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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. Either way, it doesn’t necessarily mean the home can’t be renovated or must 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.
‘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 may be open to fixing up other parts of the home.
Sellers may select this option because 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
You may see a property listed as-is with “where-is” included at the end of it. When a property is sold “as-is, where-is,” this means the property must be accepted in its current location. Any issues that arise from the property’s location are the responsibility of the buyer. Some examples include:
- Property in a flood zone
- Property not zoned for current use
- Restrictive deed covenants limiting what an owner can do with a property
- Geological hazards (radon, erosion, etc.)
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 to the challenge of financing it. Before they can approve your home loan, lenders must confirm that you can afford any repairs and 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 whether 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 loans, which are affordable, government-backed loan options, require that the home is structurally sound and safe to occupy at the time of purchase.
- U.S. 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 the home to have up-to-date and functional electrical, heating, cooling and plumbing systems.
- Department of Veterans Affairs (VA) loan: VA loans help qualified veterans, active-duty service members and surviving spouses get a mortgage loan with no down payment. Because the loans are government-backed, they have high standards when it comes to MPRs. “As-is” homes must have potable water, functional heating, a water heater, a good sewage system, a reliable roof and be pest-free.
Should You Buy a House As-Is?
Here are some pros and cons to help you decide if buying as-is makes sense for you.
As-is properties usually have lower listing prices, making them a great value that allows you to build equity in the home faster as you pay down a smaller mortgage.
“As-is” sellers are usually motivated to sell quickly. By removing potential haggling over repairs, the closing process is typically fast-tracked.
Because of the additional risks and repairs a buyer assumes with an “as-is” property, there is usually less competition for them.
A major risk with an “as-is” property is buying a home that needs more work than you anticipated. Unexpected repairs can become costly headaches.
The home must meet the minimum property requirements of the loan you choose. Your closing may be delayed or derailed if the home inspection reveals disqualifying defects the seller refuses to fix.
A major reason sellers list as-is is to eliminate back-and-forth negotiations. “As-is” sellers are typically less accommodating than traditional sellers and less open to counteroffers.
Tips for Buying a Home As-Is
Buying a property as-is can be a tremendous investment if you can afford to make the necessary repairs. It’s a chance to purchase your dream home for less than it would cost to build it.
If buying an “as-is home makes sense for you, here are some buyer best practices to consider:
Use a real estate agent
Find a real estate agent or REALTOR® with experience working with “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 should 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.
Understand required disclosures
When it comes to “as-is” real estate, sellers aren’t required to disclose everything that’s wrong with a 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 need to make, which will vary from state to state. And there is one mandatory federal disclosure: the lead or lead-based paint disclosure. Title X requires anyone selling a home 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.
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.
Make it your business to understand the condition of the home and know what the major issues are before you spend your hard-earned money.
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. In fact, the seller may not have known about it.
Getting a home inspection (which typically costs between $300 and $400) before you move forward with the purchase will give you greater insight into the home and what living comfortably in it may entail.
Consider a home warranty
While “as-is” sellers are required to disclose certain hazards before selling their homes, they don’t have to disclose everything. 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 an 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 it.
A home warranty is the best way to protect yourself in the event of unplanned, emergency repairs or concerns.
In short, yes. You can get a mortgage loan for a property sold as-is. However, depending on the loan, the home must meet different minimum property requirements.
Some general rules are that the home must be safe and structurally sound, and all rooms must have a functioning heat source. You can read the Department of Housing and Urban Development’s (HUD’s) minimum property standards handbook for more details.
Yes, but the Department of Veterans Affairs has stringent minimum property requirements. “As-is” homes must have potable water, functional heating, a water heater, a good sewage system, a reliable roof and be pest-free.
A lender sells a foreclosed home; an “as-is” home still belongs to the seller. Buying a foreclosed home is different from buying a home directly from a seller.
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.
Take the first step toward buying a home.
Get approved. See what you qualify for. Start house hunting.
The Short Version
- When a home is “sold as-is,” it means the seller won’t be making any repairs to the home
- Either the entire home or a specific feature(s) of the home can be sold as-is
- If you’re considering buying a home as-is, get a home inspection done to get a handle on any hazards or major repairs
Environmental Protection Agency. “Lead-Based Paint Disclosure Rule (Section 1018 of Title X).” Retrieved December 2022 from https://www.epa.gov/lead/lead-based-paint-disclosure-rule-section-1018-title-x