Selling a home "As Is" can be advantageous to both the buyer and the seller. It is essential, however, that both sides of the transaction are protected by a properly drafted purchase contract and fully understand what is involved.

Professional guidance

As Is sales are often the result of a seller not wanting the responsibility of making repairs to the home or an inability to afford them. Buyers frequently are balancing the cost of repairs against the lower price they may pay for an As Is property. In either case, having an experienced Realtor as your guide through the intricacies of such sales can save everyone time and money. It also offers protection against important items being overlooked.

Contract clauses

An As Is sale will usually have a contract clause indicating that the property is being purchased in its present condition, with no repairs or warranties from the seller or agents.
It is crucial that a buyer make himself aware of what these shortcomings are by having the home adequately inspected. A buyer who is not a contractor should hire an experienced,  professional home inspector, and, possibly, other qualified individuals for specific issues. Even if the buyer has extensive experience in home repairs and remodeling, an outside opinion can be invaluable. A Realtor can give recommendations.

The purpose of the inspection(s) is to determine the extent of the "deferred maintenance" and to estimate the cost of repairs. After these inspections involving As Is sales, sellers can expect buyers to re-negotiate the price of the home. For this reason, a seller who has had the home inspected prior to putting it on the market—and listed it at a reasonable price based on those inspections—can usually avoid, or minimize, a mid-escrow crisis.

The following are some of the areas sellers should look at before marketing a home, and buyers should emphasize during their inspections:

Structural pest control/termites. A common buyer's mistake is to accept a pest control report that calls for further inspections without insisting on having them done before removing his inspection contingency. Further inspections have been known to turn $5000 reports into ones of $20,000 or more. For this same reason, sellers who order a pest control report should follow through with any further inspections recommended.

Soils/slides. Check with the local Public Works department to see if there has been any slide activity on or near the property. If this is a concern, hire a local soils engineer to evaluate the situation. Get a written engineer's report, even though it is an additional expense. Any issues that arise should be presented to the seller in writing. When the sale of the home is completed, the buyer should save the report for when he sells.

Drainage/foundation. Although drainage and foundation are different considerations, drainage inadequacies often lead to foundation problems. Drainage deficiencies are more difficult to uncover during dry weather, so be sure to look for telltale signs. Have the foundation thoroughly inspected from under the house.

Roof, gutters, downspouts. A non-leaking roof may be near or at the end of its useful life. Unless it is relatively new, you may want to take the additional step of getting a licensed roofer, especially if your home inspector has shown reservations about the roof.

Electrical/heating/plumbing. These should be closely evaluated for health and safety reasons.

Listing & selling price

For the seller of an As Is, fixer-upper property, arriving at a fair list price can be a complex proposition; for the buyer, coming up with a reasonable offer is equally involved. A contractor may see the potential for a profit if he can buy the house at an acceptable price. If a buyer intends to live in the home, he can make an offer without having to figure in a profit margin. Every year I see fixers bought and resold by professional contractors, some of which result in little or no profit to them. Even contractors can misjudge costs and resale price.

Fixers with character and charm in good neighborhoods tend to sell for more than their As Is condition would otherwise warrant. When a house is extremely desirable, with the possibility of multiple offers, the advantage is to the buyer who intends to occupy the property over a contractor who plans to resell. The disadvantage is if the buyer does not have the know-how and experience to make the more costly repairs. The non-professional who must hire outside help will have to pay the going rate to licensed professionals, an expense that must be included in the calculations.

Lender & insurance issues

As Is properties often have problems which are obvious to the lender's appraiser and to an insurance agent. In extremely distressed fixers, an all cash sale is the only alternative. In addition, insurance may not be available—another barrier to getting a loan. All cash, As Is transactions sell at steep discounts to the buyer. These invariably involve seasoned professional contractor buyers who have the cash and will renovate and resell as quickly as possible.

Final thoughts

An As Is sale can run the gamut from the buyer accepting one or two relatively minor problems to the purchase of a fixer-upper with a laundry list of high-priced issues.

For the buyer, inadequate investigation can negate any savings. Having thorough inspections and realistically calculating repair expenses, it is possible for a buyer in an As Is sale to end up with a better house than he could otherwise afford.

By having inspections prior to marketing a property, a seller can avoid misunderstandings and help fulfill all disclosure requirements. He can then sell his property with a minimum of surprises and without the burden of having to make repairs.

Related Articles: As Is Pointers, Part 1; Understand Before You Sign,  Another New Contract, Part 1 and Part 2;  Check Drainage; Understanding The Market