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'As-is' tool cuts both ways
Dear Real Estate Adviser,
I am considering buying a house for sale by owner. The seller, who
is actually just the trustee of the owner (who is in a nursing home),
wants to sell the house "as is." What does this mean and
is there anything I should know about this?
Buyer B. Ware
Dear Buyer,
"As is," as they say in the used-car biz, can be a euphemism
for somebody else's troubles.
Often called a "unique, fixer-upper opportunity"
in the home-sales industry, an "as-is" home is being proffered
warts and all. What you see is what you get. What you don't see
is what you get, too.
The reasons for selling a home "as is" can
vary. An owner may need to transfer quickly to another market and
needs to make a quick, painless exit. Or the place may have so many
little nagging (but perhaps relatively minor) problems that the
owners can't endure the inconvenience of having workmen traipse
through the place for weeks on end.
But in your case, it's likely that the seller is infirm,
and can't devote the energy or the resources to restoring the place
to its original sparkle. So he or she is cashing in this valuable
asset through a trustee, without a real estate agent. While there's
a moderate chance that you might be looking at a bargain here, it's
incumbent on you to perform some very thorough due diligence before
taking a plunge.
State laws vary, but in general, sellers must disclose
the conditions of their properties before an "as is" transaction
can take place. Even if the trustee has had the place inspected
and has documented its flaws, you should get your own home inspection(s)
if you're really serious about buying. Sometimes, a few crucial,
ahem, oversights may surface.
You'll want your inspector(s) to look for structural
and foundation flaws and evidence of any past pest infestation or
mold contamination. Tests on built-in appliances, fireplace, chimney
and roof would also be a good idea, too.
Of course, the revelations from these inspections
won't mean you can force the owner to fix the flaws. It just means
you'll have a better idea of what you'll face should you buy the
place, and it gives you a better idea of what to pay.
As for the offer, you'll want to take the estimated
cost of the repairs and probably affix a value to a few of the less
tangible elements -- the time and inconvenience that will be involved
for you. (I'm assuming, by the way, that you won't be personally
repairing the place, which would really give you an edge in extracting
more value for your dollar). Anyway, subtract this "impact
package" from the value of a few similar homes -- "comps"
or "comparables" -- near you, but which sold in excellent
condition. Then shape your "as-is" offer.
You may want to enlist your own agent to make sure
you are protected legally and to help you with "comps"
and negotiation. Don't believe for a minute that you are taking
advantage of someone. The "as-is" sales tool cuts both
ways and the seller and trustee, no doubt, are motivated to sell
to someone. The other party, after all, is under no obligation to
accept your offer.
And good luck!
-- Steve "As Is" McLinden
-- Posted: March 13, 2004
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