What Is a fixer upper?
In real estate, a fixer upper is a property that requires repairs, renovations, or upgrades before it can be lived in. They can be had at a lower price compared to brand new or move-in ready homes, and are a popular choice for first time home buyers. As a matter of fact, an overwhelming 82% of millennial buyers say that they are willing to bet on riskier homes such as fixer uppers.
Evidently, there is a market for distressed properties. The question now is, how to reach that market, so here are some tips to get you started.
Useful Tips in Selling Fixer Uppers
Declutter and Deep Clean
Even if you can't afford a new paint job--which costs upward of $2000--pressure washing can work wonders for your façade. Taking the grime and dirt off your walls and along your driveway can breathe new life into your old home.
Washing your windows can let plenty of natural light in, making your house more attractive.
Purge all personal items from every room in the house and stash them in the garage or in storage units if budget permits. Kitchen, bathrooms, and tiled areas must be scrubbed clean and disinfected to get rid of smells that may turn away most buyers.
It's also helpful to keep in mind that potential buyers looking to purchase a fixer upper are interested in making the space their own, so it would be best if you could leave them a blank canvas to paint on, literally! So tear off that aging wallpaper and the ratty old carpeting, so when they come for the open house, they'd easily imagine themselves occupying and decorating the space.
Decide Which Fixes Are Worth It
Generally, if you're going for the widest pool of potential buyers, you'll be including those buyers who are dependent on financing as well. Mortgage lenders are wary of approving loans on fixer upper houses unless all major issues have been fixed such as cracks in the foundation, problems in the electrical system, or a roof that's falling apart.
Arranging a pre-listing home inspection is a great way to find out all the repairs that need to be done on your property.
The resulting inspection report provides you a rundown of all the work your house needs, such as major repairs involving the septic system or the HVAC system, or minor repairs like leaky faucets and broken light bulbs that are ought to be replaced.
From the report, you can easily shop around for contractors who may be able to do the work and ask them for quotations. Depending on your financial situation, you may go ahead and pay for them yourself or pass them on to the buyer.
Do Not Forget Curb Appeal
A home's curb appeal is what gets potential buyers inside the property.
Don't underestimate the effect of a fresh coat of paint on the façade. Throw in some basic yard work and lawn trim, new light fixtures out front, and an immaculate fence, and your curb appeal will surely be through the roof.
Determine the Right Price
As home sellers, it's already given that you want to get the most profit from the sale. After all, it is usually an individual's largest purchase in their lifetime.
However, setting your listing price is a delicate balancing act between aiming to get the most eyes on your property and selling for a price good enough that you'd be able to afford the down payment and moving expenses for your next home, and then some.
Here are a few options you can explore in setting a competitive price for your house:
Comparative Market Analysis
A Comparative Market Analysis (CMA) is a must-do when selling homes and involves checking the prices of recently sold similar houses in the neighborhood (called "comps") to establish a basis in setting the listing price.
As you can see, this calls for plenty of research on your end so you arrive at a price that both you and potential buyers can be happy with. Alternatively, if you hired a real estate agent, they'll be the one to do the CMA for you.
After Repair Value
The After Repair Value, or the ARV is the estimated future value of the property after the repairs have been made. For cash buyers such as investors and flippers, their maximum offers are typically up to 70% of a home's ARV as they will be the one to deal with the necessary repairs and other costs in hopes of selling the house for a higher price down the line.
A home appraisal is a professional opinion on your home's value as performed by a licensed real estate appraiser. An appraisal takes into account the following in establishing the market value:
- Local real estate market conditions: Hot or cool market?
- Neighborhood: Is it in an in demand location?
- Features of the House: Total square footage, number of bedrooms and bathrooms, upgrades or remodels done, and its overall condition.
An appraisal costs between $300-$800, and is an excellent tool in preventing you from underpricing your home and missing out on a lot more money.
Dwell on the Positives, but Don't Downplay the Negatives
Location is a key driver in the appreciation of your property's value. If your house is in a prime location, don't be shy about it! If you could mention nearby establishments in the listing, such as schools, restaurants, parks, and walking trails--that would be extremely helpful.
Additionally, accentuate your home's unique selling points such as an open floor plan, a pool, hardwood floors, a walk-in pantry, and the like in your property listing.
On the other hand, your house has its flaws too. Don't downplay them, rather be upfront and straightforward about what needs to be done to prospective buyers so they can decide whether to take on the project or walk away from the deal.
Don't fret though, for many buyers, getting a fixer upper is the most accessible pathway to homeownership, and in this seller's market, you won't have a shortage of offers.
Options in Selling a Fixer Upper House
Would you like to get top dollar for your fixer upper or would you like to sell quickly? Your answer to this question determines which route you're going to take in selling fixer upper houses.
Let's explore the pros and cons of each:
Higher Price: Real Estate Agents
Selling move-in ready houses, or so-called turnkey properties for the price you want can be tough. Not to mention the whole process is stressful, filled with loads of paperwork, so it's reasonable to expect that fixer upper selling can be doubly challenging.
Hiring the best real estate agents can take a load off your plate. They can help sell your house quickly by:
- Focusing on your home's key features (for example, a sun room or an extended deck) that would be desirable to most home buyers in the listing;
- Performing a CMA so you arrive at a fair price that would attract buyers into showing up for the open house and making offers;
- Connecting you with prospective buyers interested in fixer uppers;
- Offering concierge services so they're also the one to take care of the repairs that would help sell a fixer upper home much more quickly and for more money;
- Staging the house for showings so you get good offers during open houses.
With an experienced real estate agent, they'll be in charge of the whole real estate transaction so all that's left for you to do is decide whether or not you'll accept the offer of a potential buyer.
Hold up, that sounds awfully convenient...
So What's the Catch?
The convenience that working with a professional real estate agent affords you doesn't come free. You have to give them a piece of the pie, about 6% from the sales price, split between your listing agent and the buyer's.
On top of this, you'll have to pay for the closing costs: title insurance, loan origination, attorney fees, and so on--shaving off another 3-6% from the selling price.
In going this path, therefore, expect to walk away with approximately 90% of proceeds from the sale of your fixer upper.
Quick Sale: Cash Buyers
In order to sell fast, you'd need to find a special type of buyer. This buyer is not dependent on a loan approval from mortgage lenders nor on the sale of a previous property, and is willing to take on the challenges of a fixer upper house which can include costly major repairs.
House flippers, investment buyers, large- and small-scale landlords, and "we buy houses" companies are among the buyers that fit the profile. Selling a fixer upper home to a cash buyer is the fastest and simplest way to unload this problem property.
You don't even have to call for an inspection nor do even a little cleaning--just pack your stuff into boxes, hand over the keys to your house, get the money, and move on with your life. It's that easy.
But What's the Catch?
Well, since possible repairs and home improvements are priced in, the tradeoff is selling for a lower price, usually below fair market value . But with the time, money, and energy saved, along with the certainty of the sale pushing through, selling your fixer upper house for cash can be worth it.
Remember, spending money to fix the house yourself gives no guarantee that you'll be able to make back what you have invested.
Frequently Asked Questions: Selling Fixer Upper Homes
What Is the 70% Rule in Real Estate?
Most real estate professionals, such as investors and house flippers operate on the so-called seventy percent rule in deciding whether the purchase of a property is a good deal or not.
According to the rule, an investor pays no more than 70% of the property's After Repair Value, or ARV, less the amount of money it took to complete said repairs.
For instance, a house has an ARV of $300,000 with repairs costing an estimated $40,000. The investor would pay no more than 70% of $260,000. Therefore, the offer would be a maximum of $182,000.
Keeping this rule in mind is extremely helpful in managing your expectations in selling fixer uppers.
Is It Possible for Home Buyers to Finance Both the Renovation and the Purchase?
Yes, there are financing options available to fund renovations for buyers with good credit scores. Both the purchase and the repair costs can be rolled into a single mortgage, called a renovation loan.
Many buyers are looking into this type of financing, and are primarily drawn to getting a fixer upper because a renovation could increase the value of a house, allowing them to build equity faster.
Some home renovation loans that buyers could look into include the following:
- FHA 203k Home Renovation Loan - as long as the house meets certain safety standards (i.e. it's not just a pile of rubble in a vacant lot), you'll typically be good to go for this type of loan;
- Fannie Mae Homestyle Renovation Loan - this is a type of loan from Fannie Mae, a government-backed company, is specifically geared towards transforming an old house back to its former glory;
- VA Renovation Loan - if you or your spouse is a member of the military, you may be able to qualify for this two-in-one loan.
Closing Thoughts: How to Sell a Fixer Upper House Fast
Fixer upper houses can be diamonds in the rough. In spite of the (sometimes) beaten-down exterior, with a few choice renovations and repairs, these houses can have tremendous resale value.
In selling these types of properties, the task for you as a seller is to help potential buyers look beyond its imperfections and envision the potential that your property holds. Investing in a professional cleaning service can be worth it in creating a clean slate for your buyer; but if you're wary of spending money upfront, tapping into your own sweat equity could do.
Then again, we understand that not everyone has the time and money to spare for cleanups and repairs. Here at House Buyer Network, we can immediately connect you to cash buyers who might be interested in buying your house as is, in three simple steps:
- Fill in our form below with your details
- Wait for our call with the cash offer (within 24 hours!)
- If you like it, you get paid everything that's on offer, and we close on the date you choose!
We're here to help you sell your home without the drawbacks and fees of working with a real estate agent. As a bonus, we even cover all closing costs!
Interested? Give us a call at (855) 835-2544 to know more about our process.