Selling a home can be a long process. From hiring a real estate agent to closing on a final deal, selling a home is rife with red tape and detailed requirements. Yet while most buyers want a home that's habitable right away and has little needed in the way of repairs, more sellers these days are putting their homes up as-is to skirt the need to fix up the place and still getting more than their asking price.
- An as-is house listing means the seller doesn't want to be responsible for any repairs prior to the final sale.
- Homes sold as-is are still beholden to state and federal disclosure standards.
- An as-is listing may refer to only certain aspects of the house, like an old chimney or a dilapidated pool.
What Is an As-Is Home Listing?
When a home is put up on the market as an as-is listing, it means it's being sold in its current state—no upgrades or improvements will be made by the seller. The home may have major repair needs or maybe it requires a style and décor update. If a home is listed as-is, then the buyer takes responsibility for repairs and modifications, including problems that may not be apparent at the time of sale.
That said, the seller and real estate agent have to list all of the home's known problems. Sellers are required to follow state and federal minimum disclosure standards. While local and state disclosure regulations vary, the only federal disclosure required of all home sales is the existence of lead paint and other lead hazards. Examples of other hazards that must be disclosed at the state and local level include past structural problems and a history of flood or infestation damage.
A home listed as-is doesn't necessarily mean the place is a complete wreck. Most of the home may be fine and the buyer will shoulder responsibility for a major problem or two. A home inspection will reveal why it's listed as-is.
When is an as-is home listed?
Generally, a home is listed as-is once it's fallen into disrepair and the homeowner wants to cut their losses. In the past, a home would be renovated and repaired before being listed for sale. However, due to today's high housing demand and scarce supply of homes, buyers may be more likely than ever to consider eating the repair and renovation costs if it means securing a home.
The need for repairs isn't necessarily the only reason for selling a home as-is. Sometimes, sellers will list their home as-is because they're in debt on the property and can't afford to maintain it. They may not have time for a contractor to finish work on a project before having to move. In other words, there is a range of reasons compelling a homeowner to sell the property without making repairs that would otherwise boost the sale price. Ultimately, the seller will indicate what's wrong with the property and let the buyer decide if the investment is proper.
What Are the Pros and Cons of Selling As-Is?
While it may only sound appealing to someone looking for a "fixer-upper" to renovate and flip a home for a profit, there are plenty of reasons why a prospective homeowner may see an as-is listing as an opportunity. And there are just as many reasons to steer clear of such a listing.
Benefits of as-is listings
- They add supply to a tight housing market. Home prices soared 19.3% in the year ending Nov. 30, 2021, as the pandemic unleashed a surge of buying for a variety of reasons. At the same time, housing stock hasn't kept pace with rising demand, creating shortages. Since an as-is home comes with added costs for repairs and renovations, these listings tend to be less desirable, meaning lower prices and less competition for the home.
- They're quicker to close. Buying or selling a home the traditional way can drag on for months. With an as-is listing, the seller is often motivated to sell quickly and won't be spending time and money making repairs. Buyers are encouraged to pay in cash, eliminating time-consuming paperwork and approvals that come with securing a mortgage.
- Loans can help cover repair costs. Depending on the loan provider and their requirements, you may be able to leverage the currently low mortgage rate to buy an as-is home and repair it. Keep in mind, however, that not every lender may have the same desire to be involved with a "fixer-upper" as you may be, so be sure to consult your lender's terms before proceeding.
Downsides of an as-is listing
- From a buyer's perspective, needed repairs may be costly. If you choose to buy as-is, the bills and headaches for all repairs are yours. You have to ask if you want to take on that time or expense.
- From the seller's point of view, such a listing may turn prospective buyers away. As-is sellers typically are motivated to sell quickly. But the costs and time associated with repairs may deter buyers, lengthening the sales process. Buyers may prefer spending a little more to have a home that's move-in ready.
- Inspections are strongly recommended. Just as a house inspection is often part of the traditional house buying experience, it's a good idea to hire one for an as-is listing, even though they are not required. As the seller, you should list everything wrong with the house. Similarly, sellers can also hire an inspector or property appraiser to determine what needs to be fixed and how much that will cost, among other major factors.
Can You Be Denied a Loan For a Home Listed As-Is?
Yes. For most conventional mortgages, lenders typically require that the home be habitable. Defects such as worn flooring and damaged interior walls can be acceptable. Government-backed home loan options, like FHA, USDA, or VA loans, come with minimum property requirements. As such, it's important that you review a mortgage's terms and conditions before attempting to buy an as-is home.
Do Banks Sell Homes Under the As-Is Listing?
In many instances, homes that end up listed as-is were foreclosed on. If a bank owns a property that needs work, the bank may be inclined to sell as-is to avoid the costs associated with those repairs.
Can a Home With Existing Code Violations Be Sold As-Is?
Code violations do not necessarily preclude a home from entering the market. In fact, most homes currently on the market today are likely to have some form of local housing code violation since even simple renovations can run afoul of local regulations.
The Bottom Line
In normal circumstances, the as-is home appeals to those looking for a property to flip for profit. Yet as demand for housing increases and the supply falls, more buyers and sellers are left considering the as-is listing. With some elbow grease and good negotiation tactics, an as-is home listing can be a benefit to both the seller and buyer.