Don't be afraid of 'as-is' listings

The Wall St Journal has an article regarding houses sold 'as-is'. Some people may be afraid that listings marketted 'as-is' are done so because they have some major problems.

That is not always the case. If the listing is by a homeowner having a hard time paying his mortgage and possibly fearing foreclosure, it could just be that they don't or can't put the money in to rectify any deficiencies if there are any. There may not be, the seller is just letting you know that any repairs are your responsibility.

There are also many bank-owned properties (REO's) on the market. And as we've seen before, banks tend to let many properties sit unmaintained, not even bothering to have the lawn mowed. They don't want to be responsible for making any repairs on the house. With an REO, the house has most likely been unmainted for up to a year or more. During the time the borrower defaults and through the foreclosure process, which takes many months, the borrower has no incentive to keep the property maintained in this market. A couple months later after the bank takes posession, they also have no desire to do anything to the property.

As-is doesn't mean there's something wrong with the property. It just means if there is the seller won't do anything about it. The house could be in pristine condition or it could be in need of some major repair. You should find out as much as you can about a property before making an offer. With foreclosures, it may be difficult to actually inspect the home, but with REO's the process is similar to purchasing any other listed house.

With REO's though, disclosure may not be as straight forward. If you look at a typical NJ disclosure form, you'll notice most of the questions start with "Are you aware..." in the case of the banks which might not have ever stepped onto the property, they're obviously not aware of many things that might be wrong. Without a first hand knowledge of the property, banks aren't expected to know as much about a property as a seller that actually lives in the house.

Many listings out there will be sold 'as-is' so don't be afraid of the term, just understand it and do your homework.

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Buying REO is no cakewalk