A few years back, I had a seller who contacted me to help her with the sale of her house. In our listing consultation, she insisted that I sell her house in “As Is” condition. I started asking questions to identify what her concern was (that she insisted to sell the house in this way) and to find out if she really had a good understanding of what it entailed. Turned out that she felt like if she didn’t sell her house in that way, buyers are going to be asking her to “repair things”, if they found anything wrong with her house, and she didn’t want to bother with repairs, contractors , etc.
Let’s dig in:
There are two ways to sell a house:
1) “Not Selling As Is”: Selling to “Regular Buyers”
By “Regular Buyers” , I mean someone who wants to buy a house, move in, live there and (possibly) raise a family. Think of Homer & Marge Simpson, for example. ( Hope you like my sense of humor)
Let’s go through the process of this kind of sale in some detail:
1) Seller puts his (Let’s just assume that both parties are male) house on the market where Homer (& Marge) see it online, read the description and decide to tour the property in person.
2) Simpsons then tour the house and decide that this is, in fact, the house of their dreams. Touring can happen during an open house or another time, using their own buyers’ agent.
3) After consulting with their agent they decide to put in an offer. In their offer, they must include a certain number of days they need for “inspections”. (“Inspection” is the $5 word in the topic of “As Is”.) They need inspections because he needs to know if there’s anything wrong with the house. And there always is some dry rot, few broken tiles on the roof, clogged up gutters, overgrown bushes & trees, ungrounded power outlets, loose toilets, rodent activity in the attic, etc.
4) He then orders inspections. Once they’re done, he receives an “Inspection Report” and reviews it with his agent.
5) Based on the report, buyers may decide to cancel the deal completely. (That rarely happens but is possible). Most often, he comes back to the seller and ask him/her to fix some of the items or reduce the price or to give him credit at closing. (Consider this a second round of negotiations.)
6) Seller responds to the buyer’s request. The respond, maybe “Ok. I’ll give you all you asked for” or “I’ll give you a % what you asked for” or “I’m not agreeing to any of what you asked for. If you don’t like it, let’s cancel the deal and go our separate ways”. Most of the times, parties reach some sort of an agreement and move along and house is sold. (An actual sale, has more “moving parts” to it, which in this blog I’ve left out because they don’t pertain to our discussion.)
In the scenario which I described above, we saw that there was some negotiations which took place after the inspection results came back. Seller was aware that buyer was going to do their inspection and there was a good chance that repairs or credits will be requested. Seller was aware that even though buyer had offered, for example, $500,000 on their property, after inspections, they might have to reduce the price to $490,000 or they might have to spend some money repairing an item here or there. This was understood by all parties when offer was made by the buyer and was accepted by the seller. This was an example of a “Typical Sale”, not an “As Is” sale. I don’t have the exact number but will go out on a limb and say that %99 of all sales are this kind.
Advantages of this kind of sale:
-Seller gets top $ or market value for their house because all the potential buyers have been able to see the house and submit their offers to purchase it. This method of selling, is “as market value” sale as it can possibly be.
-Buyers get to inspect the house and find out during the sale process, what might be wrong with the house so there are no surprises and regrets down the road. They will also receive “Seller Disclosures” from the seller which tells the buyers what sellers know about the property and also a “Natural Hazard Disclosure” which tells the buyers if this property is, for example, located in flood , fire or earthquake zone.
In this kind of transaction, both parties are benefitting: Seller is getting market value for their house and buyer will have the chance to inspect the house and based on the results, either walk away or negotiate the price with the seller.
2) Selling a house “As Is”. Selling to an investor (most of the times)
Advertising a house for “As Is Sale” means that the seller does not want to do any repairs or give credits to the buyers or negotiate the price if buyer found things wrong after inspections. And a lot of times it also means that seller doesn’t know a lot about the property and that they never lived in the house (possibly inherited it) and that they just want to get rid of it, quickly and with minimum amount of hassle. No Muss No Fuss. It can also mean that property is a fixer and lenders would not lend on it and it’s a Cash Only sale. For the buyers it means that it’s probably a fixer or at least it’s not move in ready and that they can purchase the house below market value, fix it and sell it for a profit. They have to consider that if they’re getting a loan, they’ll (probably) have to compete with cash-buyers.
So, as you see, unless a house is in bad condition or sellers are in a rush to sell, it’s not to the benefit of the sellers to advertise the property as an “AS IS” sale. It might be a more bumpy road kind of a process, it may bring more headaches, there might be even getting in contract and cancelling later but the outcome is more $$ in their pocket.
If $$$ IS an object, let’s go with option 1. However, if they want a quick close, No Muss No Fuss kind of a sale, option 2 is the way to go.
