As the name indicates, the “as-is” clause in a real estate transaction means a property is being sold in the current condition, as it exists, with any faults and defects. This brings with it some benefits but also some risks that must be considered.

The benefits to consider are usually pretty clear, some of them being:

• A reduced price: Since the buyer will be responsible for any repairs, an “as-is” property will typically be priced lower, and depending on circumstances, sellers may even still consider lower offers than the listing price.
• Expediency: An “as-is” property will likely require much less paperwork and negotiation time because the seller isn’t obligated to fix any problems beforehand. That means that the inspection would solely serve as an informational tool to understand the property’s condition, and the costs associated with any repairs.

While “as is” doesn’t always mean a home is in disrepair, the risks of buying an “as-is” property could be quite considerable, and they need to be considered before entering into any such contract.

• Hidden issues: The most common problem is, of course, the hidden issues that could come up with the property, including electrical issues, plumbing issues, roof leaks, mold problems, or even foundational cracks.
• While buying a home “as-is” doesn’t mean you’re giving up your legal rights as a buyer, depending on the state in which the property is located, there might be limited seller disclosure, which means the seller might not be obligated to disclose all known issues with the house. That means you could purchase a property with many more problems than you know. Again, this is dictated by state regulations so be sure to ask your real estate agent about the disclosure laws and what information you’re entitled to as the borrower.
• Problems with financing: “As-is” properties are sometimes more challenging to get mortgages for because there is an increased risk of major repairs. Most loan types will require that the property meets certain livability standards, known as “minimum property requirements.” That means you might need to put down a much larger down payment, pay cash, or secure a special loan program. This sometimes depends on the level of repairs needed. It’s important to discuss with your lender before taking any additional action.
• Resale issues: An “as is” property might be challenging to resell in the future, particularly if all the issues aren’t addressed when you purchase the property.

The bottom line is that while some “as-is” properties may come with risks and expenses, an “as-is” property doesn’t always mean you should run the other way. You should, however, consult with your real estate agent and lender when considering the purchase of an “as-is” property. Our team at Attorney’s Title Group is also happy to be a part of your real estate team and we’re here to discuss your thoughts and concerns regarding the title and closing of an “as-is” property.

If you are a buyer, a seller, or an investor thinking about your next real estate transaction, the Attorney’s Title Group team can help. Call us or reach out to us online if you have any questions about “as is” transactions, or any other real estate needs.

Click here to contact us online or give us a call: (501) 734-2233 or email: atg@youratg.com.