When looking through property listings and the term "as is" appears, some people see it as a warning. Others see it as an opportunity. That might get you wondering, what exactly does "as is" mean?
Technically, the term means the owner is selling the home in its current condition, and will make no repairs or improvements (or give the buyer any credits to fund these fix-its).
The term "as is" is rarely tacked on a property that's perfect and move-in ready. On the contrary, "as is" homes are often in disrepair, because the sellers can't afford to fix these flaws (which would help them sell the home for a higher price). Or else, the house may have been through foreclosure and is now owned by a bank, or the seller died and left the house to inheritors who have little idea what could be wrong with it.
Whatever the reason, the current sellers aren't willing to pretty up the place before they pass it along. They just want to cash in on the sale and move on.
All of this means that if you buy this house, you buy any problems it may have, too.
Pros and cons of 'as is' homes
So how can "as is" be the aforementioned opportunity, if you're taking on all those problems? It all comes down to cash value.
When you see those two short words in a listing, it usually indicates that the home will have a relatively low price to start with, and the sellers might even entertain still lower offers. If you are a contractor or handy with a hammer, are looking for a home to flip, or maybe just want an extreme bargain, "as is" could be music to your ears.
Yet the downsides of an "as is" property are obvious and should not be underestimated; any number of things could be wrong with the house that are not immediately apparent to the eye. You might think you're getting a killer deal, but you could also be throwing your life savings into a black hole.
Should you buy a home as is?
Now that you know the pros and cons of buying an "as is" home, you might be wondering whether to move ahead -- and how.
Since they can be bargains, they are worth considering, although there's one precaution you'll definitely want to take: a home inspection. A home inspector examines the house from basement to rafters and will point out any problems plaguing the place -- both current or potentially in your future, such as an old roof that may need replacing five years later.
A home inspection costs around $300 to $500, and typically occurs after you've made an offer on a home that's been accepted and put down a deposit. On houses that aren't sold "as is," buyers may use problems found during the inspection to demand that repairs are made (or that credits be given so they can make those repairs themselves).
While "as is" sellers have already made it clear they won't lift a finger on that front, a home inspection still serves an important purpose for buyers. Provided you place a home inspection contingency in your contract, this means that if the inspector unearths problems you don't want to address, you can walk away from the deal with your deposit in hand.
"You should always elect to do a home inspection, especially on a bank-owned property where no one knew how the home was cared for and no one knows what happened right before the past owners left the property," says Winston Westbrook, a broker and owner of Westbrook National Real Estate Co. specializing in short sales and distressed properties.
"Yes, you lose out on the cost of the home inspection, but the cost of the home inspection is well worth it considering the headache you would have had in the future trying to make the house livable."