What it Means to Sell a House As-Is
What it Means to Sell a House As-Is
There’s plenty of advice online on how to sell a home fast. Our post 20 Creative Ways to Sell Your Home in Under a Month is a good example. But some sellers are in too much of a hurry to try those tips or don’t want to go to the trouble. They might be contemplating selling a house “as-is.”
An as-is sale can be a way to get fast cash, avoid having to make repairs, and eliminate the stress of negotiating. And while this might sound great, there is a downside. The speed and convenience of the sale are offset by a sales price that can be as much as 40% below market value.
In some cases, a fast, as-is sale might be the best option, even if it means accepting a low offer. In other circumstances, it pays to follow a more traditional route. Understanding what it means to sell a house as-is can help you decide if it’s right for you.
Reasons to Sell a Home As-Is
There are several possible motives that will make a homeowner want to offer a house for sale as-is:
An “Extra” House
Homeowners may find themselves in possession of a house that is not their primary residence. The two situations that are most common are a house inherited from a deceased relative or one that is the result of combining households with another homeowner.
Whatever the source of this “extra” property, it’s not needed as a place to live. The homeowner has a few different options:
- Keep it to use as a secondary residence or vacation home.
- Generate income by turning it into a rental property.
- Gift the house to someone.
- Sell it.
When selling it makes the most sense, the owner has another decision to make. They can put it on the market in the usual way, or sell it as-is.
If the home was part of an inheritance and the new owner neither needs nor wants to keep it, selling as-is can be appealing. Even more so if the house is in disrepair. The owner doesn’t have to deal with making any repairs before selling. They can simply collect the proceeds and move on.
In the case of a combined household, the original owner of the unused home may be more interested in recouping their investment in the property. Whether they are willing to accept a low offer will depend on how badly they want to get rid of it and their overall financial situation.
A seller who is in good shape financially may choose to sell a home as-is to avoid the hassle of going through the normal sales process. If they have somewhere else to live, they will not be concerned with needing the proceeds for a down payment on their next house.
If they took ownership without any personal investment (as in an inheritance) the sales price is “free money.” The same goes for a property that was purchased long ago, or that they invested very little in. Sellers do need to be aware that they will be responsible for some closing costs, and they may be taxed on any capital gains from the sale.
On the other end of the financial spectrum is someone who is having money troubles and needs cash right away. They may choose to sell a house as-is for a quick payout. Even though they may receive less money in the long run, these sales close fast. They do not have to spend any time or money fixing up the house, showing it, and negotiating with potential buyers.
On average, homes that sell as-is only get about 60%-70% of their market value. Sellers need to weigh that loss against their cost in time and money to look for a buyer through typical real estate channels. These costs include expenses for repairs and home improvements that are needed to make the house attractive to buyers. Then, there may be additional work to do (and pay for) as part of price negotiations. It can also take a long time to sell a house, depending on the market. Not only will this drag out the time until an owner can be rid of the house, but it will also cost them in property taxes and insurance until a closing date finally arrives.
A neglected, rundown house is often a prime candidate for an as-is sale. It might simply be considered a “fixer-upper” or it could have serious damage or structural problems. When repairs and updates will cost more than an owner can afford—and more than they will fetch in the sale price—they may choose to cut their losses and get what they can for the house.
When selling a home in the usual way, there are several things that need to be in good shape before putting the house on the market. These include things like the electrical wiring, plumbing, HVAC, the roof, and the basement. A buyer will often insist on these essential things being fixed as part of the negotiations. Other things like new appliances and cosmetic updates might be done in order to increase the asking price.
Selling as-is gives the owner the ability to walk away from fixing just about anything that is wrong with the home. That does not mean that the buyer does not have some legal rights. A seller must still disclose known problems with the property such as structural and foundation issues, mold, termites, or high radon levels.
Once disclosed, problems with the house can affect the offering price. And a buyer can insist that a sale be contingent upon an inspection. But buyers considering a house that is offered as-is are usually looking for a bargain. They know going into the deal that the responsibility for fixing the house will be theirs. They may negotiate on some matters, but in general, will be more accepting of a home’s flaws than a typical homebuyer.
It’s important to note that some sellers will request “cash offers only,” especially if there are enough problems with the house to possibly prevent buyers from qualifying for a home loan.
Who Buys As-Is Houses?
The reason why some buyers are willing, and even eager, to buy a house that is offered as-is, is because they are not typical homebuyers. That is to say, they are not looking for someplace to live and raise their family. Instead, these buyers fall into two categories: investment companies and individual house-flippers.
There are large investment companies—their billboards and TV ads are hard to miss—who buy up properties regardless of their condition. They have the cash flow and resources to purchase and rehab many homes at once, then reselling them for a profit. If someone wants to sell a house as-is, they can contact one of these companies and a successful sale is pretty much guaranteed, although as we’ve already mentioned, the price will be set low.
House-flippers do the same thing but on a smaller scale. It might be one person who does the work themselves or a small company that invests in a few houses at once. One thing they have in common is their desire for a bargain. They will estimate how much it will cost them to fix up the house and offer the lowest possible price to the seller. The more that is wrong with a house, the lower their offer will be. Their goal is to refurbish the house and sell it at a tidy profit on top of their investment.
If a house needs work but is not in terrible shape, it may find a buyer who plans to live there. This is especially true if the home is in a desirable area or has other features that make it desirable. They too may be bargain hunting and will be looking for an asking price that takes into account any work that needs to be done.
Should You Sell Your House As-Is?
For someone in a hurry to sell, desperately needs the money, or is overwhelmed by the amount of work to be done, selling a home as-is is one solution. But the process can leave an awful lot of money on the table.
Sellers should weigh the impact on their time and finances of putting the house on the market in the traditional way. Doing some repairs and marketing it through a real estate agent could bring in offers that are much higher than settling for 60% to 70% of its real value.
The agents at Berkshire Hathaway HomeServices Select Properties can help you review your options and determine your home’s true worth. Should you choose to sell it as-is, they can help you with that too.
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