There is one type of seller that every real estate investor will deal with at one point or another: one who insists on selling their property “as-is.” At first glance, it might seem like you’re getting the short end of the stick, but this post will explain why sometimes this type of sale can be worth the risk, explains what your legal rights are and examines pros and cons of as-is sales.
So what exactly is an as-is sale? Essentially, it means the seller will not make any repairs to the property nor will the seller credit the buyer at closing for physical problems that may be uncovered during the home inspection. So does that mean an as-is property is full of major problems and by listing as-is, the seller is absolving themselves of all responsibility? Not exactly.
As the buyer, you retain a number of important rights in an “as-is” sale that not only protect you and your investment but could turn the property into a great long-term asset for you.
Buyer rights in an as-is sale:
- The seller must still disclose all major property defects that they’re aware of:
If the foundation is crumbling or the entire electrical system is no longer up to code, the seller must let you know prior to sale. Any known issues should be plainly disclosed in the sale agreement, or your seller may be in legal hot water!
- You have the right to as many home inspections as you like:
You should feel comfortable asking for as many inspections as you need to feel comfortable that all defects and issues with the property have been uncovered. This can save you a headache later!
- You can walk away from a sale up to a certain point:
If at any time major issues are uncovered via inspections or your own examination of the property, you are free to walk away from the sale. Canceling the sale due to major defects is well within your rights. Of course, you may also use this new information to ask for a lower price.
Now that we’ve covered your rights let’s think about the situations in which you would (and would not) want to purchase an as-is home. Knowing when it’s a good investment of your cash is vital to your real estate success.
Pros of buying an as-is property
- As-is sellers are motivated:
This can lead to a faster turnaround on the sale and your investment.
- The property could be relatively free of major defects:
If this is the case, you have an excellent opportunity to purchase a “fixer-upper” investment.
Cons of buying an as-is property
- Undiscovered issues may still crop up after a sale:
This is especially true if you don’t do your due diligence on inspections.
- You may have to walk away:
A property that looks like a great investment on the surface may be more trouble than it’s worth, and you not only have to know when to walk away, but you must be comfortable doing so.
When you are faced with a seller insisting on an “as-is” sale, carefully weigh these pros and cons, and remember your rights! You need to know how to identify a diamond in the rough and how to know when it’s time to walk away.
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