Selling a House That Needs Repairs
Here are the steps to sell a house: list it, wait for buyers to come up with their offers, agree on one offer, and finally close on it. Money and property changes hands, and that's about it.
Ideally, that is.
But things in life aren't so clear-cut and straightforward. If you're like most homeowners, you probably owned your home for about 16 years.
Some issues may have come up in all the years you've lived in the property. You may have addressed it, or postponed the repairs to a later time. Unfortunately, if you have opted for the latter, these issues--they compound. They could quickly spiral out of control until it's too costly for you to fix them so you have no choice but to sell the house.
But who's going to buy a house in disrepair? Is there a way you could turn this situation around?
Fortunately for you, there's a way out of this situation you have found yourself in. You can sell your house as is, and we'll walk you through the whole process so you'd know what to do.
What Does It Mean When Selling a House as Is?
When you sell as is, it means the buyer gets the house exactly as it is--missing shingles, falling gutters, overgrown yard--the works, or rather, the lack of. Selling a house as is absolves you from guaranteeing that your house is in good working condition. It provides you with an out from doing repairs, allowing you to dispose of your problem property so you can move on with your life.
But what if your home's resale value is a tiny fraction of how much you got it for...
Should You Undertake Home Repairs, or Still Sell a House as Is?
There are lots of factors to consider in choosing between repairing the house first, or selling as is. Generally, if you aim for getting top dollar, then you should fix the property first.
To help you along, you have to ask yourself these questions:
Do you have the time to do the repairs before you sell your house?
Most buyers looking to purchase homes do so in spring, although it can still vary depending on local housing market conditions. If you choose to do the repairs and sell during the peak season, give yourself ample time to vet contractors, get quotes, and complete the works required.
Otherwise, if you're in a rush, you can forego the repairs and just sell your house as is.
Do You Have the Funds for Making Repairs or Upgrades?
Assess all the repairs your house might need. After arranging a home inspection, the inspector will be able to determine whether your house calls for extensive repairs or not, and you'll be able to plan your budget around it accordingly.
Alternatively, if you're short on funds, you can look into FHA loans and check whether you qualify.
A thing of note though: although you'll definitely be able to get a much higher sale price for your home if you perform repairs or upgrades first, there's no guarantee that you'd be able to completely recoup this upfront cost.
Ultimately, it's the market that decides how much you'd be able to sell your house for, so if this sounds like a bet you're not willing to make, you can just sell your home in as is condition.
Is Your Home in Critical Need of Repairs?
To entice potential buyers, the prospect of upgrading the kitchen or remodeling the bathroom can be immensely appealing to you. However, you have to be strategic about where you spend your money on.
For instance, if your house has a leaky roof, broken water heater, or other issues that present safety concerns, then you're better off spending those dollars rectifying these.
Leaving these issues unattended is akin to giving your potential buyer a powerful tool in the negotiating table, possibly shaving off a not-insignificant amount from your asking price.
If you can't afford making these major repairs, then consider selling as is.
How does your house stack against other recently sold properties in your area?
Majority of homes across the United States are between 20 and 31 years old, which means plenty of listed homes could do with some home improvements such as a deck, or a new stone sidings.
However, lots of houses still get sold without the home sellers doing anything to the property. If anything, this could be better for the buyer as they'll be purchasing the equivalent of a blank canvas and they'll have the freedom to transform it into their dream home.
Pay attention to the real estate trends in your neighborhood--sometimes putting in additional time and money for renovations may not be worth your while.
Are Buyers Going to Be Interested in a House That Needs Repairs?
According to the National Association of Realtors, only 41% of potential buyers are looking to avoid renovations when buying a home. If you look at the other side of the coin, this means 59% of buyers wouldn't mind doing home repair projects! That's a significant swathe of the buyer pool, so you definitely have a market for it--you just have to find a way to reach them.
But everyone's online nowadays with the number standing at a staggering 92% of the US population. What you have to figure out is how to reach the right buyers, and the first step in doing that is knowing what type of buyer is going to be interested in purchasing a home as is.
Buyer Profile #1: The Deal Hunter
Who they are
Deal hunters are savvy individuals looking to get a house on the cheap and don't mind the work required to get it. They may be first time home buyers who are undaunted at the prospect of getting a fixer upper--some may even relish the challenge of restoring a house back into its former glory. They can be financed buyers eligible for FHA loans, or those unable to tap an existing equity for a down payment, so they're looking to stretch the dollar as much as they can.
How they work
Unlike traditional buyers who are fully dependent on their real estate agent, they're keen DIYers, who do their own research so they can get their dream house for less money than they expect to spend.
If they're working with a realtor, they're likely to request listings that require some form of work, which can be had at a lower price point.
What they value
Since this type of buyer will live in the property, and therefore do not expect it to generate cash flow, they'd look for a property that would provide the best value for the money that they have. They'd also make sure the house is in good working condition, and cosmetic fixes and upgrades will be slated for later.
Although the bargain hunter would likely go for a budget friendly option when choosing a house, they wouldn't compromise on location. When marketing to this type of buyer, be sure to highlight features of the neighborhood, such as schools, restaurants, and other nearby amenities.
Buyer Profile #2: The Real Estate Investor
Who they are
Real estate investors can be house flippers, landlords, or home cash buying companies. They never look for move-in ready homes. Instead, they purposefully seek out problem properties which they can buy as is for way below market value, make repairs, upgrades, and renovations, before selling for a much higher price later on. c
How they work
A real estate investor is typically a cash buyer. They don't have to wait on loan approvals, or for a previous property to be sold before they'd be able to buy your home. They also prefer to procure properties off-market, which means they'll be able to close on a deal much faster compared to selling the traditional way to a financed buyer.
What they value
Getting a fixer upper for the right price is usually all that matters to this type of buyer since they don't plan to live in the property anyway. They employ the 70 percent rule in real estate as they crunch the numbers. This means they will only buy a property if it is priced at 70% or less than its After Repair Value (ARV) after subtracting estimated renovation costs.
For example, a cash buyer estimates a property will have an ARV of $300,000 after doing home repairs that cost $25,000. In effect, the revenue they'll net from the sale is $275,000. Going by the 70 percent rule, they'll pay no more than 70% of $275,000 for the property, thus, the maximum bid will be $192,500.
Options in Selling a House That Needs Certain Repairs
Now that you have decided what type of buyer you're targeting, you're probably wondering how you'd be able to get exposure for your property. You have the choice between going the traditional way with a real estate agent, or getting on the highway to a quick sale with a cash buyer.
Traditional Sale: List With a Real Estate Agent
Real estate agents know the ins-and-outs of buying and selling property. Choosing to list with them affords you the convenience of having an expert handling the real estate transaction on your behalf. They would be able to guide you through every step of the listing process: from determining your asking price, to deciding which repairs you should prioritize, to staging, showing, negotiating, and finally, closing on your home sale.
All these conveniences and expertise aren't for free, though.
You'd have to pay a hefty commission cost to your real estate agent, in addition to all the closing costs such as a title search, title insurance, appraisals, attorney's fees, and many more. These realtor's fees and closing costs could easily eat up to 12% of the sales price.
Additionally, when going the traditional route in your home sale process, expect to complete it in 55-70 days, even in a hot market. If that timeline doesn't work for you, you can opt for a quick sale with a real estate investor.
Fast Sale: Sell Your Home as Is to a Cash Buyer
When selling as is, your best bet is to sell to a cash buyer. They'll gladly take your troublesome house off your hands and deal with the repairs before selling it for profit or renting it out for a steady cash flow.
The potential resale value along with the repair cost is factored in their cash offers, so you may not be able to get the fair market value for your house.
Either way, you're freed of the headache of dealing with a house that needs repairs.
When you think about it, it's possible that you still get more money in your bank account without all the drawbacks of paying commissions. You also avoid the upfront investment of time, energy, and money in arranging inspections, coordinating contractors for the rehab and renovation, and waiting on the sale of your as is home on the open market.
Pointers When Selling a House That Needs Repairs
You Can Skip Major Repairs
In the course of owning a home, major repairs may need to be done. Most homeowners aren't expected to be familiar with these, that's why having a home inspector come in and look over the property is essential.
These major repairs include, but are not limited to:
- plumbing and sewer line re-piping due to burst pipes or a failing septic system;
- foundation repairs for cracked foundation, bowed basement walls, or flooding basement;
- roof replacement for leaking roof or roof that has been blown away due to a hurricane;
- asbestos removal
- mold remediation
These are typically big-ticket items, and depending on your readiness or willingness to invest your time and money to set everything right, then you might be better off selling as is. Still...
It Pays to Do Minor Repairs
Fixing leaking faucets, replacing broken bulbs, and changing old and broken door knobs doesn't cost much but has big benefits. Doing so communicates to the prospective buyer that you care about the little things in your home, and although it may need some repairs, its fundamentals are solid.
Even doing something as simple as a fresh coat of paint has the instant effect of making a fixer upper home look and feel new. You can either choose to do this yourself or hire professionals for the job.
If you can't spare some funds for painting works, at least remove the wallpaper. Old wallpaper makes a home appear dated, and removing it makes your home more appealing.
These minor repairs could also boost curb appeal and attract potential buyers into actually setting foot on the property.
Furthermore, for a house that needs repairs, a little cleanup and decluttering can go a long way when trying to find the right buyer. Potential buyers are aware of what they're signing up for when looking at this type of property, but having it clean and presentable won't hurt your asking price.
More buyers showing up for open houses means an increased chance at getting multiple offers and possibly selling the house sooner--and for a higher sale price too!
Price Your Home Competitively
You can accomplish this by doing a comparative market analysis (CMA). This involves looking at comparable properties (similar type, size, and features as your house) that are recently sold in your area in order to set a listing price.
Note that the purpose of a listing price is to get prospective buyers to eyeball the property. No matter which home selling process you go with, a delicate balancing act must be maintained. Pricing it too low will cause you to miss out on profits, and pricing it too high will turn interested parties away.
Disclosure Is Paramount
Being open and transparent about your home's condition helps you avoid getting into legal hot water later on. Disclosing all the issues fosters trust and helps the deal go as smoothly as possible.
Final Thoughts: Selling a House That Needs Repairs
In today's competitive real estate landscape, trying to sell a house that needs repairs can be challenging. Doing small, cosmetic fixes can certainly help, but if you haven't got the time for that, you can always sell as is.
When you decide to do so, selling your house to a cash buyer like us is the way to go. Here at House Buyer Network, we buy houses in any condition! You don't have to spruce up your yard or declutter your garage! Skip the hassles and headaches of making repairs or doing upgrades, sell your home as is, and let us do all the heavy lifting for you.
Once you fill in our form with your property address, email, and phone number, we'll instantly connect you with a cash buyer who can give you a fair, no obligation cash offer within 24 hours! If you're satisfied with the offer, we can close on the date you choose. We even cover all closing costs for you!
What are you waiting for? If you have any questions, you can reach us at (855) 835-2544 and we'd love to talk with you!