It’s always tempting to go for a good deal when buying a home. As-is homes often present themselves as a thrifty alternative to a more traditional type of purchase, but it’s easy to get burned on this type of transaction. Before you buy an as-is home, you should develop a solid game-plan for buying a house as is.
What you need to know about buying a house as is
As you prepare to look at as-is homes, you may want to take advantage of a few Do’s and Dont’s compiled from those who have already gone through the process of buying this type of home. These tips will help you to determine whether it’s a good idea to buy an as-is home or if you need to move on to the next property.
DO get an inspection
It can be tempting to ignore an inspection when you’re looking for a house in as-is condition. After all, you know that the other party isn’t going to fix any problem areas, so it might seem like it makes good sense to save a few hundred dollars by foregoing an inspection altogether. In reality, an inspection is at least as important in an as-is house sale as it is for a more traditional sale. The more knowledge you have about buying a home as is, the better the choices you’ll be able to make.
When you get your inspection done for this type of home, go all-out. Find a home inspector who has a good reputation and who can walk you through every problem. Make sure you have separate inspections done by electricians, plumbers, and even roofers so that you know exactly what is going on with some of the more expensive areas of your potential house. Once you have all of this data in front of you, you’ll be able to a better picture of the state of the home and whether it’s worth the money you’d have to pay to get everything fixed.
DON’T rush the process
One of the biggest mistakes you can make when buying a house as is is to rush through the buying process. Most homes that are sold as-is are sold because the seller needs the home to get off the market quickly, but that’s not necessarily a problem on which you need to focus. Instead, you need to dictate the pace of the sale as much as possible. If the seller is not comfortable with the fact that you need inspections done and that you are paying attention to details, it’s a sure sign that there’s something wrong with the sale.
Go through the process of buying an as-is home in the same way that you would when you have bought a more traditional home. Ensure that there is enough time between your offer and closing that you won’t have to rush inspections or financing, and never let yourself be bullied into moving faster than you think is fair. As the buyer, you are the person who is really in control of this process.
DO look at financing
It should be noted that buying a house is as can actually be very problematic for certain types of loans. If you are considering buying a home in a state of disrepair, you need to consult with your loan originator to make sure you’ll be able to buy an as-is house. FHA loans, for example, require a home to be in relatively good condition with few (if any) exterior issues. Likewise, VA loans are fairly strict as to the condition of a home, especially when the house might require significant amounts of work that will impact its immediate resale value.
This is not, however, to say that you can’t get financing for an as-is home. There are many loan types that will allow you to buy a home that needs repairs and even some of the more stringent loan types will still allow you to buy homes that need a bit of work. Your best bet is to talk to a lender about your plans before you put in an offer, as you don’t want your ability to buy a home to be contingent on a third party’s assessment of the home’s value.
DON’T trust disclosures
Try to remember that the purchase of a home is often a matter of balancing the wants of the buyer with the needs of the seller. The buyer always wants to get a good deal, while the seller wants to get as much money as possible for his or her property. As the buyer, your biggest piece of leverage is your ability to walk away. For the buyer, the leverage lies in how the home is represented to the buyer. When an ethical seller makes disclosures about the state of his or her home, they put themselves at a disadvantage. It should come as no surprise, then, that many unethical sellers aren’t totally honest with disclosures.
Can sellers get in trouble for failing to disclose a problem? Of course, but only if you can prove that the seller should have known about the problem. When there are underlying, unseen issues with a home, it’s easy for the seller to argue that he or she had no knowledge of that problem. As such, you should always assume that there’s more going on when buying a house as is than the seller has revealed.
DO create a realistic budget
As a buyer, your most important job is to create a realistic budget for your house. Take a look at the as-is home and figure out what it’s really worth – and then decide if the price you are paying plus the price of repairs is anywhere near that ideal value. If your repairs are so costly that you’re immediately underwater on a home, you aren’t making a good investment. Put together your budget and make sure that you’re making a choice based on the numbers rather than a choice based on your emotional assessment of the home. Once you know what you should spend, you’ll know whether an as-is home is a good choice.
Buying a house as is can save you money so long as you are reasonable about what you can expect. Use the information above the determine if your potential new home is actually worth the time and money it will take to bring it back to its ideal state. If you aren’t sure if you can afford an as-is home, don’t try to do all the work yourself. Visit Century21 Northwest today and take a look at the home affordability calculator to figure out exactly what you can afford.