your buyer knows what is in and out of budget ahead of time, the inspection results won’t feel so overwhelming.
2. Order the right inspections
Inspections are especially important for an as-is sale, and they will need to be completed during the negotiated inspection period. Prior to going under contract, it may be helpful to encourage your buyer to do some research on local inspectors, as their findings will weigh heavily on their decision to move forward with the contract.
You know who is reputable and who isn’t, and you are in a position to help the buyer avoid inspectors who may not have the knowledge or expertise to distinguish between a drywall stain and mold.
Once your buyer has settled on a trusted inspector, you can help determine the inspections that may need to be done. Aside from a standard inspection, a four-point or septic tank inspection may be in order for insurance purposes.
Remember, the inspection period is the only time during which your buyer can cancel the contract based on conditions they may find, so uncovering everything possible during this time is important.
3. Advise your buyer on ‘the lender talk’
So the inspection came back, and the home needs a new roof. You and your buyer knew this might be the case, and he or she is OK with tackling this project. The thing is, it’s not only about the buyer’s feelings on the matter: Is his or her lender OK with this as well?
Chances are, a lender is going to require the home be safe and sound. Any items that affect safety and structural soundness, like that old roof, may prevent your buyer from obtaining financing on the home.
If the inspection turns up any major concerns, encourage your buyer to be upfront with the lender so that he or she can look for ways to help secure the financing needed to get the home.
Some options include renovation loans and escrow holdbacks, and so the sooner your buyer talks with his or her lender, the more time there will be to find a solution.
If the appraisal notes any “lender required repairs,” the seller has the option of declining the repairs or fixing the elements in question but also increasing the purchase price to offset repair costs.
Buying a home as-is may seem daunting for your buyer based on the sheer number of unknowns. But with some additional planning and prepping, you can help your buyer be better prepared to handle this process.
Focus on encouraging thoroughness and asking plenty of questions, and your buyer will be armed with the information he or she needs to find the perfect new home.