Is buying a home As Is a good deal? Does it mean no repairs will be made? Like everything in real estate, it depends and regardless of which side you are on a good agent should walk you through the possibilities.
These homes may not be in great condition but they can offer the potential for considerable gain or enjoyment if proper repairs and updates are made. These handyman specials tend to fall in one of two extremes. Either they just need a little paint, clean up and landscaping or they need a full rehab with major systems like HVAC, wiring or foundation problems requiring repair or replacement.
Frequently buyers try to low ball these properties due to the condition not understanding they are already discounted & expect the seller to make repairs after a professional home inspection.
While you can ask, don’t be surprised when the seller says no. Unless it is a safety, financing requirement or undisclosed structural problem, asking for repairs on As Is listed property normally won’t be successful.
Ten Things To Know About Buying A Home As Is
Know The Market Condition
Recognize the market condition. In a sellers market. Asking for repairs and low balling is setting yourself up for disappointment. You might even get in a bidding war with investors or other home owners due to the lack of inventory. During a buyer’s market, everything reverses.
Get A Home Inspection
Get a professional inspection. Often sellers have deferred home maintenance or major systems need repair but sellers don’t have the means or the time to fix them. This can be a really good deal or a money pit so savvy buyers should do their due diligence and set their expectations accordingly.
Many investors forego the inspection process because they self inspect and are good at it. The general homeowner should never self inspect. There are far too many items you will miss and the cost is minimal compared to the potential loss.
Have Financing Or Cash Ready
Have your financing or cash ready. A home in this condition will probably be sold for cash because most lenders will want some repairs done. If financing, get the loan officer to advise you on the various financing programs that allow for repairs, the process, limits, contractor choices and ask what the normal loan deal breakers are.
If you are a cash buyer, be prepared with proof of funds when you submit your offer.
Be Prepared For A Surprise
Be prepared for a surprise expense. Always figure the ARV (After Repair Value) but allow a contingency fund for the unknown. Allow for a $5,000 surprise.
Unrecognized old wiring, plumbing replacement, foundation and septic problems can easily turn into unexpected 5K bills. Simple kitchen cabinet painting may turn into a kitchen gut job.
Plan For Delays
Plan for delays and be flexible. If you have a lender involved, expect a delay while they obtain more information or approve your chosen contractor. The city may look into past building permits, code violations or request changes to your plans.
A number of things from contractors, materials, rework, last-minute changes and weather can affect your repair and move in schedules. Always figure in your holding costs. While delayed, mortgage, taxes, utilities, equipment rental and insurance cost continue.
Learn to Estimate Repairs
When buying a home as is, you need to learn how to estimate your cost of repairs. Are you going to do the work or are you hiring contractors? You can spend hours getting down to details but you should be good at ballparking your repairs or upgrades your wish to complete.
When it is all said and done, you need to know what your after repaired value (ARV) will be. You don’t want to buy a property needing lots of work and ending up with something worth much more than the market for the neighborhood.
Make A Clean Offer
Make your offer as clean as possible. This means your offer should be as simple as possible. In a low inventory market there are many people looking for these properties. Some will even buy them sight unseen. You should already know what your ARV (After Repaired Value) should be so you can make a sensible offer.
Cash is always king as is a quick closing date. Don’t ask for the seller to pay for repairs, home warranties, accept an offer contingent on your home sale, assist in closing costs or long time frames on contract terms. If you are in a highly competitive multiple offer situation, you might even consider paying for the title policy and any needed surveys.
Recognize Emotional Attachment
Understand emotional attachment. Realize that some of these properties are the lifelong home of the seller or an estate sale. The condition may be less than ideal but realize that, the seller and their family may have a strong emotional attachment because they probably grew up in the home with fond memories.
Estate properties can be excellent finds if the surviving relatives live out-of-state and just want to liquidate. The problem is that one siblings out of four that thinks mom’s house is worth much more regardless if it is stuck in the year 1940 and full of termites. Ask plenty of questions to see if that will be an issue or if the owners just want to unload it quickly.
Know The Neighborhood
Know if the neighborhood is going down or poised for a comeback? A good deal in an undesirable neighborhood isn’t a good deal for resale or rental.
Check with the city, county and state concerning road, utility, employment and private industry plans. If a power plant, airport or freeway is going to be built nearby in the next few years that may be the reason the owner stopped maintenance.
You may have an easy As Is purchase and remodel only to find out no one wants to live there.
Hire A Competent Realtor
Hire a competent and experienced Realtor. Ideally your Realtor should not only have market knowledge but also have experience in working with investors or rehabbing homes. They will be a wealth of knowledge on what to expect, know the good contractors and know how to make the purchase go smoothly.
Ask them to set up an alert for frequently used listing key words like As Is, Handyman Special, HUD, REO, etc. For help buying or selling As Is or any property in North Texas, call Van Alstyne Realtor Keith Laursen at 469-233-1234. I have done rehabs and understand the pitfalls.
