“As-is” can mean numerous things in an Outer Banks real estate transaction. It could relate to the condition of the home but also it could relate to an encomberance or an encroachment. Most commonly means that the seller will not make any repairs. This frequency of this type of sale waxes and wanes with Outer Banks market conditions. Almost all distressed sales are sold this way. Banks rarely want to make repairs to a property and sellers of short sales don’t have the cash to make any repairs. If a seller is selling their property “as-is” then it is a good idea to ask what does sold “as-is” mean in this situation. Here are some thoughts on the most common way this phrase is used in a sale.
During the inspection process if the buyer finds a problem they cannot live with then they can void the contract and get their earnest money back. Another option is to re-negotiate the sales price to pay for the repair or ask the seller to fix it. Just about every home has some minor repairs. Buyers of “as is” properties should negotiate the original sales price accordingly.
Buyers often think there must be something major wrong with the property if a seller offers their property “as-is”. More often than not these buyers are overly cautious. Some sellers don’t want to deal with supervising and paying local contractors. Out of town owners may not want to make a special trip to check on these repairs. Other times a seller may not be knowledgeable about how to fix problems. They don’t want to be saddled with repair issue decisions. Some sellers may just want to avoid negotiating on minor repairs. Of course if you, the buyer, have to deal with these things then that should cost the seller in the final purchase price. Buyers should negotiate accordingly.
Negotiate Up Front
Keep in mind if you are buying an “as-is” property that you need to negotiate with the understanding that more items than a normal may need to be fixed when you close on the property. Furthermore unlike a normal sale, you have less negotiating power with the seller if there is an item you need fixed because the agreement was “as-is” to begin with. What is the difference in value between an “as-is” sale and a normal sale? That is going to vary from one sale to the next but a buyer should pay less for a home in an “as-is” condition.
More Risk = More Reward
At a minimum, the buyer will have to pay for those minor repairs that the seller sometimes takes care of in a normal sale. They also are risking the money they spend on inspections with a much smaller chance that the seller will pay for any repair items. The older, less maintained property has more risk to the buyer than a newer, well maintained home. Buying an “as-is” home has its trade-offs. If you are capable of home repairs you may be able to purchase a home at a below market price. Where there is greater risk, there should also be a greater reward.
If you see an Outer Banks house for sale and the seller is selling it “as-is”, then it’s a good idea to ask your agent what does sold “as-is” mean in this specific situation. They can contact the listing agent for clarification.