Sometimes selling a home as-is is unavoidable. We’ve had clients trying to beat the bank in foreclosure who just needed to sell quickly and were committed to deeply discounting the price because they would still make more than they would if the bank took the home. We’ve worked with folks selling a deceased parent’s home who likewise didn’t have the time or money to fix the home enough so that it would bring in current market value. So, we understand that there are many circumstances that might warrant an as-is sale.
Much will depend on what type of loan the eventual buyer is using, unless you exclude those buyers when marketing the home. Let’s take a look at some of the basic repairs you’ll need to make and also those specific to certain loan programs.
You may need to make some repairs, regardless
Aside from several popular loan programs even a conventional lender will want to ensure that the basic safety of the home is up to snuff. After all, the home is the collateral and if it’s about to fall down it’s not worth lending on.
As well, the buyer’s homeowner insurance company may insist on some repairs, especially anything that creates a fire hazard.
So concentrate on the following repairs, if needed:
- Roof leaks
- Loose handrails on staircases
- Holes in the walls and ceiling
- Broken windows
- Pest problems
- Problems with the heating and air conditioning
- Problems with any code violations
The buyer’s loan
The Department of Veterans Affairs has specific requirements for a home before it will lend money for it:
- Mechanical systems – must be protected from the elements, be of adequate capacity, be safe to operate and have a “reasonable” amount of life left in them.
- Heat – the homes heating must be adequate for the entire home and provide at least a 50 degree Fahrenheit room temperature wherever there is plumbing.
- The VA prefers that the home is connected to a public sewer, “if feasible.”
These are the basics that the VA requires.
FHA-backed loans require that all repairs that the appraiser marks as essential be performed before the home closes escrow.
As you can see, an as-is sale, where make no repairs, significantly reduces the buyer pool.
According to the State of Alaska Residential Real Property Transfer Disclosure Statement, homeowners are required to, in good faith, disclose “defects or other conditions in the real property or the real property interest being transferred.” In other words, you are required by law to tell the buyer everything you know about the home that may affect his or her use and enjoyment of the home.
Yes, the buyer may back away, but it’s important that you disclose everything, warts and all.