How Much Do You Lose Selling a House As-Is?
Selling a home as-is has its advantages. You get to avoid negotiating with the buyer regarding repairs and you save time and energy getting the house up to code. However, we cannot get away with the fact that you won't net more money when you sell as-is.
We cannot say exactly how much you'll lose when you sell your house as-is. But what we know for sure is that there are four factors that impact this amount which include the type of buyer, the home's condition and location, and current market trends.
While it seems that selling as-is is not a wise financial decision, it actually is if you factor in all the expenses of repairs, staging, and marketing your home. To learn more about this, check out the rest of this article!
What is Selling a House As-Is?
Selling a house as-is means the buyer purchases it without requesting any repairs from the seller. In other words, the buyer accepts the house in its current condition no matter how bad it is (water-damaged, fire-damaged, mold-infested, leaking pipes, etc.) and without any warranties.
An as-is sale is the exact opposite of a traditional home sale where the seller is expected to spruce up the house, make repairs, and enhance its curb appeal before listing. Instead, it would be a "what you see is what you get" type of sale.
This doesn't mean however that the seller won't disclose any known defects of the property. If the house is situated in a disclosure state, any issues in the property that can impact its desirability and value should be disclosed to avoid legal implications.
The buyer also has the right to have the property inspected according to the purchase agreement.
If for instance, the buyer discovers a material issue that is not previously known or you intentionally kept, they may use it to renegotiate the asking price of the property or in the worst cases, walk away from the sale.
This leads us to one of the most crucial steps when selling as-is— have the home pre-inspectedso you can disclose any defect to the buyer and gain their confidence through an inspection report. Otherwise, you will be leaving money on the table.
What Are the Benefits and Drawbacks of Selling a House As-Is?
Just like a traditional sale, selling a home as-is has its benefits and drawbacks. In this section, we'll look into these pros and cons to further weigh whether the amount you'll lose in the sale is acceptable.
Benefits of Selling As-Is
No Repairs
The main benefit of selling as-is is that you get to avoid minor repairs as well as major ones. Home repairs can easily cost thousands of dollars depending on the defects or damages. You would also wait weeks or months to accomplish this.
Sure, you can DIY some minor repairs, but if your house has major issues like a damaged foundation, failed septic system, asbestos, lead paint, etc., doing repairs can really be stressful. When you sell as-is, the buyer would be responsible for all the repairs.
Save Money on Repair Costs
As mentioned above, repairs cost thousands of dollars. But aside from the cost of repairing damages, you also have to stage your house for a conventional sale. These expenses won't be a problem when you sell as-is.
Faster Sale
Once you found a buyer for your house, you would be able to sell quickly. This is because you won't be waiting on any repairs before closing. You can also avoid lender-required repairs.
Drawbacks of Selling As-Is
Sales Price is Below Market Value
The selling price is the major con of selling as-is. You won't be able to sell above market value since your house isn't in great condition. Nevertheless, selling for less may be worth it given that you'll skip all the repairs.
Fewer Potential Buyers
Only a few retail buyers would get interested in your house if you sell as-is in the local market. Most buyers want houses they can readily move into.
Risky Sale
Retail buyers are often scared or unsure of purchasing as-is houses so the real estate transaction may fall through.
Factors That Affect How Much You'll Lose in an As-Is Sale
There's no simple computation that can give us the exact money you'll lose when you sell as is. There are so many variables that come into play and the best way to get a rough estimate is to look into these factors.
The Type of Home Buyer
There are two common types of buyers that buy houses as-is: retail buyers and investors or cash buyers. These two types of buyers have different motivations for buying so the amount of money they'll pay also differs.
Retail Buyer
A retail buyer is someone who aims to buy a home to occupy it. They are more suspicious of an as-is house specifically of the issues that they may discover once they bought it.
Several years ago, retail buyers were very enthusiastic about purchasing as-is houses at a very low price due to instant equity. However, the local market keeps on changing and today, more and more retail buyers prefer homes that are in great condition.
Although there are prospective buyers who are interested in as-is houses, they are very limited.
Cash Buyer or Investor
The primary goal of cash buyers, investors, house flippers, or cash offer companies in purchasing houses as-is is to flip them to become investment properties. Before cash buyers put in a final offer, they have already calculated the risks and their profit margin.
Generally, the type of investor also impacts how much you'll lose on the sale. Long-term investors or cash buyers, those who buy and hold the property until it appreciates in value, tend to pay more because they'll see more profit in the home's equity.
Meanwhile, short-term investors, those who flip and sell right after, tend to pay less because they only rely on after-repair value. Once the seller accepted the offer, they proceed to repairs, and sell without growing equity.
The Location of The Property
Location is also another crucial factor that dictates how much you'll lose or gain in an as-is home sale.
If the house is situated in a desirable location, perhaps near the ocean, a famous school, or a busy shopping district, you can sell the house close to market value even if you do not make any repairs.
The reason behind this is that retail home buyers know they'll benefit from living in the house in such a location. For cash buyers, on the other hand, a home's great location promises high ROIs even though the house is close to being condemned.
The Home's Condition
Generally speaking, you'll lose a lot of money if you sell a house that needs major repairs compared to a house that only has minor defects.
If your house has major repairs, the time and effort needed in fixing it are quite significant. Hence, when it is deducted from the sales price, you'll see quite a loss.
Houses that need major repairs are typically purchased by cash buyers because they are able to make more profit from them after repairs.
Market Trends or Market Conditions
If you are selling in a hot seller's market, the price gap between conventional homes and as-is homes disappears. Home buyers aren't that picky because there are fewer houses in the market. They set aside their apprehensions and put in offers for as-is houses.
How Much Do You Lose Selling a House As-Is?
Considering the factors we mentioned in the previous section, we can say that you'll lose around 5% to 15% of your home's value at the very least when you sell as-is. Offers are typically between 75% to 95% of your home's after-repair value.
There's no exact science here so you have to reach out to more potential buyers or investors if you want to get the best market price for your house or rental property.
Is It Worth Losing Money Selling a House As-Is?
In most cases, yes. It is worth losing money when selling a home as-is. Remember that the cost of repairs or home improvements is deducted from the offer.
That means that even though you'll lose money selling your home, you would no longer have to work with a contractor, move out while repairs are being made, make decisions on huge and minor details, spend a huge amount, worry about whether the repairs got the house up to code, etc.
Other Fees Associated With Selling As-Is
Selling a house in the real estate market, whether as is or not, means paying the closing cost and seller fees.
So aside from the value you'll lose due to unrepaired damages, you'll also spend on a title search, transfer fees, inspection, appraisal, legal fees, etc.
If you still haven't paid off your mortgage, it would also be deducted from your net proceeds.
Closing Costs
According to Bankrate, the average closing cost for home sellers is $6,837. Note that this is different from the realtor fees that you pay to your real estate agent.
Here are some of the most typical closing fees for a home seller:
- Title Search: $300 to $600
- Title Insurance: $550
- Escrow Fees: $350 to $1,000
- Transfer Taxes: Varies
- Attorney Fees: $150 to $500
- Pre-Listing Home Inspection: $300 to $500
- Appraisal: $450 to $650
- Recording Fees: Varies
Mortgage Payoff
If your home has enough equity and the repairs are minor, you can still sell at a fair price and there won't be any issues paying off your mortgage. But if your house has negative equity and also has major damages, you would be in a difficult financial situation even after the sale.
How to Sell Your House As-Is
Just like traditional home sales, there are two major ways to sell your home as-is: selling to a cash buyer or listing with an agent.
Sell Your House As-Is to a Cash Buyer
Selling as-is for cash is the go-to of many homeowners especially if major repairs or major renovations are needed by the property.
As-is home sales through cash buyers are a lot faster and hassle-free because there is no mortgage lender involved. The cash buyer can pay cash to as-is sellers so the sale has a flexible timeline. It can even close in 7 days because it's a business from the investor's perspective!
Here are the general steps in selling as-is to a cash buyer:
Get a Cash Offer
It's fairly easy to get a cash offer. You just have to check out the cash buyer's website and fill out a form usually found on the top or bottom of the home page.
If you are more comfortable talking to the buyer, you can give them a call to get an offer. Note that you can ask for a lot of cash offers and weigh which ones offer the best price.
Welcome the Cash Buyer into Your Home
A home walkthrough is necessary to assess the current state of your home. This is somehow similar to a home inspection but less stringent. The cash buyer won't require you to make repairs after inspecting your home. They only do this to come up with an accurate cash offer.
Sign the Purchase Agreement
Once you've agreed on the best cash offer, the cash buyer would send a contract electronically that you have to read and sign. Of course, they'll allow you to ask questions regarding the terms before signing.
Close on the Sale
After signing the purchase agreement or contract, the sale would move forward to closing. In this stage, expect to sign some paperwork to transfer the legal ownership of your house to the cash buyer. After this, the money would be transferred to your bank.
Sell Your House As-Is With a Real Estate Agent
Selling your house as-is with an agent means listing in the local real estate market. Although you would skip repairs and staging, this home sale can still take some time because there are only a few retail buyers interested in as-is homes.
Here are the crucial steps when selling as-is traditionally:
Set a Sales Price
Setting a sales price for your property is a bit tricky since you cannot sell at your home's standard market value or at a higher price.
The good thing is that real estate agents are experts in pricing. They'll set a price that still holds substantial value, but doesn't scare away potential buyers. This will be based on comps or the value of the same house in the area.
Consider Necessary Disclosures
While disclosure isn't always required, this may be necessary if you want to gain a buyer's confidence. Your real estate agent will guide you on what disclosure documents to fill out. Many mortgage lenders also look into disclosure so doing this gives you an advantage.
Plan a Selling Strategy
Together with your real estate agent, you have to work on a suitable selling strategy for your as-is home.
As mentioned, these types of houses are harder to sell in the open market since more and more buyers want move-in ready homes. Thus, you have to ensure that your selling strategy would convince them that it is worth making repairs.
List in the Real Estate Market
Listing in the open market also needs a lot of work because you have to make a catchy description to attract more buyers. This is where most home sellers fail. Their listing description scares buyers away because it doesn't highlight anything good in the property.
Also, they fail to make professional photos look as if the property is worth buying.
Final Thoughts: How Much Do You Lose Selling a House As-Is?
Many homeowners fear selling their homes as-is for fear that they would lose too much. But to be honest, many buyers pay almost the same amount for an as-is home, especially in a hot seller's market.
And even if the offer price is low, we can't discount the fact that it's a lot less stressful to sell when the burden of repairs is lifted from our shoulders.
If you are ready to sell your home as-is, connect to us at House Buyer Network. We'll give you a fair cash offer so you still get the best value out of your home.
Call us at (855) 835-2544 or fill out our form below to start selling your home as-is.
