Know that buyers are less willing to take on fix-up work
By Dian Hymer
A listing that is advertised as an “as is” sale can be a put-off to buyers. They might assume that something is wrong with the property that will cost a lot to repair. If they have little free time or money, they might decide before even taking a look that this isn’t the house for them.
An “as is” sale can mean a number of different things. So, before you dismiss a listing as unsuitable, find out what “as is” means. It could mean that the property is part of the estate of someone who died. In some states, such properties are sold in their “as is” condition and without warranty in order to protect the heirs who might know nothing about the property.
Let’s say you inherited your aunt’s farm in Lassen County, Calif. You were there once when you were a kid, but haven’t seen it since. You are not in a position to make any disclosures about the property. In this case, “as is” means the seller knows little if anything about the property. The property could be in wonderful condition or not depending on how well it was maintained over the years. “As is” doesn’t necessarily mean there is a problem.
When a bank forecloses on a property, the sale is usually an “as is” sale. As with an estate sale, the bank might know nothing about the condition of the property. It’s up to the buyers to satisfy themselves before buying. Homeowners who let their homes go into foreclosure because they can’t afford to make the mortgage payments also might not have enough money to keep the home well maintained.
HOUSE HUNTING TIP: Don’t skimp on inspections if you’re going to buy a foreclosure property. You may need to inspect the property — with the owner’s permission — before you make an offer. But, it is money well spent even if the deal doesn’t go through if it keeps you from buying a property that needs more work than you can afford to pay for.
“As is” can have a much more benign connotation. For example, in California, most sales are made “as is” subject to the buyers’ right to inspect the property. In this case, “as is” tells you nothing about the property except that the sellers won’t warrant the condition. Buyers are encouraged to have the property inspected by professionals. And, they are usually able to withdraw from a purchase contract without penalty if they don’t approve the inspections.
However, for a buyer to be protected in this situation, an inspection contingency that gives the buyers the right to withdraw without losing their deposit money needs to be included in the purchase contract.
Be aware that offers made on foreclosures or probate properties that require court confirmation often need to be contingency-free. There could be severe legal consequences if you back out of such a contract. Consult with a knowledgeable real estate attorney before considering backing out of a contingency-free contract.
Several years ago, when the market favored sellers and was highly competitive, some buyers made offers without any contingencies. Often in these cases, sellers had presale inspection reports available for buyers to review before they made an offer. The market was so frenzied that buyers often bought “as is” with respect to work that needed to be done. Many of these buyers stretched to buy and didn’t have the resources to have the work done. With the change in the market, today’s buyers probably won’t be willing to take on the work “as is” without a price concession.
THE CLOSING: Sellers will be in a better position to sell in today’s market if they have the work done before they put their homes on the market.
Borrowed by our friends at top producer