As Is Home Sale
An as is home sale can have a lot of benefits, but only if you’re targeting the right buyers. Cash buyers and investors are almost always your only safe bet. Why? We’ll walk you through the pros and cons!
Many people have the idea that selling your home as is where is means a quick settlement, that you won’t need to make any repairs, and that your headache will soon be over. This often couldn’t be further from the truth, especially if you’re listing your home on MLS. Below are the top six considerations when selling your home as-is.
As Is Home Sale Disclosures
The first item to keep in mind that you will have to answer questions truthfully and honestly regarding problems with your home. In Massachusetts, many known issues do not require direct disclosure (for instance, a roof leak) but if asked by a buyer, you’ll need to answer truthfully. You won’t be able to intentionally hide defects, misrepresent facts, or fail to disclose certain issues, such as the presence of lead paint. While this is surely understandable, your target buyer needs to be considered here, as some home defects could pose issues with traditional home buyers looking to take a mortgage on the property.
Buyers agents can also pose problems for sellers, as realtors are legally obligated to disclose all known property defects. Imagine for a moment that your city a superstar buyer’s agent named John that has three potential buyers for your home. If Client Jones asked you about the roof condition and Client Williams asked you about termite damage, by the time Client Smith even schedules a time to see the place, John will have been legally obligated to tell him about all issues identified by Jones and Williams. This could mean that by the time Smith even walks through, he’s already planning to put in an offer that’s 30% under asking!
This, of course, does not mean you should lie, but you should certainly consider the implications of listing on MLS and working through traditional realty channels. In doing so, you could quickly and drastically limit your buyer pool and risk significant hits to your financial gains in a very short period.
Low-Ball Home Purchase Offers
Not only will home buyers see your dirty laundry very quickly, but they’re actually much more likely to low-ball the price than an investor or cash buyer. Most traditional home buyers are looking for a place to live, and when they see defects, they see dollar signs. Most are also not equipped with a full team of contractors, plumbers, and electricians who are prepared to address any and all structural and cosmetic defects. If a traditional home buyer sees the need for a new bathroom, they’ll see it as a $20,000 job, while an investor knows the true cost and potential profit margin on the repair.
As Is Home Sale Concessions
An often-overlooked part of the process is the issue of concessions. While selling as-is implies you won’t make repairs, unless explicitly stated that you will make no concessions, your buyers could still come back after inspection and request discounts or money toward repairs. In fact, if you accept any offers contingent on inspection, there’s a risk of someone backing out at any time or revising offers.
If you do choose to work with an MLS listing agent or realtor, take care to ensure that any offers accepted include the proper legal language to protect you from having to renegotiate after inspections. Your contract should be clear that the home is being sold as-is, where-is, and the offer is accepted with no further concessions. You may also wish to consider accepting only offers that contain no contingencies such as financing or inspections.
As Is Home Financing
And lastly, if most home buyers working off MLS are looking for a place to live, they’re likely also seeking financing. Many as-is homes will not qualify for popular financing options like FHA. In order to be approved for an FHA loan, the home needs to meet “Minimum Property Standards” that include electrical, heating, roof condition and lifespan, certain hazards, structural items, and even bathroom contents (like yes, there has to be a sink, toilet, and shower). Failure to meet these standards requires potential buyers to jump through additional hoops, including exploring different types of loans, which may turn them off and cause them to back away from the purchase.
Working with an investor is a sure way to cut out issues with concessions, inspections, and contingent offers with minimal time, effort, or risk of low-ball offers.