Buying a House 'As-Is'

Home buyers will periodically run into properties being marketed as “as-is.” In many cases, they assume the price is far less than other comparable homes in the area and that the property likely needs some work.

For seasoned handyman types and investors, buying one of these as-is properties can turn out to be a good buy. But if you’re new to the game, all I can say is “buyer beware.” Cover all of your bases before jumping in.

There is an inspection contingency clause in the purchase contract that allows you an out if the property turns out to have problems you did not anticipate. And doing a series of thorough home inspections is the best way to really understand what you’re getting into.

In California, sellers—even when the property is being marketed "as-is"—are required by law to disclose to potential buyers any major issues with the home that they know about (e.g. a previous water intrusion from a broken pipe, a roof leak, termites, or a cracked foundation or chimney.)

Then there are the foreclosure properties that are almost always sold as-is. With these properties, the banks have no knowledge of the home's condition, and are therefore exempt from completing disclosures. When buying a foreclosure you need to be especially diligent with your inspections.     

Some types of inspections to consider doing are a general home inspection, a chimney inspection, a termite inspection, a sewer line inspection, and HVAC, pool and mold inspection.

If previously undisclosed problems are found, it can be a negotiating point. And if the seller is not willing to budge, the contingency clause allows you to walk away from the deal and get your deposit back.

In the case of termites, it’s customary for the seller to take care of termite issues during escrow, but it’s not mandatory.

Local laws also require sellers to install smoke detectors, low-flow toilets, an earthquake shut-off valve, a water heater that is strapped for earthquake safety, and carbon monoxide detectors.

In my opinion, buying an as-is house should be no different than buying any other property. In both cases, buyers need to cover all of their bases. Knowledge is power.