3 Misconceptions of Buying an Indianapolis Rental Property As-Is””
For Indianapolis real estate Investors, there are many factors to consider when analyzing a deal.
A factor you may or may not have considered, is if a property is being sold as-is.
At some point, those two little words may have raised a red flag in your brain to run the other way, and understandably so.
If you’re not super familiar with real estate investing, that can certainly seem like a risky move.
But I’m here to share some insight into these types of deals and hopefully put some of that concern to rest.
Here are the 3 biggest misconceptions about buying a property “as-is” that many buyers seem to have.
1) There must be something majorly wrong with the property
It seems that most Investors’ gut reaction to hearing “as-is”, is that there is a major problem that they have to be concerned about.
I see this time and time again, and it’s often caused buyers to completely shy away from a deal, even if it checks all of their boxes.
I can certainly understand this initial feeling, especially for newbies. However, there are various reasons a seller may want to list a property “as-is” that go beyond major defects.
It usually comes down to a seller not being able to financially afford any repairs or they simply just don’t want to deal with the hassle of coordinating contractors and potentially delaying closing for the work to be completed.
More often than not, a seller will decide to list a property as-is because it’s just an all around quicker and more streamlined process, not because there’s a huge problem and they are trying to off load it.
Of course, that certainly can be the case, but regardless of as-is or not, the seller is obligated to disclose any major defects that they are aware of.
2) No inspection contingency
Another huge misconception that buyers seem to have about as-is purchases, is that they don’t get any sort of inspection contingency.
This is absolutely NOT the case.
Even for as-is purchases, we always advise having an inspection, and there is an addendum that you can include with the Purchase Agreement that provides protections for you.
In fact, I would almost venture to say that the verbiage in the as-is addendum provides more protection than the typical inspection contingency clause.
In the as-is addendum, you can select a certain period of time, most commonly 10-14 days, in which to have an inspection and if any previously undisclosed major defects are uncovered, you have grounds to back out of the deal and get your earnest money back.
Just as the seller isn’t obligated to address any repairs, you are not obligated to try and negotiate which is the main difference between a regular and as-is inspection contingency.
The verbiage in a regular inspection contingency requires you to try and work with the seller to remedy any issues before you can be released from the contract.
3) There’s no chance to negotiate
The third and final most common misconception that I’ve encountered is the notion that “you get what you get and you don’t throw a fit”.
You will most definitely deal with sellers in an as-is sale that won’t be willing to give an inch. However, more often than not, we’ve found that many are willing to negotiate after the inspection, depending on what comes back on the report.
While repair requests may be off the table, other concessions certainly are not.
We have successfully negotiated price reductions, credits, closing costs, etc. in lieu of the seller conducting any repairs which usually ends up working out better in a buyer’s favor anyway.
The bottom line is, by the time you’ve made it to the inspection phase of a purchase, everyone has time invested and sellers know it’s risky to assume they will be able to find another buyer quickly and who won’t ask for the same concessions.
Chances are, once certain things are uncovered in an inspection, the seller will realize that they will show up on every inspection there after, and it will have to be addressed in some fashion if they ever want to sell the property.
This can give you leverage as a buyer in most cases, even in an as-is purchase.
Using “As-Is” as a Buying Tactic
As we have discussed in depth in past blogs, the Indianapolis real estate market is incredibly competitive.
Home prices are higher than ever, and there is no shortage of investors or owner occupants looking to buy.
Because of this, we have to get creative with our offers to make them stand out and more appealing.
One tactic we use to accomplish this is making it an as-is offer, even if the property wasn’t listed that way.
If it comes down to 2 very similar offers and one is as-is and the other isn’t, chances are the as-is will be much more appealing to the seller.
Will You Consider an As-Is Purchase?
Hopefully this blog has given you some insight and perspective when it comes to as-is purchases.
We help our clients navigate these deals on a regular basis, and I personally don’t feel that they come with anymore risk than other real estate purchases you will go through.
The key is having an experienced Agent you can trust.
If you have any questions about as-is purchases, or investing in Indianapolis, we would love to speak with you!