Should You Sell As is?
Updated: Feb 23
Typically you shouldn't sell as is, because you'll typically be netting lower profits by selling as is than you would if selling after doing some work to the home and being willing to do more work should the buyer request reasonable repairs. That said, there are some exceptions where selling as is will be viable. As a buyer, sometimes it can be good to buy as is if you're willing to go through the hassle that a seller isn't in order to gain the profits that the seller loses because of their unwillingness or inability.
Above: My as-is HUD foreclosure purchase that is my rental property where I got a fantastic deal in part because it was being sold as is and other buyers didn't want it.
Below I'll go over some of the main reasons why I believe that, with expandable sections in case you'd like to skip around.
In rare cases, sellers are best suited to sell a home without any repairs, as is, & with just some clean up/staging.
For instance, that would typically be the case when I list a home for a seller who is short on cash, selling a short sale, works overtime, and who is no longer in town. Even in that case though, cleaning is recommended if the seller &/or friends/family are able to come in town and do some DIY cleaning, lawn care, maintenance, etc. as long as the quality of the work done wouldn't make a situation worse. An appraiser (such as for a bank) is more likely to see past a dirty home than a buyer.
One of the biggest issues I find with sellers wanting to sell a home "as is" derives from inheritance where they don't want to deal with the hassle of all needing to be in agreement on repairs and are splitting proceeds between multiple parties, but if your family doesn't tend to argue that much, it might not be a bad idea, while a family that already has a number of interpersonal issues may not want to stir up the pot.
Problem 1 with selling as is: Lower Net Profits
Just like some sellers don't want to deal with the time or cost of fixing a property, buyers have some of the same feelings, but have less skin in the game than a seller does to even check to see what estimates would be involved, so often they'll overestimate work costs, stress involved, and time involved to be safe. While some inspectors provide estimates for costs within a home inspection, in SE VA, I've found that most do not. The main problem with selling as is will be lower net profits. An "as is" home is a distressed property. Many buyers are unwilling to even consider distressed properties or fixer uppers. By narrowing your buyer pool to investors and those that are willing to go through more hassle, you encounter a lot more buyers looking to get a significant discount in order for them to go through the hassle of getting it fixed themself when the seller doesn't want to or is incapable of doing so.
Problem 2 with selling as is: Repair Requests & Price Reduction Requests After Contract Ratification
In addition to lower net profits, in some cases, a seller may list a home for sale without doing work on a home, only for a buyer, after home inspection or within the offer itself, to then request the very work that their listing agent would have suggested had the seller been willing to do the work or pay for the work prior to listing. The buyer could request work or request a price reduction if they include a home inspection contingency clause. Sometimes a home is listed as is, or an offer is made as is, but while you would think that the buyer really should treat "as is" as something where they don't request repairs, that's not always the case. Even if they don't request repairs, I've represented buyers before where our inspection revealed significant hidden problems, and we got $10k in price reduction from the seller. Also of note, I don't practice dual agency where I represent buyer and seller. In cases where the seller finds issues after home inspection that the seller is unwilling to do or unwilling to reduce the price for, the buyer may walk from the contract, leading to my next point.
Problem 3 with selling as is: Higher Probability of Contract Fall Through (Which Also Often Leads to a Lower Net)
The buyers won't always give sellers the opportunity to remediate problems, and sometimes walk from contracts rather than requesting repairs after seeing substantial issues that were not disclosed by the seller. If the buyer walks from the contract, at least in Virginia, that seller should disclose to future buyers what material adverse facts stopped the sale from occurring. The second time it goes under contract, it could be for a difference significantly greater than the cost of the repairs had the seller been willing to do them.
Fixer uppers have a much higher likelihood than homes that are in good shape for the contract falling through due to home inspection, & contract fall through is costly. One of the main reasons why homes that go back on the market don't sell for as much is that the hottest time on the market for a home is when it's brand new on the market. There is a stigma with homes that go back on the market; buyers wonder why it went back on the market and wonder about how honest the listing agent/seller is being about why if they provide an explanation why. The buyers have good reason to be suspect. I've seen where a listing agent stated that a home sale fell through at "no fault of the seller", only to find with more probing questions that the actual reason it fell through is because of a bad home inspection where the seller didn't have a chance to see respond to requested repairs because the buyer went to terminate immediately after inspection rather than trying to haggle them for repairs to be completed.
I've also seen where, 2nd time on the market after contract fall through, a home sold for around $13,000 less than the original contract, with the first buyer requesting no repairs while the 2nd buyer requested repairs. $13000 isn't even including the repair cost of that 2nd contract. For example, I saw where a property went under contract for $362k with $10k in closing cost assistance within the first week of it hitting the market. The contract fell through (not due to repairs either; the property was in good shape & had appraised fine) due to the buyer being in breach of contract etc. After some price reductions and time sitting on the market, it eventually sold for $337,500.
How Listening to My Advice to Not Sell As Is Has Helped Sellers Get Higher Net Prices
There are some sellers that listen to my advice about what to do to a home much more so than others. I like to eliminate as many cost effective negatives as I can when going through a home with a seller if they are willing to not sell as is, & I've seen fantastic results from sales prices at times because of it. I have a keen eye for the details, and on at least one occasion, I've pointed out to my client more legitimate home defects than a home inspector at the same property. I've seen where sellers listen to a lot of my advice, and in doing so, the homes get in multiple offer scenarios & eventually go under contract & sell for more than comparable properties, even if all or most of the improvements that they make are DIY since they have some skill to do them well. In those scenarios, I have sometimes seen high guarantees above appraisal, including situations where all of that large above appraisal guarantee was utilized because the appraiser couldn't justify the price that the buyer was willing to pay.
Selling Almost As Is: Better than Selling As Is
If you plan to not do any work to a house, you are typically better off not including the term "as is". That language is actually used in some searches by investor buyers who are looking for properties to low ball, making many offers at a time and seeing where one sticks. Conversely, there are some owner occupant buyers where they rule out in their search criteria any properties that mention "as is", so even if it's only a small shed that you're talking about, the same buyer might not even see your home because of that language.
One exception to this rule is that it is typically not true with short sales and many foreclosures, where you are required to sell "as is" often by the bank or other institution involved. Also, if you know that there are significant problems that you don't want to go into detail on disclosing, stating that something like a shed is being sold "as is" does reduce some disclosure liability by acknowledging that it has issues.
Buying As Is
In most cases, I don't recommend selling as is, but for some buyers, purchasing as is can yield substantial savings if the buyers are willing to go through the hassle that some sellers aren't prior to listing. Your profits tend to be lower when you do. When I bought my first home, I was able to pocket significant equity after repairs because I was willing to go through the hassle of repairs, even though most of it was hired out, that other buyers were unwilling to do. Flippers make their money in part because of this unwillingness of many buyers to do repairs.
My example purchasing as is
While I don't recommend that sellers sell as is, with buyers I represent, it's a different story, & my first home purchase was a fixer upper where I made significant profits because of it. In February of 2017, I purchased the lowest price home in a neighborhood, that was selling as is and needed work, for $115k. It was a 3 bed, 2 bath property built in 1992 with a garage in an area with low crime according to the Trulia crime map at the time & with no flood insurance required. I used a conventional renovation loan putting 5% down. The after repair cost of the home at closing was $140,726. The after repair appraisal was $190k before closing, and once repairs were completed, that appraisal was confirmed.
How I saved more (not important for this blog, but fun tidbits to note): The seller paid 3% of my closing costs, and I used a program to reduce home cost to cover $4,000 more. I intentionally avoided other programs to rent it out, despite some others saving more money, because unlike some of the higher paying programs, the program I used didn't have too many restrictions on me renting it out & even renting out rooms in it in the not too distant future after purchasing it. I paid out of pocket for some additional things I wanted to do to the home (i.e. blinds, but less than 10% of total reno costs) because I wanted to do some things DIY to save more costs. I was able to get the PMI removed 2 years after purchase, lowering my payments. After the interest rates nationwide were lowered, after it was rented out, I reduced the mortgage interest rate from 4.5% to less than 3%, and from a 30 year loan to a 15 year loan. I also gradually increased the rent over time.
Funding Repairs
One of the biggest issues I find with sellers wanting to sell as is derives from sellers who don't have much cash on hand, especially if they have poor credit. I have a separate article dedicated to the topic, as there are many options that sellers may not be aware of even in that situation to fund their repairs and gain higher net profits.