February 8th, 2010 by Michael Oliver

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Not Always Is "AS-IS" What You Think

This is a topic that comes up all the time. Many times buyers are worried to buy a foreclosure or bank owned home(s) in Tucson because the home states it can only be bought “AS-IS” and they want a home that has little to no problems. For that reason they don’t look at foreclosures, and many times spend a lot more for a comparable home that isn’t a lender owned or foreclosure home where repairs can be asked for and granted…

But what if I were to tell you these “AS-IS” sales are not anything (in most situations) as they sound? Would you then be willing to take a look and save a lot of money?

-Now there is some disclosure here a lot of this depends on the skill of your Realtor and their understanding of the foreclosure process as well as their negotiation abilities.

-Second item worth mentioning if your Realtor is also the listing agent on the foreclosure or even out of the same brokerage 99% of the time they are not going to go to bat for you and risk upsetting their client the bank. These banks/lenders in many situations give that agent/ brokerage 100’s of listings a year! Simply put your 1 home purchase isn’t enough business for them to take the hard stance needed to risk losing millions of dollars in future commissions from the lender’s portfolio of foreclosures they handle.

So what can you have/get repaired?

Honestly there is no answer to this its a pure negotiation between the buyer and the seller. I have personally had banks fix thousands and thousands of dollars worth of items to where the buyer was almost buying a brand new home. A lot of times I find super BUYS on homes that no one else knows about in the market for my clients because the listing says the bank won’t accept certain types of financing that most buyers have. (Most specifically FHA loans for First time buyers)  The reason is these loans have provisions in them stating the property must have basic “livable conditions” (safety, mechanical, and/or home features) and if the property doesn’t offer them the financing can’t happen. Those buyer’s agents (a Realtor who is representing a buyer) (as well as their clients) just assume since the home doesn’t meet their clients financing (loan) needs and with the listing strictly stating “NO REPAIRS” why bother showing it or getting involved?

The reason is this:

Many times (not all the time but a high percentage of it) I can (with a proper explanation to my clients so they know what to expect) not only show the home, but also negotiate a great deal on the home for the buyer. Then after we do inspections push for the repairs we must have done for the buyer to close on the property. This nets the buyer a great deal up-front, AND the repairs needed to obtain the financing. (Not to mention new items a lot of regular sellers cant/ wont do but a billion dollar bank will have no problem approving. Such as new roofs, Mold Remediation (super expensive) and other fixes that might be needed.)

The reason I can negotiate a great deal of a home and then get repairs approved?

The first (getting the great deal) is because these types of homes rarely get shown if its in a first (1st) time buyer price range and the home isn’t in good enough shape to obtain FHA financing which I would say 95% of first time buyers use then the home has knocked out 95% of its potential buyer pool….. The banks know this and also realize that they are more then likely going to have to drop the price significantly to encourage a cash investor or buyer who can get the proper financing to buy the home. Investors don’t pay much for homes that need repairs so they would rather be willing to work with a buyer who understands the risk of buying and sell the home for a little more then they would have to sell to the investor.

Once the home is inspected and repairs are asked for usually the hard part begins. Banks do not want to fix any of their homes ever! They want to just unload them, however they also don’t want to place the home back on the market and have to re-sell it. -OR- sell it for less then they can just make the repairs for and sell it now for.

So how do you get the repairs made by the bank when they don’t typically do that? At this point it basically comes down to your Realtors negotiation and deal making abilities and the banks willingness to also make a deal work.

As a Realtor you have to know the market extremely well, you have to know what repairs generally cost, what items the buyer’s lender is going to need fixed for the loan to go through, how to make the case for these items to be fixed, and how to “sell” the bank on why it is a great idea to do what your buyer needs so they can get rid of the home and the buyer can buy it. To be honest this is not a type of sale for anyone but a seasoned and experienced Realtor to handle. Furthermore buyers must realize they are trying to buy a home in a manner banks don’t normally sell them in. That is to list, sell, then fix-up and then close the sale. However if you as a buyer are willing to try this process the savings can be serious many times foreclosures sell for 20% (or more) off of market value! Then add in the cost of the repairs you can get many times and the discount is very appealing especially for first time buyers. Look for a total of 20%-40% off of market value with the right home and negotiation applied using this strategy.

AS-IS sales, Buying a Foreclosure, Tucson Foreclosures