What Should You Consider Before Buying a House As-Is?

As you begin the homebuying process, you may come across homes sold “as-is.” If you’ve never encountered the term before or are curious about buying an “as-is” home, it’s important to know what to expect. The term “as-is” in a real estate listing indicates that the buyer must be willing to accept the home exactly as it currently is.

In this Redfin article, we’ll cover what you need to know about buying a house “as-is,” – and whether it’s the right option for you.  So whether you’re buying a home in Raleigh, NC, or a townhouse in Baltimore, MD, learn how you may encounter the term “as-is” in a real estate transaction.

What does “as-is” mean when buying a house?

When the entire property is being listed and sold “as-is,” the seller will not make any repairs, nor offer any credits for potential defects of the home or grounds.

Some examples of major defects that the seller doesn’t have to correct include:

• Structural problems
• Leaking or faulty roof
• Defective drywall
• Active termite infestation or damage
• Non-functioning systems (HVAC, septic system, etc.)
• Mold or mildew problems
• Presence of asbestos or other harmful materials

As a result, agreeing to purchase a property “as-is” is a serious decision for any buyer. In some instances, you may request an opportunity to inspect the property for informational purposes only, even though you have already contractually obligated yourself to purchase the property.

In practice, some buyers and sellers may agree to an “as-is” sale, but still allow for a home inspection and the opportunity for the buyer to unilaterally terminate the contract for a specified period of time following inspections. While technically not adhering to the legal definition of “as-is,” this is permissible as long as the parties are in agreement.

What does it mean if some parts of the home are sold “as-is”?

Sometimes sellers may identify specific aspects of a home being sold “as-is,” rather than the entire home. Common examples include:

• Fireplaces, chimneys and flues
• Detached structures (sheds, garages, etc.)
• Household appliances (washer, dryer, refrigerator, etc.)
• Swimming pools, spas, hot tubs

Oftentimes, “as-is” in this situation refers to aspects of the property that may or may not be functioning, but that the seller will not repair or change as part of the contract of sale. Because the “as-is” specifications refer to a very specific part of the property, this situation is often less risky to non-investor homebuyers.

What does “as-is, where-is” mean in a listing?

With the inclusion of “where-is,” the seller is indicating that the property must be accepted in its current location. In real estate terms, “where-is” effectively excuses any potential locational faults. Some examples include:

• The property is in a flood zone
• The property is not zoned for its current use
• The property is or may be scheduled to be taken by a government by eminent domain, right-of-way, easement, etc.
• The presence, or lack thereof, of restrictive deed covenants limiting what an owner may or may not do upon the property
• Inclusion, or non-inclusion, within a designated historic zone
• The property lies within an airport flyover zone
• The presence of some geological defect (inability to perc a septic system, elevated radon levels, shrink-swell soil, etc.)
• Actual or potential defects of Title

Before buying a house “as-is”, it’s important you learn why the home is listed “where-is”, so you can make a fully-informed decision.

Should I buy a home as-is?

For buyers, it’s important to recognize the critical significance of buying a house “as-is.” You’re giving up the very significant opportunity for inspections found during most real estate transactions. This means that due diligence prior to entering into an “as-is” contract is an absolute must. Some examples of due diligence to consider:

• Consulting with an attorney
• Having a title search performed
• Examining the deed and land records for potential red flags
• Inspecting the property prior to offering a contract
• Including a provision in the contract that allows for inspections and cancellation of the contract as a result of any inspection findings
• Commissioning a Wood Destroying Insect (termite) inspection in advance
• Having a licensed contractor examine the major structural components of the dwelling

At the end of the day, you’ll have to decide if the potential benefits of an “as-is” transaction outweigh the potential pitfalls and expenses.

Most residential real estate listings are not “as-is.” Listings that are “as-is” are often geared towards professional investors and rehabbers, who have experience with such transactions. The reward of such a transaction can be high – so can the risk. Professional investors often spread the risk by buying several “as-is” properties at once. They assume that one or more may not be successful, but that the majority will, therefore covering their losses.

The average homebuyer usually doesn’t have this luxury. So, for a buyer not especially experienced in real estate, home-contracting or home construction, it often makes sense to skip an “as-is” purchase in favor of a less-risky purchase with more conventional terms.