What Does ‘As-Is’ Mean? How to Sell a House As-Is?

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Real estate attorney explaining to the buyer, what does as-is mean in real estate, showing a house model

A seller in Illinois must still disclose known problems with the house in accordance with the Illinois Residential Real Property Disclosure Act, but they are not obligated to fix them or provide any type of warranty.

As a result, as-is properties often come with a lower price tag to account for the risk and cost of necessary repairs.

When Do You See ‘As-is’ Listings?

As-is listings can be found in various types of real estate transactions, such as normal sales, short sales and foreclosures. 

1. In a traditional sale, the homeowner may choose to sell their property as-is to avoid spending money on costly repairs or to expedite the home sale process. 

2. In a short sale, foreclosure or real-estate-owned (REO) sale, the property is usually sold as-is because the seller (a bank or other financial institution in a foreclosure or REO sale) is not interested in investing additional money into the property.

A teddy bear doll holding a slate, in which pros and cons infographic is drawn using a chalk

Advantages of Buying or Selling a house As-Is

For buyers

The main advantage of purchasing a house as-is is the potential to acquire the property at a lower price. This can be particularly appealing to real estate investors looking to flip houses, as well as buyers who are handy and willing to assume the risk and tackle the necessary repairs themselves.

For sellers

Selling a house as-is can save time and money, since they don’t need to invest in repairs or improvements before listing it. This can be especially beneficial for sellers who are in a financial bind or need to sell the house quickly.

Disadvantages of Buying or Selling a Property As Is

For buyers

An as-is house presents the risk of uncovering major defects or additional problems that require costly repairs after the home-buying process. This can lead to a higher overall cost than initially anticipated, and in some cases, the property may not be worth the investment.

For sellers

Selling a house as-is can result in a lower sales price, as buyers will likely factor in the cost of repairs when making an offer. Such a house may also attract fewer potential buyers. Not everyone is willing to take on the responsibility of making repairs, especially since the costs of these repairs cannot easily be financed.

A house meant for as-is sale has a 'for sale' sign placed in front of it

How to sell a house As-Is?

Step 1: Preparing a Property for an ‘As-is’ Sale

Start by listing any known problems or issues. You’ll need to disclose these to potential buyers, so it’s essential to be honest and transparent. 

Try to clean and declutter the property to make it more appealing to potential buyers. Emphasizing its best features will show them why it’s worth the additional time and effort to make it move-in ready.

Step 2: Marketing Strategies for making an ‘As-is’ sale

Be upfront about its condition in the real estate listing and highlight the potential benefits for the potential buyer. For example, emphasize the lower price and the opportunity for customization. 

Working with an experienced real estate agent can help you target the right audience. Real estate investors or first-time homebuyers, for example, may be more open to taking on a fixer-upper in order to get the best real estate deal.

Alternatively, listing the house for sale by owner (FSBO) might be a more attractive option than the conventional route, since you may be able to recoup some of the price reduction by not having to pay broker commissions on the sale. A decision to sell a house by owner, however, requires a lot of considerations, many of which are discussed on our How to sell a house by owner page.  

Step 3: Disclose Known Issues with the house in an ‘As-is’ Sale?

Even though you are selling your house as-is, you are still required to provide any buyer with an Illinois Residential Real Property Disclosure Report, which outlines known condition issues with the house. Be honest and transparent in your disclosure, as failing to disclose known problems can lead to legal issues down the line.

Step 4: Negotiate the Purchase Price of an ‘As-is’ Property?

  1. Be prepared with research on comparable properties in the area and their sale prices.
  2. Use the home inspection report to highlight any necessary repairs and their estimated costs.
  3. Be willing to walk away if the seller is unwilling to negotiate a fair price.

Use the home inspection report to your advantage by:

  1. Requesting a price reduction to account for the cost of necessary repairs. (Try to stick to the big stuff – it shows good faith, as opposed to nitpicking on smaller items.)
  2. Asking the seller to make specific repairs before closing. While a seller can decline, citing the as-is nature of the sale, it never hurts to ask. 
  3. Requesting a credit at closing to cover the cost of repairs.

In most cases, the seller is under no obligation to make repairs or offer concessions, but it’s worth trying to negotiate a better deal. Depending on what happens after attorney review, the seller might be motivated to negotiate.

Protect Yourself as a Buyer During the Negotiation Process?

  1. Include an inspection contingency in your purchase agreement either during or after the attorney review period. Inspection contingency rights allow you to back out of the real estate deal if the home inspection reveals major defects or costly repairs.
  2. Work with knowledgeable real estate agents who can provide guidance and advice throughout the process.
  3. Seek legal advice from a real estate attorney to ensure your interests are protected.

For Buyers

When dealing with ‘As-Is’ contracts, make sure you’re protected!. Our legal team is here to help you understand exactly what it entails.

For Sellers

Sell ‘As-Is’ confidently and without stress. Let our expert guidance provide a hassle-free experience.

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Step 5: Legal Requirements

Selling a house as-is does not absolve the seller from their legal obligations. They are still required to disclose known issues and defects and cannot intentionally conceal problems or misrepresent the house’s condition.

Should You Buy a ‘Sold As-is’ House?

  • Assess your financial situation and determine if you can afford the necessary repairs and improvements.
  • Consider whether you have the skills and resources to tackle the repairs yourself, or if you will need to hire professionals.
  • Be aware of the potential risks and hidden costs associated with as-is properties.

How to Buy a house ‘As-is’?

Step 1: Purchase with Cash

Purchasing an as-is property with cash can make your offer more attractive to the seller, as it eliminates the need for lender approval and can potentially expedite the closing process. 

However, it’s essential to ensure that you have enough funds to cover not only the purchase price but also the necessary repairs and improvements.

Alternatively, you can finance the purchase of the home with a conventional loan as long as you can pay out-of-pocket for any necessary repairs.

A financier uses a calculator while surrounded by coins and currencies, illustrating common examples and issues in financial decision making where the buyer waives any related matters.

Step 2: Obtain Financing

Some lenders may require certain repairs to be completed before closing, or they may be more hesitant to lend on a property that requires significant work.

For buyers looking to finance the purchase, these loans allow you to borrow the funds needed for both the purchase and the necessary repairs, with the costs rolled into a single mortgage.

FHA 203(k) Loan:

This is backed by the Federal Housing Administration and is designed for properties requiring repairs or renovations. With an FHA 203(k) loan, you can finance the purchase price and the cost of necessary repairs or improvements. 

These loans typically have lower down payment requirements and more lenient credit requirements than conventional loans.

HomeStyle Renovation Mortgage:

This loan product is offered by Fannie Mae and is designed for borrowers looking to finance the purchase and renovation of a property.

The HomeStyle Renovation Mortgage allows you to finance the property’s purchase price and the cost of improvements in a single mortgage. This loan typically requires a higher credit score and a larger down payment than the FHA 203(k) loan.

Step 3: Look for These When Buying a home ‘As-is’?

  1. Structural integrity concerns, such as foundation problems or termite damage
  2. Roof leaks or damage
  3. Plumbing, electrical, or HVAC system issues
  4. Mold or water damage
  5. Cosmetic issues, such as peeling paint or damaged flooring

In some cases, only certain aspects of a house may be as-is, while others may be in move-in-ready condition. Be sure to clarify with the seller which parts of the house are being sold as-is and which are not.

An experienced inspector inspecting a house

Step 4: Conduct a Home Inspection

Hire a qualified home inspector to perform a thorough examination of the house and provide a detailed report of their findings. 

This report will help you 

  • Understand the property’s condition
  • Identify any necessary repairs
  • Make an informed decision about moving forward with the purchase

Step 5: Estimate Repair Costs

  1. Hire a professional home inspector:
    • A qualified home inspector can provide a comprehensive assessment of the home’s condition and identify any necessary repairs.
  2. Create a repair list:
    • Organize the identified issues into a list, prioritizing them based on urgency and potential impact on the home’s value.
  3. Get multiple contractor estimates:
    • Obtain estimates from at least three reputable contractors to get a range of repair costs for each item on your list. (If one estimate is significantly higher or lower than the other two, it would be wise to go with a different contractor.)
  4. Factor in DIY repairs:
    • If you plan to complete some repairs yourself, account for the cost of materials and tools needed.
  5. Consider permit and inspection fees:
    • Research local building codes and permit requirements for the identified repairs, and include any associated fees in your estimate.
  6. Add a contingency buffer:
    • Include a buffer of 10-20% to account for unforeseen issues or additional costs that may arise during the repair process.
  7. Total the repair costs:
    • Add up all the estimates, fees and contingency buffers to arrive at a total repair cost for the as-is home.
  8. Evaluate the home’s potential value:
    • Compare the total repair costs against the home’s potential value after repairs to determine if the investment makes financial sense.

Step 6: Repair Requirements By Loans Types

Each loan type has specific minimum property requirements to ensure that the property is safe, sound and habitable. 

1. Conventional loans: Lenders typically require properties to be free of health and safety hazards, have functioning systems (e.g. plumbing, electrical), and meet local building code standards.

2. FHA loans: FHA loans have strict requirements, such as a sound roof, no peeling paint, proper drainage, and safe access to the property.

3. VA loans: VA loans require properties to meet the VA’s Minimum Property Requirements (MPRs), which include safe mechanical systems, adequate living space, and proper roof and foundation conditions.

4. USDA loans: USDA loans require properties to be located in eligible rural areas and meet basic requirements for safety, sanitation and structural soundness.

5. 203(k) loans: These FHA-backed loans allow for the purchase and renovation of a property, but the property must still meet minimum health and safety standards upon completion of the renovations.

6. HomeStyle Renovation loans: Similar to 203(k) loans, HomeStyle Renovation loans allow for the purchase and renovation of a property, but the completed property must meet conventional loan standards.

Consider the necessary standards and be prepared to have the required repairs done before closing.

Step 7: Legal Requirements

Buyers should be aware of potential legal issues, such as disputes over undisclosed defects or disagreements about the scope of necessary repairs.

Rules and regulations or legal requirements

Step 8: Consider using a Real Estate Agent

7 reasons why working with a real estate agent is helpful for as-is transactions:

  1. Expertise in the local market
  2. Assistance in finding as-is homes
  3. Guidance on home inspections
  4. Negotiation skills
  5. Assistance with due diligence
  6. Access to a network of professionals
  7. Representation of your interests

Call now & Get a Free Consultation!

Special Offer: Mention this website (Northsidelegal.com) and get a free consultation on your first Real estate attorney service!

Is Buying or Selling a house ‘As-is’ right for me?

An as-is house is sold in its current condition, with the seller making no repairs or improvements before the sale. While as-is homes can present potential risks, they can offer opportunities for buyers and sellers alike. 

  • For buyers,
    • An as-is house may provide a more affordable entry into homeownership or a chance to customize a home to their liking. 
  • For sellers,
    • An as-is sale can be a way to offload a house without the hassle of making costly repairs.

To navigate the complexities of an as-is real estate transaction, working with experienced professionals, such as a real estate agent and/or a real estate attorney, is essential. 

By conducting thorough research, obtaining a comprehensive property inspection, and carefully weighing the potential risks and rewards, you can decide whether buying or selling a property as-is is the right choice for you.

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