For sellers who may need to relocate quickly or don’t have the resources to repair or upgrade a house before listing, an as is home sale could get you on your way sooner rather than negotiating about repairs in the traditional sales process. Prospective buyers willing to overlook dated decor or other imperfections may not have to outbid numerous buyers if they’re willing to take on needed improvements themselves.
For sellers, a hot market may be a good time to consider an as is home sale. Buyers usually pay the asking price with 29% paying even more, reports the 2021 Profile of Home Buyers and Sellers by the National Association of REALTORS® (NAR). An as-is home sale allows first-time home buyers faced with rising interest rates, high prices, and low inventory to break into the housing market with a home they can fix up over time. In fact, more than half of the agents surveyed by HomeLight for its Top Agent Insights for New Year 2022 recommend asking for no repairs to help first-time buyers beat out other offers.
Whether you’re looking to sell or buy a house, here’s what you need to know about an as-is home sale.
What is an as-is home sale?
When selling a home as is, the owner offers the property in its present condition and doesn’t plan on repairing items revealed during the buyer’s inspection. While an as-is home sale could sound the alarm that the house is a potential money pit, this may not be the case.
For estate sales, an as-is home sale is easier for out-of-town families and avoids a logistical nightmare of flying in to deal with minor repairs or bringing a tired interior up-to-date. “We’d rather sell it for a little bit less because the expense of trying to get here and fix it isn’t going to be worth it,” says Kim Alden, a top real estate agent in the Chicago area whose specialties include foreclosures and investment properties.
You don’t have to sell the entire property as is, but can opt for a partial as-is sale in which you specify parts of the premises that won’t be repaired such as an in-ground pool with surface cracks or a deck with rotting wood. If you are willing to address other problem areas, make sure you state which items are offered as is.
Sellers: reveal, don’t conceal known defects
Even though buyers are willing to overlook issues in an as-is home sale, they want to know that the house is safe and livable before moving in. The NAR reports that 36% of people who bought new homes didn’t want the hassle of renovations and problems with plumbing or electricity. Although a slightly higher percentage, 38%, purchased resales to get a better value, buyers are cautious about hidden problems they might encounter with homes being sold as is.
Just because making repairs isn’t on the table doesn’t mean you can hide major issues from prospective buyers. Real estate disclosure laws in most states require sellers to reveal known problems that could substantially reduce property value or be a significant risk for people. Failing to do so or misrepresenting a material defect could expose you to legal risk. So even if you’re not going to fix your air conditioner that leaks refrigerant, you’ll still have to let the buyer know about this or any other issues you’re aware of.
“You would want to disclose more than less,” says attorney Brett Wasserman. Otherwise you’ll give buyers a reason to ask for money back and you’d be responsible for repair costs.
Although you should discuss specific disclosure requirements with your real estate agent or attorney, you can learn more about state regulations in the guide prepared by Nolo, a provider of plain-English legal information and products.
Buying as is is not a waiver of a home inspection. It’s just saying that you’re going to take the house with any defect the home inspector finds.
- Kim Alden Real Estate AgentCloseKim Alden Real Estate Agent at Compass
- Years of Experience 17
- Transactions 1533
- Average Price Point $324k
- Single Family Homes 1225
Home inspection is key for buyer’s due diligence
While customarily part of a buyer’s due diligence, a home inspection is even more critical when considering an as-is home sale because the term raises a red flag warning of potential problems. Home inspections examine the structure and systems of the house including HVAC, plumbing, electrical, roof, foundation, basement, as well as walls, ceilings, floors, windows, and doors.
Don’t expect your buyer to forgo the inspection. Alden advises buyers to hire a licensed home inspector. “Buying as is is not a waiver of a home inspection. It’s just saying that you’re going to take the house with any defect the home inspector finds,” she says.
Buyers of as-is homes usually want the seller to remedy health and safety issues such as mold, radon, and electrical and fire hazards. “If someone has a high elevation of radon, they may choose to walk away or they may ask the seller to mitigate the radon,” Alden notes.
Although you’re not planning to make repairs or lower your price should troubling flaws turn up, Alden says be prepared for buyers to ask for something. And if you’re not open minded, buyers can take their earnest money and run when the contract includes a home inspection contingency.
Consider a pre-listing inspection, but don’t overlook the risk
One way to get a jump on any unexpected deal breakers is to hire a home inspector before putting your house on the market. A pre-listing inspection, which costs an average of $350, reveals issues that you could easily resolve. This insight helps price your home more realistically and justifies a higher price if it’s in good condition. Providing a home inspection report could also make buyers more comfortable with an as-is home sale.
However, there’s always a risk that a home inspector could uncover problems that you knew nothing about, which you would then have to disclose.
Buyers may still try to negotiate the cost of repairs into a lower sales price, even with as-is home sales. If the offer is a good one, it might be worth spending a few dollars to fix a dripping faucet or make some other minor repair. If there are health and safety concerns, consider offering a credit at closing if you lack the funds to tackle the repairs yourself.
Although repairs might not be in your budget, your buyer will most likely need financing, and significant issues could slow down that process. Most lenders require that a house meets minimum property requirements to ensure it is safe to live in.
Minor defects like cracked windows or worn carpeting might not impede loan approval, but a faulty roof and other major problems could disqualify your home from government-backed FHA or VA loans. To widen the buyer pool, address serious issues before listing your house. These might include issues with the heating system, the roof and attic, or structural damage.
Alden says FHA or VA loans present more hurdles to get over. She calls the lender if the buyer is looking into them and inquires, “What are their rules and regulations so then we can make an educated decision if this could be a good fit or not?”
Steps to boosts your home’s price
While usually priced lower than updated houses whose owners are willing to make repairs, homes selling as is have greater value to buyers who will live there rather than investors who will make renovations and either flip or rent the property.
The worse shape your house is in, the bigger the discount you can expect to give. Alden says homes that need work could sell for 5% to 10% less than move-in ready homes. Depending on the severity of the damage, the price drop could be as high as 50%.
But with inventory remaining low, rising interest rates, and intense competition, as-is home sellers might still get an acceptable price if houses in their community are in high demand and short supply.
Although you may give up some value in exchange for a faster sale without the hassle of home improvements, here’s how a little effort can make all the difference in getting the best price.
Make your house shine
“Clean, clean, clean. People love a super clean house,” says Alden. If you’ve got the time, all it takes is a little elbow grease to make your house sparkle. Don’t forget to clean light fixtures and wipe down woodwork.
If you’re too busy or scrubbing floors isn’t your scene, hire a cleaning service at a national average cost of $40 to $65 per hour or $150 to $250 for a three-bedroom, 2,000-square-foot home. Deep cleaning or move-out cleaning adds another $175 to the total.
Alden also suggests painting the front door and giving your walls a fresh coat of paint like a neutral gray.
Curb appeal tips to add value
A terrific first impression increases value and attracts buyers even when selling your home as is. Buyers will pay 7% more for a house with great curb appeal than one with a neglected exterior, according to HomeLight’s recent Top Agents Insights report. Agents surveyed suggest these budget-friendly projects to enhance curb appeal and add value:
- Basic yard care including mowing and fertilizing the lawn plus weed control costs about $340 and adds $2,173 to home value or ROI of 539%.
- Spread fresh mulch at approximately $275 for 3 cubic yards to increase your home’s worth by $1,749 with ROI of 536%.
- Install a new garage door costing about $1,200 for an additional $2,797 in value or ROI of 133%.
Get rid of the clutter
Decluttering is also important for a successful as-is home sale and will cost just a little time if you do it yourself. “Pack away anything that’s personal. Less is more,” says Alden. “You don’t want people focusing on your family photos. You want them to focus on the house,” she adds.
As an extra bonus, you’ll get a head start for moving day by throwing away or donating items you don’t need and packing up cherished possessions.
Let a top agent be your guide
Even if you’re opting for an as-is home sale, you’ll benefit from working with a top agent who knows the area and can factor in your property’s condition and current market trends to maximize profit.
HomeLight’s can put you in touch with real estate agents experienced in selling as is to create a competitive pricing and marketing strategy. They’ll also identify small repairs or cosmetic improvements to boost your price and speed up your as is home sale.
Sell to cash buyers with Simple Sale
If you don’t have the financial resources to rectify major issues, selling to investors and cash buyers could be the best approach. Lenders may not approve mortgages for homes needing significant repairs. Buyers with money in the bank eliminate the need for financing or appraisals, thus decreasing closing time to just one to two weeks.
Cash buyers, such as house-buying companies, flippers, and investors, are more willing to overlook serious defects such as a leaking roof or foundation cracks. “They think they are going to get a better deal,” says Alden. Expect a lower price to offset the cost of repairs and renovations before they can rent or resell the property.
If you want to sell your fixer-upper quickly without spending money on repairs or stressing out about showings, then connect with cash buyers via HomeLight’s Simple Sale platform.
Just answer a few simple questions about your home, its condition, and your selling timeline. You’ll get a competitive cash offer with no financing contingencies, hidden fees, or agent commissions. With Simple Sale, you’ll be able to sell your home in as little as 10 days without the inconvenience and expense of putting your home on the market.
Don’t give your home away when selling as is
Whether you’re undertaking an as-is home sale because of financial reasons or time constraints, knowing why buyers will make an offer for a house in its current condition and what items are important can help maximize your property’s value and lead to a faster sale. Just because you’re selling as is doesn’t mean you’ll have to give away your home in a fire sale. Whether working with a top agent or getting a cash offer, you can make an as is home sale work for you.
Header Image Source: (Matthew Addington / Death to Stock)