A charming house has caught your eye, and it’s landed at the top of your dream-home wish list. Whether it’s the features, the retro facade or the low purchase price, you love it. In fact, you love it as-is.
But love can be blinding. There are a few things you’ll want to take into consideration before you buy a home as-is. Don’t fall so head over heels in love that you forget to look out for any red flags. 🚩🚩
Sold As-Is, Explained
When a home is “sold as-is,” it means the seller won’t be making any repairs to the home or specific features of the home.
Maybe the seller needs to sell their home quickly. Or maybe the seller can’t afford to make any major repairs before the home is sold. This doesn’t necessarily mean that the home can’t be renovated or has to be torn down and rebuilt.
In this home-selling scenario, sellers aren’t required to provide buyers with a Seller’s Disclosure, but sellers must fulfill any mandatory state or federal requirements to disclose defects, like lead paint, to potential home buyers.
The ‘As-Is’ Home vs. ‘As-Is’ Home Features
Sometimes a home is listed “as-is,” but the entire home isn’t being sold as-is. Sellers will often sell specific home features as-is but are maybe open to fixing up other parts of the home.
Sellers may select this option because either they don’t have the time or the money to address the concerns. Here are some features that are commonly sold as-is:
- Sheds or barns
Minimum Property Requirements
You may feel up to the task of buying a fixer-upper, but it doesn’t mean your mortgage lender is up for the challenge. Before they can approve your home loan, lenders will want to confirm that you can afford repairs, and you can live in the home.
Each mortgage loan has its minimum property requirements (MPRs). These requirements are the baseline standards of livability lenders use to decide if they’ll approve a mortgage for a particular home.
Let’s dig into some of the more common mortgage loan MPRs.
- Conventional loan: Most conventional loans must meet the MPRs set by Fannie Mae and Freddie Mac. To be approved for a mortgage, the “as-is” home must be safe, structurally sound and only have minor defects.
- Federal Housing Administration (FHA) loan: FHA mortgage loans, which are an affordable, government-backed loan option, require that the home is structurally sound and safe to occupy at the time of purchase.
- United States Department of Agriculture (USDA) loan: USDA loans are targeted to rural and suburban home buyers. To qualify for a USDA mortgage, the “as-is” home must have a sound foundation and a roof that seals against moisture. The USDA’s MPRs also require that the home has up-to-date, functional electrical, heating, cooling and plumbing systems.
- Department of Veterans Affairs (VA) loan: VA loans help veterans, active-duty members and qualified surviving spouses get a mortgage loan with no down payment. Because these loans are government-backed, they have high standards when it comes to their MPRs. “As-is” homes must have potable water, functional heating, a water heater, a good sewage system, a reliable roof and be pest-free.
Use a Real Estate Agent
Find a real estate agent or REALTORⓇ with experience buying “as-is” homes. Having an experienced agent by your side can help you sidestep potential money pits. They’ll know what to look for and advise you on any additional steps you’ll need to take.
An experienced real estate agent will be able to assess the repairs with you and factor them into your purchase offer. They should also know the MPRs for different loan products and be able to help you find the right mortgage for your property.
Know Required Disclosures
When it comes to “as-is” real estate, sellers aren’t required to disclose everything that’s wrong with the house. In the name of transparency, many sellers will provide buyers with a comprehensive Seller’s Disclosure to help move things along – but that’s not always the case.
In general, sellers aren’t completely off the hook when it comes to disclosures. There are state-mandated disclosures sellers will have to make, which will vary from state to state. And there is one mandatory federal disclosure: the lead and/or lead-based paint disclosure. Title X requires anyone selling a home that was built before 1978 to disclose any lead hazards.
Your real estate agent will know exactly what sellers must disclose in the area and can help you navigate any potential risks. They’ll also know what home hazards are common in the area.
Negotiate a Home Warranty
While “as-is” sellers are required to disclose certain hazards before selling their homes, they don’t have to disclose everything. TBH, they may not even know all the deficiencies and defects in the home. This is where a home warranty comes in.
A home warranty is a type of insurance that covers any problems that may come up with major home appliances, home systems or other parts of the home after you close and settle into your new home.
FYI: A home warranty isn’t homeowners insurance.
Homeowners insurance protects against major losses or damage from things like fire or theft. A home warranty protects homeowners against general day-to-day breakdowns or problems with major appliances, like air conditioners, kitchen appliances, garage doors and water heaters.
A home warranty is the best way to protect yourself in the event of unplanned, emergency repairs or concerns.
Pro tip: Negotiate with the seller and see if they’d be willing to pay for at least a year of a home warranty program.
Get a Home Inspection
You may be wondering why you should bother with a home inspection if you’re willing to buy the home as-is.
Well, you may know some of the issues in the home, but it’s still a good idea to double-check.
Before you spend your hard-earned money, make it your business to understand the condition of the home and know what the major issues are.
Sure, you may know about the tattered roof, but without an inspection, you may not learn about the mold in the basement that the seller didn’t disclose. TBH, the seller may not have even known about it.
Getting a home inspection (which typically costs between $300 and $400) before you move ahead with the purchase will give you greater insight into the home and what living comfortably in it may entail.
Love the Home for What It Is
Buying a house as-is could be the start of a fun, new adventure or an expensive thorn in your side. To help avoid the latter, take your time, take precautions (like getting a home inspection done) and navigate buying an “as-is” home with professional advice and support.
“As-is” homes are a unique opportunity to afford, remodel and build the house of your dreams.
Environmental Protection Agency. “Lead-Based Paint Disclosure Rule (Section 1018 of Title X).” Retrieved December 2021 from https://www.epa.gov/lead/lead-based-paint-disclosure-rule-section-1018-title-x