What it Means to Sell Your Home As-Is
Once you’ve decided to sell your home, you must take a look at it through the eyes of a prospective buyer. Doing so, however, may not be pretty. Maybe the surfaces and fixtures are hopelessly outdated, or maybe there are too many minor repairs to count. And that’s before a buyer sees the results of a home inspection.
If you need to sell your home fast, or are financially or physically unable to take on any house projects before you sell, the best strategy may be to list your home for sale “as-is.” To sell a home as-is means that you are selling the property in its current state, with an understanding that no repairs will be made. In this case, what the buyer sees is what they get. An inherited home from a relative who has not keep up the property, or a home without much of a loan to pay off – these are ideal candidates for an “as-is” sale, since there is less need financially to get top dollar for the house.
Technically, all homes are being offered “as-is” to a certain extent. A seller is under no obligation to make repairs discovered during the escrow period. By listing a home as-is, however, the seller is setting the expectation that they do not intend to make any repairs or provide a credit in the event the home inspection discovers a problem.
Whether you’re a seller considering listing as-is or a buyer who just saw this term on a counter-offer, understanding what it means for a home to sell as-is will help you make the right decision. Here are five tips for selling your home “as-is”
Risk: Buyers will be scared off by an as-is house.
Unfortunately, “as-is” homes do carry a stigma. Many buyers will skip straight over the house, assuming that it will need too much work, or because they need a place that’s move-in ready for their families. Your home may simply not get as much attention, particularly if you aren’t in an area with particularly high housing costs where there’s plenty of other available homes at a competitive price point.
Solution: Be transparent.
Provide as much information as possible to buyers so that they aren’t afraid that the house is going to fall down on top of them. Get a pre-listing inspection so that you can be upfront about the home’s issues. If you can say truthfully that the house is structurally sound, just in need of certain upgrades, then do so – this may help some buyers get over their fear of buying a home “as-is.”
A note: some sellers, in the interest of selling the property quickly, will refuse to accept an offer that has a home inspection contingency – meaning that they might provide a home inspection at the time of the offer to the buyer for review, but not always. Typically, this does not remove the buyer’s ability to have an inspection; they just do not have the option of cancelling the contract risk-free if they discover a problem. It may be tempting to go with this option, but many otherwise qualified buyers will get scared off, and you’ll have to price the house extremely low to attract interested parties.
Risk: A buyer may back out if they didn’t realize right away that the house was “as-is.”
The average homebuyer isn’t ready for a major fixer-upper. If a buyer is under the impression that the seller will be making certain repairs before the house is sold, as is the common practice, they are almost certain to flee as soon as they figure it out. This defeats the purpose of unloading a home quickly, which also means more expense in the long run.
Solution: Be extremely clear in your marketing.
Make your intentions crystal clear in your home’s listings or other marketing, and have your real estate agent do the same. It’s a bad idea to play coy and hoping that a prospective buyer will become too attached to the home to want to back out when they realize the extent of repairs that it needs. Buyers are used to having as much information as possible at their fingertips, so if they feel blindsided or tricked they’re almost sure to run.
Risk: You may have to field lowball offers.
A house that’s listed “as-is” may attract the wrong kind of attention – namely, investors or buyers looking for a money-maker. If someone is hoping to “flip” the home by fixing it up and re-selling at a tidy profit, they’re going to want to buy it at a price that’s reduced more than the home value minus repair costs. If you end up getting a lot of lowball offers, you may end up wasting your time.
Solution: Be fair and realistic with your pricing.
Get some reputable contractors on the phone and get estimates for fixing the biggest concerns that your inspection revealed. Once you have a clear picture of the likely costs of repairs that your house will need, you’ll be able to price the house at a fair value for you as the seller as well as for the buyer. Yes, a serious buyer will still have their own inspection done, and likely will talk to their own contractors for estimates. But being able to offer them a baseline expectation will lessen the chance that they’ll get sticker shock and walk away. Additionally, many buyers will still try to negotiate the price or certain contingencies, so the more information you have to justify your asking price that you have available, the better.
If you’re still getting lowballed on your home, consider whether it’s worth hanging onto. Is it worth the headache of waiting for your ideal price point? It might be worth negotiating with the deal-seekers just to offload the property quickly.
Risk: The home is in such disrepair that it might not be inhabitable.
You may be trying to sell your home as-is because you don’t want to deal with repairs before putting the property up for sale; however, even a property being sold as-is must still pass the lender’s standards for livability. A lender will not lend on a home which is considered unlivable, so if an appraisal indicates the home is damaged, the buyer might not be able to get a loan on the property.
Solution: Make some repairs.
You’ll have to ensure that the house is at least livable. Going one step further and taking care of things like that old roof or damaged plumbing might get you more value, as well. Too many problems can be a dealbreaker unless, again, you’re willing to list the home well below market value.
While selling your home as-is may seem like the easier option, you might end up spending more time and efforts fielding lowball offers and justifying the value of your home. A home that’s listed “as-is” will still face a certain amount of stigma from buyers, which you’ll have to overcome in order to sell your home. Is that uphill battle worth skipping over the repairs? If you really and truly cannot afford to make repairs, or if you’re selling an inheritance or another property that you aren’t financially invested in, then it might be worth the hassle. However, be sure that you fully understand what you’re getting into.
As-is listings do provide some challenges to both buyers and sellers. Sellers who want to take the uncertainty out of the process and ensure they will not have unexpected costs after they accept an offer, might consider using this strategy; however, they may have other challenges that they didn’t anticipate. If you’re considering listing your home as-is, be sure you do your research and, most importantly, talk to your realtor about what to expect.
Tags: as-is homes, home inspection, Real Estate, selling a home, Setschedule