Sell a House AS-IS: The Interactive Guide

Are you looking to sell a house “as-is”?

The house may need work, and you’d rather not waste time and money on a fixer-upper.

Perhaps you prefer a quick and easy sale rather than dragging it out months.

Weighing the pros and cons of selling “as-is” will help make the best decision. It’s important figure out if an as-is sale is even permitted in your area, as well as required legal disclosures.

This Sell a House AS-IS: The Interactive Guide walk through everything you need to know from the personal experience of the House Heroes Team. Watch the Quick Intro Video and dive-in with the index!

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We Buy Houses (In Any Condition)

Call Us (954) 676-1846 or Fill Out This Form For Your FAIR Offer.

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What Selling a House As-Is Means

The meaning of an “as-is” sale is often misunderstood (even among real estate professionals).

Here’s the formal definition:

Selling “as-is” means selling the house in its present condition or as it exists immediately prior to closing, even if there is property damage or defects, without the seller making or paying for modifications or repairs.

Sound simple?

The tricky part is understanding what “as-is” DOESN’T mean.

Three common misconceptions relate to allowable inspections, selling site unseen, and re-negotiating price.

Watch the video below or read on to get our thoughts on what an AS-IS sale means!

Allowable Inspections.

Homeowners often believe an “as-is” sale means the buyer is not permitted to cancel the contract due to property condition. This confuses as-is with the inspection contingency.

The vast majority of “as-is” sales – to the contrary – expressly allow the buyer to cancel after inspecting.

The inspection contingency contract clause allows the buyer time to “inspect” the premises. The buyer may cancel during this period without violating the contract.

Why would you allow the buyer an “out” after inspection?

Buyers pay substantially more if you give them a few days to tighten up their market value and repair estimates.

Selling Site Unseen.

Selling a house “site unseen” means the buyer is not able to enter the premises.

No walkthroughs, no property inspectors, no repair quotes.

The buyer “rolls the dice” 🎲 as to property condition.

“Site unseen” sales are rare because offers are dramatically lower. The risk is too high for buyers to pay more than a nominal amount when the house could be in shambles.

Hostile tenant or occupant, dangerous or hazardous conditions, or the owner has no access: these situations give rise to site unseen sales.

Buyers with an inspection contingency are usually permitted to inspect with contractors, and even re-negotiate repairs, during an “as-is” cash house sale.

Re-Negotiating Price.

Selling “as-is” doesn’t mean the buyer can’t re-negotiate price.

Real estate contracts typically set the inspection period to 15-days.

Buyers have three options at the conclusion of inspection:

1. Close at the agreed upon price.
2. Cancel the contract.
3. Re-negotiate with the seller for a lower price.

Should you grant the buyer a lower price? Depends on the reason for re-negotiation.

Granting a price reduction makes sense if the buyer truly uncovered unanticipated repairs. Inspections exist for a reason: for everyone to take time to understand the actual condition of the property. Buyers naturally need a price reduction if there are substantial unforeseen renovations.

However, not all reductions are in good faith.

Some buyers employ a “bait and switch” technique.

The buyer offers a very high dollar amount to convince the seller to sign the contract, drags the process on-and-on, and months later threatens to only close at a far lower price. Worn down by months of uncertainty and counting on the money from the sale, they often go along with the massive reduction.

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Pros & Cons of an As-Is Sale

Selling “as-is” is attractive to virtually every owner.

I’m so lucky to spend my day interviewing, supervising, and collecting quotes from home renovation contractors. I can’t wait to lose tens of thousands of dollars to fix-up a house for someone else to live in.

SAID NOBODY EVER.

However, there are downsides to skipping out on repairs and insisting on an as-is sale.

Let’s carefully examine the “pros” and “cons” . . .

The Pros of An As-Is Sale.

Fast Sales.

Closing fast is the biggest advantage of an “as-is” sale.

How long it takes to renovate a house and then sell on the open market?

Take a glance at these statistics:

• Average Time to Sell After Listing: 68 Days [Zillow]
• Average Time To Close After Contract: 40 Days [The Balance]
• Average Time For Mortgage Approval: 45 Days [Mortgage Reports]
• Cosmetic Renovations Only: 2-3 Months [Flip Academy]
• Full Property Renovation: 3-12 Months [Flip Academy]

The average time from beginning renovations to selling is 6-months for cosmetic rehab, and 12-months for substantive repairs. Payments on taxes, utilities, insurance, and unexpected weather events keep piling up.

Selling a house “as-is” by owner takes just a few weeks.

Save Money on Repairs.

Home renovations empty a bank account. Quick.

Updating an older house costs tens of thousands of dollars.

Home Advisor created a detailed guide outlining current renovation costs. Check out the details below:

According to Houzz author Erin Carlyle:

So how much does a renovation cost overall? Obviously, the total cost will depend on the project’s scope, the materials selected and the fees of the professionals hired to do the job. Owners who completed our survey spent an average of $59,800 on renovation projects.

Lucas manages renovations for the House Heroes Team.

Check the video below (click here for the case study) to see Lucas’ work on 818 NW 133 Avenue in Pembroke Pines!

Here’s the bottom line . . .

Selling “as-is” without paying for repairs saves huge amounts of money.

Avoid Stress.

Is it safe to take Advil every day?

Renovating a house is a headache 😫

Dealing with contractors, unanticipated repairs and costs, months of delays. Rehabs test the patience of even seasoned real estate professionals. The frustrations even damage personal relationships.

Common reasons home renovations become stressful include:

• Not Knowing Where To Begin. First time home renovator? It’s more complicated than Flip or Flop. The learning curve is steep.
• Spending Money. Nobody likes watching their bank account drop tens of thousands of dollars. Renovations burn a hole in your pocket.
• Surprise Defects. One fact of renovating is – no matter how detailed your plan – surprises pop up. “The best laid plans of mice and men often go awry.” Robert Burns.
• Interrupting Home Life. Breakfast with your kids? Usual sleeping spot? Quality time with a spouse? All influx during a home renovation.
• Dealing With Contractors. Home renovations require interviewing and hiring lots of contractors. Poor craftmanship or a disappearing contractor is inevitable.
• Lost Time. Fixing up an old house takes hours (if not days) in planning, interviewing, letting contractors in daily, and overseeing the entire process. It’s bumpy ride if your schedule is jam-packed with work and family obligations.
• Price & Time Uncertainty. Humans like predictability. Renovations are notorious for surpassing budget and timeline.

The Cons of An As-Is Sale.

You’d like to save the time, money, and stress of a rehab?

Perfectly understandable.

There are, however, a few negative consequences of that decision.

Lower Sale Proceeds.

An ugly house isn’t worth nearly as much as a beautiful one.

Renovating an old house builds market value in two ways:

1. Financial Investment. Renovating is big cash out lay. Buyers pay more for benefits of renovations without spending the money themselves.
2. Sweat Equity. Even basic cosmetic repairs can take months of  contractor supervision. This work builds “sweat equity”: you spent time and energy on renovations and now the buyer doesn’t have to.
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Buyers offer substantially less for houses that require them spend financial resources and days of their lives to renovate.

Less Buyers Are Interested.

Everyone hopes to one day buy their dream home.

The mental images never appear like these “ugly houses” 🏚 we bought:

The majority of home buyers aren’t interested if you’re selling a house in poor condition.

You will lose these buyers when selling a home in need of renovations:

• Buyers With Mortgage Financing: Most home buyers rely on conventional mortgages. Houses with notable defects aren’t approved for a mortgage: broken window panes, leaking plumbing, electrical problems, an old or leaky roof, termite damage, lead paint. The sale must be “cash only” if any of those problems exist.
• Buyers That Need To Move In: Looking to sell a house a bad shape such that buyers wouldn’t be able to comfortably move-in upon closing? Homeowners that need to move in pronto may pass on major fixer-uppers.
• Buyers That Desire a Turnkey Property. Many buyers aren’t interested in making repairs. They may live remotely, be too busy to handle repairs, or simply have enough money they don’t need a “cheap” house.

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What happens if less buyers are interested in your house?

The sale goes slow when selling a run-down house at a high price. Only a handful of buyers will pay top prices to go through the hassle of renovating. Expect months before connecting with the “right buyer”.

Making matters worse . . .  fewer offers also drives down sale price.

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Should You Sell As-Is?

There is no “one answer” on whether you should sell a house as-is, or invest in the renovations.

Here are the critical questions to honestly ask yourself . . .

Do you have enough money to pay for the renovations?

As discussed above, home renovations cost tens of thousands of dollars.

Not all of us have that kind of money sitting around. Selling as-is makes sense if cash is in short supply.

Got just enough money to renovate? Beginning the job is not advisable.

Renovation budgets typical surpass anticipated costs. You could end up selling a house that needs updates if cash reserves barely covered renovations.

Renovating makes sense with financial resources in excess of $10,000 – $20,000 of the expected cost.

Borrowing from friends, a home equity line of credit, a high interest short term loan, or credit card debt aren’t ideal to finance remaining repairs.

Do you live nearby the house?

Managing renovations from a remote distance is complex.

Ask yourself 3 questions before deciding to take on major renovations. Do you have the financial resources? Are you nearby to manage the contractors? Does your work/family allow you enough free time?

How will you meet and interview contractors? Who will monitor day-to-day work? Does a neighbor keep a key to the house to let people inside, or do you risk turning it over to people managing the work?

Owners that live out-of-state usually quit updating the property after several months. A half-way renovated house isn’t attractive to regular home buyers who just want a “ready to move in” experience.

You may end up selling at a reduced price to a fix-and-flip investor (who needs profit margin).

Do you have time to plan and manage renovations?

Updating a house that needs work is time-consuming.

The first time sink is creating a “Scope of Work” that details the renovation from start to finish. Scopes of Work should include a list of repairs by category, physical materials, photos of areas to be rehabbed, and drawings.

According to Flipper Force, the Scope of Work is incredibly important to help compare contract bids, prevent mid-renovation problems, and minimize contractor disputes:

Creating a detailed Scope of Work document for your rehab project is critical because it establishes a clear project plan that your contractors can use to estimate costs.  If you don’t tell your contractor exactly what work needs to be included, it leaves too much room for interpretation which can result in change orders, conflicts and disagreements.

The second major time sink is supervising contractors. Depending on the level of renovations, you may be working with ten or more professional handymen at various phases of the project.

If you don’t have free time to carefully watch the contractors, there may be unwarranted delays (or worse – a contractor stops showing).

Do you have handyman or renovation experience?

Fixing up a beaten down home isn’t easy [contrary to HGTV fix-and-flip shows 📺]

Most people can manage small updates. However, the difficulty grows exponentially as the project grows in time, money, and necessary repairs.

There is a “learning curve” to renovation projects. The first project is a struggle but management skills get honed as you rinse and repeat.

Selling “as-is” and letting a professional manage the rehab is a good solution if you’ve never managed a home renovation and have no intention of doing so again.

This is particularly true on a limited money or time budget. Inexperienced renovators have trouble measuring how long and how expensive the rehab is.

If you do plan to renovate, keep in mind that not all home improvements are created equal, as illustrated in this list of 31 home improvements. The list includes 7 home improvements that you should avoid like the plague if you want to get the best bang for your buck. Remember, if you are upgrading to sell your home, don’t add features that YOU like, add features that potential buyers want. You can also check out this home renovation guide.

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Legal Disclosures Selling a House That Needs Work

I could sell for so much more if the buyer doesn’t think he has to fix the roof. I’ll just keep that attic leak to myself. The central AC didn’t work for a few weeks. Seems fine now. They probably won’t notice.

We’d all love to sell property for as much as possible. It’s tempting to not mention hidden defects.

Unfortunately, the law doesn’t allow this.

Selling “as-is” does not remove the obligation to disclose latent property defects.

Disclosure of known property defects becomes particularly important when selling a house that needs work (due to invisible defects). It could turn out you’re selling a tear-down house if foundation problems were hidden.

Concealing problems intentionally to get a higher sale price can lead to you being responsible for the costs of repairs and other damages due to the undisclosed defect.

According to Find Law:

In general, you have an obligation to disclose potential problems to a prospective buyer that could affect the value of the property you’re trying to sell. In addition, it is considered illegal in most states to deliberately conceal major defects on your property. Several states have begun requiring property owners to put their real estate disclosures in writing.

In most areas, owners are required only to disclose information within their personal knowledge that was not readily observative. Owners do not need to hire an inspector to uncover every potential flaw.

How should you properly disclose a material defect?

States often require written disclosures. Florida’s disclosure form asks “Yes” “No” and “Don’t Know” on a series of questions involving structures, systems, appliances, pests, drainage, flooding, plumbing, pools, and sink holes. Here is a sample “Seller Disclosure” provision:

Legal protection is stronger with written disclosures.

Check Nolo’s index on seller disclosure in each state or contact a local attorney for applicable laws.

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Critical Offer Terms When Selling a Fixer-Upper

Any buyer can offer any amount on paper.

Got an offer that you can’t refuse?  If it’s too good to be true . . .

High prices are exciting – but entirely meaningless unless supported by a fair written contract. Contracts can be drafted with unwarranted “loop holes” letting buyers cancel without repercussion.

Keep these four contract terms on your radar when selling a house that needs repairs: escrow deposit, inspection period, appraisal contingency, and financing contingency.

Watch the video breakdown or read on to get info on NEED TO KNOW contract terms . . .

Escrow Deposit.

Is the buyer making a serious offer or wasting my time?

The answer to this question depends on the “escrow deposit”.

An escrow deposit (also known as “earnest money” or “good faith” deposit) is a payment made by the buyer to prove the buyer’s offer is serious and that they will hold up to their end of the bargain. The deposit is held in neutral escrow account upon both parties entering the contract.

Escrow deposits are negotiable, but typically 1-2% of the purchase price.

Here’s Brendon Deismone take on the escrow deposit:

The deposit is a good-faith gesture to the seller, indicating you’re serious about buying their home. Once deposited, this money can’t be moved or touched without written consent from both buyer and seller. Upon the close of escrow, the earnest money deposit is applied to the balance of the down payment.

Escrow deposits are important: they are the seller’s financial “remedy” upon buyer default.

Should the buyer “back-out” or fail to close without justification, the escrow deposit is transferred to the seller. Buyers making a small escrow payment lose very little stringing you along and then canceling at the last minute.

Small deposits are particularly troublesome when your selling a house that needs work. Buyers get “cold feet” that repairs are too expensive or time consuming. If they only put in a few hundred bucks down, there is no incentive to “follow through” with the sale.

Best Practice: Insist on at least 1% escrow deposit and confirm it was deposited.

Sample “Escrow Deposit” provision:

Inspection Period.

How long does the buyer have to cancel due to property condition?

Check the length of the “inspection period”.

The inspection period is the agreed upon amount of time for the buyer to inspect the house. Buyers may “cancel” for any reason during inspection. Average inspection periods last 15-day.

Land Century explained:

In real estate, an inspection period is the time frame during which buyers have the opportunity to perform their due-diligence on the piece of property they intend to buy. It gives buyers an opportunity to inspect the property, and if it doesn’t meet their standards, they can either cancel the contract, or renegotiate the terms. If the contract is canceled, the buyer doesn’t lose money in the process.

Inspection periods are a “hot button” issue when selling an older house.  Property defects are bound to pop up (a lot!) examining a fixer-upper.

Buyers prefer a longer inspection to allow enough time to estimate renovation costs.

Sellers want a short inspection to close ASAP without wasted time. Sellers have to re-start the entire process again if the buyer cancels.

Best Practice: Negotiate a fair inspection period memorialized in the written contract.

Sample “Inspection Period” provision:

Appraisal Contingency.

Can the buyer cancel if an appraiser says the house is not worth the offer price?

Buyers may cancel due to a low appraisal if the contract has an “appraisal contingency”.

The appraisal contingency protects the buyer. If the property does not appraise for the specified amount, the buyer may cancel with the return of their escrow deposit.

Appraisal contingencies are necessary for buyers with mortgage financing. The house serves as the loan’s collateral. The appraisal allows the bank to confirm the house’s value is enough to cover the debt should the buyer default.

Selling a house in “as-is” condition means it probably needs work. Mortgages are not available if a house has notable property defects. Cash buyers do not need an appraisal because the house is not securing any loan.

Best Practice: Cash offers don’t need an appraisal contingency. Mortgage financing does.

Sample “Appraisal Contingency” provision:

Financing Contingency.

Can the buyer cancel if he can’t come up with the money?

Contracts with a “financing contingency” allow the buyer to cancel with the return of their escrow deposit if they can’t fund the purchase. The sale is “contingent” on the buyer securing financing.

Financing contingencies serve to protect buyers should they fail to qualify for a mortgage.

Cash buyers rarely ask for financing contingencies. Selling a house “as-is” for cash without this contingency makes sense. If a buyer has cash, there is no need for a contingency based on cash being unavailable.

If you’re selling a house “as-is” that needs work, buyers usually make cash offers (banks don’t lend on fixer-upper properties). Since cash offers don’t need the financing contingency, the clause is unnecessary for handy-man property.

Best Practice: Mortgage buyers need financing contingencies. Cash buyers of “ugly houses” don’t.

Sample “Financing Contingency” provision:

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Tips From The Experts!

Selling a house that needs work is a big decision.

We’ve collected insights from various real estate professionals – check out what they had to say below!

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Vetting a Buyer (To Not Waste Time)

The sun will rise. Death and taxes. Buyers “backing out” when a house needs work.

You can count on each of those!

There are a few reasons “as-is” sales consistently fall through:

• Mortgage Not Approved. Banks won’t lend on houses that need too much work. If the inspection reveals notable defects, the mortgage likely won’t be approved.
• Low Appraisal. Houses in disrepair get a lower appraisal price than comps in better condition. Buyers cancel when appraisal comes in lower than the amount specified in the appraisal contingency.
• Renovations Too Costly. Making offers is an inexact science. Thoroughly inspecting a house can take days or even weeks depending on level of rehab. High costs that surpassed the buyers initial “ball park” estimate will lead to cancellation or re-negotiating price.
• Months To Renovate. Renovating a house from top to bottom can take over 6-months. Buyers may have made an offer believing rehab work was simpler. It may even turn out your selling a tear-down house.

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Vetting a buyer before accepting the offer saves time, stress, and frustration.

Here are some key considerations (and an opportunity for us to show off a bit 😄)

Experience Rehabbing Property. Has the buyer purchased a “fixer-upper” before? Good chance an overwhelmed buyer will back out if they have no history with ugly houses. Check out our Case Studies to see 10 fixer-uppers 🔨 we purchased.

    

Cash Proof of Funds. Anyone can write an offer amount in a contract. It doesn’t mean they can get that money to you. Ask for a bank statement proof of funds showing the cash. Give us a call at (954) 676-1846 for our proof of funds.

    

Testimonials & Reviews. Check out if the buyer has online testimonials and social media reviews (HINT: click here to see our video testimonials). Past is the best predictor of the future. If others had a good sale experience, there is a good chance you will too.

    

Better Business Bureau Accredited. Better Business Bureau is the “gold standard” for a company willing to put their reputation on the line. The BBB reviews the company’s online and corporate history before approving. The House Heroes Team is A+ Rated!

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We Buy Houses (In Any Condition)

Call Us (954) 676-1846 or Fill Out This Form For Your FAIR Offer.

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