While navigating the NYC home buying process there are numerous expressions and nuances that you’ll encounter. One of these that you’re sure to come across is the term “as-is.” This wording in a listing description means the buyer must be willing to accept the property in its current condition. In effect, this means that you’ll be forgoing any opportunity to request repairs from the seller. Obviously, this makes it look like a risky purchase. No one wants to pay top dollar for a property only to find out later it has major problems that will require expensive repairs. That said, purchasing a property as-is can also be a golden opportunity for a bargain. To help you decide, here are some considerations you need to make before buying an NYC property as-is.
What does “as-is” mean?
As stated, a property that’s being listed in “as-is” condition means that what you see is what you get. The seller’s reasons for this may be that they don’t have the funds to do repairs. Another reason is that time could be a factor. They just want to get it off their hands as soon as possible for whatever they can get. By New York State law, any issues with the property that the owner is aware of must be fully disclosed. However, they are not required to do an inspection that might uncover other defects that they are not aware of. Sellers can also forgo making any disclosure by instead paying a $500 fee on closing day, a decision that many “as-is” sellers chose to go for.
All this is true when purchasing a resale. But if you’re buying a new development, you’ll have guarantees from the owner that it will be free of defects for a certain period of time as per the offering plan. The same applies when buying a co-op or condo. But if you’re buying a full building, such as a townhouse, brownstone or single-family home then any defects will be entirely your responsibility once the transaction is complete.
Common problems that you might encounter in an “as-is” home include:
- Structural problems
- Leaking or faulty roof
- Termites or other pest infestations
- Non-functioning systems such as HVAC, plumbing or electrical
- Mold or mildew problems
It should be clear by now that purchasing a home as-is can be a serious risk. But if you take the right precautions you can lessen that risk.
How can you protect yourself?
The best protection you can give yourself in purchasing an as-is property is by insisting on a home inspection contingency. If the seller refuses to allow this then that is a good reason to suspect they know something is wrong. Getting an inspection will allow you to see what they mean by “as-is.” It could turn out that everything is in good shape and the seller just wants to forgo any long drawn-out negotiations. They simply want you to see it for what it is and make an offer based on that.
If problems are encountered, then so long as you have the inspection contingency in place you will be able to exit the deal and get your down payment back. Even if you’re willing to purchase a property that is in need of repairs you may run into trouble if you require financing. Mortgage lenders typically require hazard insurance to ensure against the collateral. If there are major defects in the property such as roofing or electrical then the insurance company may not approve the loan. Properties in need of extensive repairs are usually only dealt with by all-cash buyers.
Provided that you are represented by a buyer’s agent, it’s still possible to renegotiate the contract if issues are found. For example, you, the buyer, have been allowed full due-diligence after the signing of the contract. The inspection later finds termite damage which the seller was not previously aware of. Now that they know this, they will be obliged to fully disclose it to any future buyer. In this scenario, it would make more sense to negotiate with you as you’ve already shown that you’re a serious buyer.
Purchasing an as-is property presents risks but these can be mitigated with the right precautions. The foremost one is to have an inspection contingency clause included in the contract. Next will be having an experienced real estate agent by your side who can advise and negotiate on your behalf. Make sure you know what you’re getting and that you’re fully prepared to do what repairs are needed once you become the owner.