What Does it Mean to Buy a Home “As-Is?”
It can be a great opportunity or a disaster to purchase real estate that needs some work. As-is lacks a legal definition – so approach it with caution.
In Northeast Los Angeles – NELA to the locals – the wide range of charming vintage, midcentury modern and newer construction homes attracts a variety of buyers. Some like it new, some like it old, and some like it new-old, as in nicely modernized but with the features of an older house.
Homes for sale in Glassell Park and Eagle Rock offer that full range. So do homes in Mt. Washington, Highland Park and Hermon. You can find some gorgeous Victorians with a price difference of $200,000 or more, depending on the condition of kitchens, bathrooms, roofs, basements, exterior cladding, windows, landscaping and floors. At the lower end are those sold “as-is” and the upper end “as you hoped it would be.”
The difference of course is the expense involved in fixing what time, wear, and tear have created. The as-is buyer may get a very good deal, or lose a significant amount of money if he or she does not understand what they are getting into.
Why? The cost of repairs may exceed the reasonable value of the home in its location. Alternatively, an as-is home might be priced very attractively because the sellers are motivated, very often owned by heirs whose parent’s home needs repairs and renovations they cannot or do not want to do themselves.
Important to note is that “as-is” is not a legal term. Property problems that the seller knows about still must be conveyed to would-be buyers, as required by California real estate disclosure laws. It’s more a term used in real estate parlance to let the buyer know it’s not move-in ready for the purchaser who wants just that.
If you’re thinking about buying an as-is home, you fall into one of three categories. Perhaps this is your first home, and at a low price you intend to fix it gradually as you have the money to do so. For you, the long-term nature of your ownership – perhaps you are especially interested in being in a particular school district, and this is the most affordable home you could find there – can make an as-is home purchase a great deal.
Other as-is homebuyers are professional flippers who calculate their repairs and renovations will raise the home’s value substantially, enough to turn a profit. And then there are the demolish-to-build developers, who see greater value in the land and location than the house itself.
An as-is buyer who on his or her own hopes to score on a good opportunity – say a fixer-upper in Garvanza – ideally will look for the following characteristics:
Some problems are too big: Roofs, foundations, mold, mechanical systems (furnaces and air conditioners, electrical and plumbing) and new windows will cost a lot to fix. Even worse are exterior features such as crumbling retainer walls. Be sure your inspector looks closely at these components to determine if a costly repair or replacement is necessary – and run away if there are very expensive problems.
Kitchens and baths: You can easily part with $50,000 (or more!) to get a modern kitchen. Or, you might be able to refinish or paint cabinets, replace appliances and countertops and refinish the floors for a much lower price. Baths cost the least to modernize if you can stay within the existing plumbing footprint.
Smaller, cosmetic changes: Bad paint colors and dated wallpaper, old carpets, light fixtures, and window coverings are the easiest and least expensive things to fix.
Not sure if an as-is home is right for you? Contact an experienced and established real estate agent who specializes in the Northeast Los Angeles region. Only an experienced realtor knows what sells, at what price, and what’s next – which is what buyers need when making such an important decision.