The relatively low price of a house being sold on an as-is basis may draw you, but you shouldn't rush the transaction. You need to take it easy just as you would with any other form of property purchase. Specifically, you should take these three precautions first:
Understand What the Defects Are
Just because you are buying a property on an as-is basis, it doesn't mean that you should ignore the major defects. Therefore, talk to the seller and conduct a home inspection just as you would when buying any other property. After that, you can decide whether to buy the property or not. For example, it may be wise to pull out of the sale if the inspection uncovers a serious defect, such as a settling foundation. In fact, you should include a contingency clause that allows you to pull out of the sale if you discover major defects.
Make Sure You Aren't Facing an Automatic Loss
Buying a house on an as-is basis doesn't mean that you are ready to lose your investment. Most people engage in such sales so that they can fix up the properties or tear them down and build new ones. This means that, at the very least, there shouldn't be anything jeopardizing the land. Here are a few things to confirm to reduce the risk of losing your entire investment:
- Confirm that the house is zoned for its current use
- The property isn't scheduled to be taken away by a third party (such as the government)
- There is no geological defect that may render the land unusable, such as extremely high radon levels
Make Sure You Have the Money
Mortgage providers are not very enthusiastic about properties being sold on an as-is basis. This is understandable because when a financier loans you a mortgage, they are also investing in the property you are buying and they don't want to lose their investment. They may lose this investment if it turns out that something is catastrophically wrong with the house. Therefore, start your mortgage search early, look for alternative lenders or liquidate your assets so that you can buy the property on a cash basis.
Buying a house on an as-is basis is fraught with risks – risks that you may not be able to handle without adequate knowledge of the real estate market. This is one of the real estate transactions that require the input of an experienced realtor, such as from RE/MAX Moves.