Mortgages & Home Loans Real Estate Resources What to Know About Buying a Short Sale Home Sold in 'As Is' Condition By Elizabeth Weintraub Elizabeth Weintraub Facebook Twitter Elizabeth Weintraub is a nationally recognized expert in real estate, titles, and escrow. She is a licensed Realtor and broker with more than 40 years of experience in titles and escrow. Her expertise has appeared in the New York Times, Washington Post, CBS Evening News, and HGTV's House Hunters. learn about our editorial policies Updated on June 30, 2022 Reviewed by Lea D. Uradu Reviewed by Lea D. Uradu Lea Uradu, J.D. is graduate of the University of Maryland School of Law, a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, Tax Writer, and Founder of L.A.W. Tax Resolution Services. Lea has worked with hundreds of federal individual and expat tax clients. learn about our financial review board Fact checked by Leila Najafi Fact checked by Leila Najafi Instagram Twitter Website Leila Najafi is a luxury travel and lifestyle writer and editor with over five years of experience covering travel rewards programs, destination and buying guides, and more. Leila's writing has been featured in NBC News, Thrillist, Fodor's, 10Best.com by USA Today, HuffPost, Eater LA, and Reader’s Digest. learn about our editorial policies Photo: Feverpitched / Getty Images You can get a great deal on a short sale home that you agree to buy in "as is" condition. But before you sign on the dotted line, you have to consider whether the risks involved are worth the money you'll save. A short sale occurs after a mortgage lender agrees to a transaction that nets it less money than it is owed by the borrower. Because the bank is already losing money on the sale, it won't be willing to make any repairs the buyer would typically request after having a home inspection, even those that are issues of health and safety. That's why the house is sold "as is," meaning its current condition or the condition it was in when the buyer first looked at it. Short Sale Example In a short sale, the amount forgiven by the bank may exceed 50 percent of the unpaid mortgage balance. The bank is willing to sell at such a discount if property values have fallen by that amount and the bankers know that's the best they can hope for. The costs of the sale are deducted from the sales price. Let's say a home with a $150,000 mortgage balance is sold in a short sale for $100,000. If the commission, title and escrow fees, property taxes, and all of the additional costs of the sale total $10,000, for example, the bank will receive $90,000. If the bank were to authorize repairs, the cost for them would be deducted from the $90,000, netting the bank even less. Repairs Priced In Many banks price short sale homes a bit below market value to allow for unexpected repairs. So if you're considering buying an "as is" short sale home, the cost to make some necessary repairs might already be figured into the price. Instances When the Seller May Make Repairs On rare occasions, the seller in a short sale may be willing to foot the bill for certain repairs. But you should also realize the bank's arm's length agreement may prevent them from doing so. An arm's length agreement is signed by the seller and buyer to prove they aren't related and have no business arrangement and so aren't trying to trick the bank into a short sale that benefits the seller and buyer but shortchanges the lender. This agreement could also prevent the buyer and seller from negotiating the correcting of even small repairs without the bank's consent. Some contracts stipulate that the seller is to deliver the property to the buyer in the same condition as when the buyer first viewed it. If something happened—say, the roof started leaking—it's not in the same condition anymore. To hold the transaction together, the seller might agree to fix the roof. But it's not required—or even permitted—in many instances. Federal Housing Administration loan requirements state there can't be any peeling paint in a home built prior to 1978 due to health concerns about lead paint. A buyer will not get a loan if the appraiser notes peeling paint. The seller might scrape and repaint the areas where the paint was peeling if they want the transaction to close. Health and Safety Issues Mold in the basement. Lack of a fire-rated door between the house and garage. A bathroom exhaust fan that vents into the attic. All of these are health and safety issues. But are any of them big enough to be a deal-breaker? Some health and safety issues that come up during an inspection are severe, and others are mild. Some deal with code violations that could be grandfathered. When buying a short sale home in "as is" condition, the bottom line is deciding whether the concerns that came up during your inspection—and the risk associated with problems that could crop up after you've moved into the home—are offset by the low sale price of the home. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. United States Environmental Protection Agency. "Real Estate Disclosures About Potential Lead Hazards."