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For many of us, fixer upper properties are the foundation for building wealth in real estate. Finding a good fixer-upper is one thing, but making sure we are getting what we pay for is something that often doesn’t always receive the same attention as the search process does.
Continuing with the Due Diligence series and following the outline from “Real Estate Investing for Dummies,” we now look at the “as-is” sale. The due diligence period is the time between the acceptance of the offer and the close of escrow, when the buyer must find out all they can about the physical and fiscal condition of the house. The purchase agreement should contain a number of contingencies that allow the buyer and seller the opportunity to cancel the transaction if certain things aren’t satisfactory.
Why Houses are Sold As-is
Some sellers try to sell their houses “as-is” to avoid disclosing any deficiencies in their house. They think that they don’t have to correct problems in the property during the due diligence period, and are not responsible for anything that crops up after the sale. They erroneously believe that their technique to dodge responsibility makes them legally bullet proof. What they don’t realize is that the as-is strategy actually only offers minimal protection to the seller. They may still be held responsible for misrepresentation, fraud, or negligence.
When you come across a house being sold as-is, a red light should start flashing in your mind. You could be dealing with a seller that is dishonest and trying to hide significant problems that would reduce the value of the house. A house offered as-is at an unusually low price may give you a headache for a long time to come, with no relief on the horizon.
Honesty the Best Policy
When you are selling a property, don’t attempt to hide anything from the buyer. For your own peace of mind, and to avoid long court battles, disclose everything of importance, and share copies of any invoices an reports that reflect on the value of your house.
An Early Experience with an As-is Seller
I once made an offer on a house that was listed “as-is.” At the time, it didn’t bother me that that the seller wasn’t disclosing everything. It would today though. But, what bothered me more, and set off alarms in my mind, was the egotistical attitude of the seller. He wasn’t willing to make any concessions and or negotiate anything. Everything had to be done his way. I was an inexperienced investor, but my sense of smell worked alright, and I could smell a rat. I think that the seller offering the property as-is was an insight into the whole self-centered attitude of the seller.
As you know, I prefer an open and friendly approach to negotiating the purchase of a house, as described in earlier posts with the “suppose that… technique” in House Buying Negotiating Techniques, and the Detective Columbo “just one more question” technique in Start Small Profit Big in Real Estate.
While I liked the property, my suspicions made me pull out of the deal. The seller blew up. I guess he had already started counting his money. He angrily told me that if I had signed a contract, he would have held me to it no matter what. I thought to myself, “I sure am glad I decided not to do business with this guy. If he harbors this much anger for someone he hardly knows, who know what lies he would tell to sell a house?”
NEXT UP: TACTICS SELLERS USE TO AVOID INSPECTIONS
How to Completely Remodel a Kitchen for Under $4,000
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