In today’s market, there are lots and lots of homes for buyers to choose from – everyone is pretty much aware of that – buyers are delighted to have so many homes to choose from; sellers may not be so happy about it because it means their homes are competing against lots of other homes!  And many of these homes the buyers have to choose from are homes being sold “as is”.  So, of course, the first question many ask me and other Realtors, is –

Just What Is An “As Is” Sale?

This post, hopefully, will shed a little bit of light on what these 2 little words actually may mean for you, whether you are a buyer or a seller! 

• It means that the seller will do no repairs!  So, as a buyer, you will want to make sure you know just what repairs you are going to have to make after closing!  You want to make sure that the cost of any and all repairs and any improvements you may need to make to bring it up to today’s living standards as well as the price you are paying will not put you into an “overimproved the for the neighborhood” state!

• It means that the seller will give no warranties or guarantees that the systems are in good working order at the time of closing!  Most of the contracts that we deal with here in Richmond VA say that the seller warrants that all systems (plumbing, electrical, HVAC, etc) will be in good working order at the time of the closing.  However, you need to keep in mind that if a system such as the plumbing system was in good working order at the time of the inspection and then it fails before closing, the seller has no obligation to put it into good working order for you.  Keep this in mind and have a contingency fund available to do these repairs if you need to after closing.

• It may mean that the type of deed the buyer may receive will be a special warranty deed, which is a much more limiting type of deed than the general warranty deed that is generally used when a buyer purchases a home here in the Richmond, VA area.  Here is a website that will give you a brief definition of the difference between the two types of deeds.

• Virginia is a “caveat emptor” state, meaning that it is up to the buyer to do any and all due diligence regarding the condition of the property.  Even if you were not purchasing a property “as is”, you would be well advised to have an inspection done on the home.  However, when you are purchasing an “as is” home it is even more important!  Therefore, it is most important that the buyer do any and all due diligence on the home they are contemplating buying.  This would include not only whole house inspections, but things like radon, roof, well, septic, termite, chimney inspections and any research on the area, crime stats, Megan’s law issues, etc.  You may also want to do your own research on well and septic permits, making sure any needed repairs/improvements were done by proper permits,

• Any and all inspections:  whole house, radon, roof, well, septic, termite, chimney
• Researching area for things like crime, schools, Megan’s law issues and anything else the buyer is concerned about
• Researching the well and septic permits that are with the local health department to make sure these are what they should be
• Making sure that the owner has obtained proper permits for any and all improvements that were made to the house that should have been done with permits
• Making sure that the lot size is what it should be by having a survey completed and that there are no encroachments on the property that you may need to take care of after closing or may affect your ability to close on the property.

• It is highly recommended that when you are buying an “as is” property that you get an owner’s title policy rather than the minimally required lender’s policy.  I had a buyer who recently purchased a home – after closing, the county came by and said that the deck that was on the house had not been properly permitted when it was put on and was now looking to the new owner to make it correct.  Because he had an owner’s title policy, he was able to have the title company take care of it.  Here is a great site for seeing what the differences are in the various title policies that are offered.

• The buyer needs to understand that when they go to closing, there will be paperwork that says you are accepting the property in the condition it is in as of the time of closing, and therefore, any addendums that were agreed to prior to closing will be terminated.  This means that if you find something after closing, you may not be able to have it resolved after closing.  Although the law says that known defects must be disclosed to a buyer, this may sometimes be a very hard thing to prove after closing.

• The buyer needs to be able to terminate the contract should inspections disclose repairs or issues you do not want to deal with.  This means that you need to make sure that your contract has these contingencies written into the contract and that you have a way out of the contract at no penalty should your inspections reveal issues you do not want with after closing.

• You need to make sure that whatever issues there are with the house will not impact your financing.  Certain government loans may require repairs to be completed prior to being able to get financing done.  So when looking at the house, if you know that you must use a certain type of loan such as FHA or VA or VHDA and you know that the seller will not do any repairs, you need to make sure that the repairs needed do not impact that financing type.

Finally, do not let the above scare you away from buying “as is” homes.  You only need to make sure that you do your own due diligence on the property.  As Is Sales will be good buys, but you need to be careful and take these things into consideration!