Considering selling a house “as-is”?
Homeowners face this challenging scenario:
I want to sell a house that needs work. It’s in poor condition. Should I spend my time, money, and energy on a fixer-upper, or go for an as-is sale?
Owners of even updated property may prefer a fast sale approach.
Selling an old, run-down house, or a fixer-upper in bad shape always raises these concerns.
This Sell a House AS-IS: The Interactive Guide will walk you through everything you need to know (with cautionary stories from the personal experience of the House Heroes Team).
Watch Earl’s Quick Intro Video and then dive-in with our handy index!
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The meaning of an “as-is” sale is often misunderstood (even among real estate professionals).
Here’s the formal definition:
Selling “as-is” means selling the house in its present condition or as it exists immediately prior to closing, even if there is property damage or defects, without the seller making or paying for modifications or repairs.
The tricky part is understanding what “as-is” DOESN’T mean.
Three common misconceptions relate to allowable inspections, selling site unseen, and re-negotiating price.
Watch the video below or read on to get our thoughts on what an AS-IS sale means!
Homeowners often believe an “as-is” sale means the buyer is not permitted to cancel the contract due to property condition. This confuses as-is with the inspection contingency.
The vast majority of “as-is” sales – to the contrary – expressly allow the buyer to cancel after inspecting.
The inspection contingency contract clause allows the buyer time to “inspect” the premises. The buyer may cancel during this period without violating the contract.
Why would you allow the buyer an “out” after inspection?
Buyers pay substantially more if you give them a few days to tighten up their market value and repair estimates.
Selling Site Unseen.
Selling a house “site unseen” means the buyer is not able to enter the premises.
No walkthroughs, no property inspectors, no repair quotes.
The buyer “rolls the dice” 🎲 as to property condition.
“Site unseen” sales are rare because offers are dramatically lower. The risk is too high for buyers to pay more than a nominal amount when the house could be in shambles.
Hostile tenant or occupant, dangerous or hazardous conditions, or the owner has no access: these situations give rise to site unseen sales.
Selling “as-is” doesn’t mean the buyer can’t re-negotiate price.
Real estate contracts typically set the inspection period to 15-days.
Buyers have three options at the conclusion of inspection:
- Close at the agreed upon price.
- Cancel the contract.
- Re-negotiate with the seller for a lower price.
Should you grant the buyer a lower price? Depends on the reason for re-negotiation.
Granting a price reduction makes sense if the buyer truly uncovered unanticipated repairs. Inspections exist for a reason: for everyone to take time to understand the actual condition of the property. Buyers naturally need a price reduction if there are substantial unforeseen renovations.
However, not all reductions are in good faith.
Some buyers employ a “bait and switch” technique.
The buyer offers a very high dollar amount to convince the seller to sign the contract, drags the process on-and-on, and months later threatens to only close at a far lower price. Worn down by months of uncertainty and counting on the money from the sale, they often go along with the massive reduction.
Cautionary Tale of “Bait & Switch”: 7610 SW 98 Court, Miami, FL 33173
The owner contacted the House Heroes Team in August 2016. Lucas visited the house and it was a wreck – over $50,000 in renovations. We offered $200,000. The seller declined because another company offered $240,000. Month after month, the other “buyer” asked for time extensions. In July 2017 (11 months later), the owner sold for $180,000 – $20,000 less than our offer. When asked about accepting $20,000 less than our offer, she responded “I was tired of the process and ready to move on.” (FYI – the giant Iguana 🦎 was really in the back yard)
Moral of the Story: Don’t grant repeated time extensions or unreasonable price reductions.
Selling “as-is” is attractive to virtually every owner.
I’m so lucky to spend my day interviewing, supervising, and collecting quotes from home renovation contractors. I can’t wait to lose tens of thousands of dollars to fix-up a house for someone else to live in.
SAID NOBODY EVER.
However, there are downsides to skipping out on repairs and insisting on an as-is sale.
Let’s carefully examine the “pros” and “cons” . . .
The Pros of An As-Is Sale.
Closing fast is the biggest advantage of an “as-is” sale.
How long it takes to renovate a house and then sell on the open market?
Take a glance at these statistics:
- Average Time to Sell After Listing: 68 Days [Zillow]
- Average Time To Close After Contract: 40 Days [The Balance]
- Average Time For Mortgage Approval: 45 Days [Mortgage Reports]
- Cosmetic Renovations Only: 2-3 Months [Flip Academy]
- Full Property Renovation: 3-12 Months [Flip Academy]
The average time from beginning renovations to selling is 6-months for cosmetic rehab, and 12-months for substantive repairs. Payments on taxes, utilities, insurance, and unexpected weather events keep piling up.
Selling a house “as-is” by owner takes just a few weeks.
Save Money on Repairs.
Home renovations empty a bank account. Quick.
Updating an older house costs tens of thousands of dollars.
Home Advisor created a detailed guide outlining current renovation costs. Check out the details below:
- Kitchen Remodel: $4,500 – $49,000
- Bath Remodel: $6,000 – $14,000
- Bedroom Remodel: $1,000 – $5,000
- Appliances: $1,000 – $10,000
- AC Unit: $4,000 – $6,000
- Furnace: $3,000 – $5,000
- HVAC: $1,900 – $4,900
- Roof: $5,000 – $7,000
- Plumbing: $45 – $512
- Basement: $10,579 – $27,000
- Ducts and Vents: $500 – $2,000
- Landscaping: $500 – $5,000
- Knocking Down Walls: $300 – $500
- Square Footage: $7,000 – $100,000
- Permitting: $100 – $3,000
According to Houzz author Erin Carlyle:
So how much does a renovation cost overall? Obviously, the total cost will depend on the project’s scope, the materials selected and the fees of the professionals hired to do the job. Owners who completed our survey spent an average of $59,800 on renovation projects.
Lucas manages renovations for the House Heroes Team.
Check the video below (click here for the case study) to see Lucas’ work on 818 NW 133 Avenue in Pembroke Pines!
Here’s the bottom line . . .
Selling “as-is” without paying for repairs saves huge amounts of money.
Is it safe to take Advil every day?
Renovating a house is a headache 😫
Dealing with contractors, unanticipated repairs and costs, months of delays. Rehabs test the patience of even seasoned real estate professionals. The frustrations even damage personal relationships.
Common reasons home renovations become stressful include:
- Not Knowing Where To Begin. First time home renovator? It’s more complicated than Flip or Flop. The learning curve is steep.
- Spending Money. Nobody likes watching their bank account drop tens of thousands of dollars. Renovations burn a hole in your pocket.
- Surprise Defects. One fact of renovating is – no matter how detailed your plan – surprises pop up. “The best laid plans of mice and men often go awry.” Robert Burns.
- Interrupting Home Life. Breakfast with your kids? Usual sleeping spot? Quality time with a spouse? All influx during a home renovation.
- Dealing With Contractors. Home renovations require interviewing and hiring lots of contractors. Poor craftmanship or a disappearing contractor is inevitable.
- Lost Time. Fixing up an old house takes hours (if not days) in planning, interviewing, letting contractors in daily, and overseeing the entire process. It’s bumpy ride if your schedule is jam-packed with work and family obligations.
- Price & Time Uncertainty. Humans like predictability. Renovations are notorious for surpassing budget and timeline.
You’d like to save the time, money, and stress of a rehab?
There are, however, a few negative consequences of that decision.
Lower Sale Proceeds.
An ugly house isn’t worth nearly as much as a beautiful one.
Renovating an old house builds market value in two ways:
- Financial Investment. Renovating is big cash out lay. Buyers pay more for benefits of renovations without spending the money themselves.
- Sweat Equity. Even basic cosmetic repairs can take months of contractor supervision. This work builds “sweat equity”: you spent time and energy on renovations and now the buyer doesn’t have to.
Buyers offer substantially less for houses that require them spend financial resources and days of their lives to renovate.
Less Buyers Are Interested.
Everyone hopes to one day buy their dream home.
The mental images never appear like these “ugly houses” 🏚 we bought:
The majority of home buyers aren’t interested if you’re selling a house in poor condition.
You will lose these buyers when selling a home in need of renovations:
- Buyers With Mortgage Financing: Most home buyers rely on conventional mortgages. Houses with notable defects aren’t approved for a mortgage: broken window panes, leaking plumbing, electrical problems, an old or leaky roof, termite damage, lead paint. The sale must be “cash only” if any of those problems exist.
- Buyers That Need To Move In: Looking to sell a house a bad shape such that buyers wouldn’t be able to comfortably move-in upon closing? Homeowners that need to move in pronto may pass on major fixer-uppers.
- Buyers That Desire a Turnkey Property. Many buyers aren’t interested in making repairs. They may live remotely, be too busy to handle repairs, or simply have enough money they don’t need a “cheap” house.
What happens if less buyers are interested in your house?
The sale goes slow when selling a run-down house at a high price. Only a handful of buyers will pay top prices to go through the hassle of renovating. Expect months before connecting with the “right buyer”.
Making matters worse . . . fewer offers also drives down sale price.
Pros & Cons of Selling a House AS-IS Comparison
Reasons To Sell “As-Is”
- Save Thousands of Dollars
- Don’t Waste Months of Your Life
- No Renovation Headaches
- Sell In a Few Weeks
- Avoid On-Going Monthly Payments
Reasons To DIY Renovations
- Increase Sale Value With Sweat Equity
- Increase Sale Value With An Updated House
- Bigger Pool of Interested Buyers
- Potential For Multiple-Offer Competition
- Free Time, Money, Rehab Experience
There is no “one answer” on whether you should sell a house as-is, or invest in the renovations.
Here are the critical questions to honestly ask yourself . . .
Do you have enough money to pay for the renovations?
As discussed above, home renovations cost tens of thousands of dollars.
Not all of us have that kind of money sitting around. Selling as-is makes sense if cash is in short supply.
Got just enough money to renovate? Beginning the job is not advisable.
Renovation budgets typical surpass anticipated costs. You could end up selling a house that needs updates if cash reserves barely covered renovations.
Renovating makes sense with financial resources in excess of $10,000 – $20,000 of the expected cost.
Borrowing from friends, a home equity line of credit, a high interest short term loan, or credit card debt aren’t ideal to finance remaining repairs.
Do you live nearby the house?
Managing renovations from a remote distance is complex.
How will you meet and interview contractors? Who will monitor day-to-day work? Does a neighbor keep a key to the house to let people inside, or do you risk turning it over to people managing the work?
Owners that live out-of-state usually quit updating the property after several months. A half-way renovated house isn’t attractive to regular home buyers who just want a “ready to move in” experience.
You may end up selling at a reduced price to a fix-and-flip investor (who needs profit margin).
Do you have time to plan and manage renovations?
Updating a house that needs work is time-consuming.
The first time sink is creating a “Scope of Work” that details the renovation from start to finish. Scopes of Work should include a list of repairs by category, physical materials, photos of areas to be rehabbed, and drawings.
According to Flipper Force, the Scope of Work is incredibly important to help compare contract bids, prevent mid-renovation problems, and minimize contractor disputes:
Creating a detailed Scope of Work document for your rehab project is critical because it establishes a clear project plan that your contractors can use to estimate costs. If you don’t tell your contractor exactly what work needs to be included, it leaves too much room for interpretation which can result in change orders, conflicts and disagreements.
The second major time sink is supervising contractors. Depending on the level of renovations, you may be working with ten or more professional handymen at various phases of the project.
If you don’t have free time to carefully watch the contractors, there may be unwarranted delays (or worse – a contractor stops showing).
Do you have handyman or renovation experience?
Fixing up a beaten down home isn’t easy [contrary to HGTV fix-and-flip shows 📺]
Most people can manage small updates. However, the difficulty grows exponentially as the project grows in time, money, and necessary repairs.
There is a “learning curve” to renovation projects. The first project is a struggle but management skills get honed as you rinse and repeat.
Selling “as-is” and letting a professional manage the rehab is a good solution if you’ve never managed a home renovation and have no intention of doing so again.
This is particularly true on a limited money or time budget. Inexperienced renovators have trouble measuring how long and how expensive the rehab is.
If you do plan to renovate, keep in mind that not all home improvements are created equal, as illustrated in this list of 31 home improvements. The list includes 7 home improvements that you should avoid like the plague if you want to get the best bang for your buck. Remember, if you are upgrading to sell your home, don’t add features that YOU like, add features that potential buyers want. You can also check out this home renovation guide.
Cautionary Tale of The “Disappearing Contractor”: 3815 Lambert Avenue
The House Heroes Team purchased 3815 Lambert Ave, West Palm Beach, FL 33405 in 2016. Our first rehab project! It needed a total makeover. Lucas picked a general contractor after a few recommendations. Lucas was hands-off and it lead to big problems. The contractor “went on vacation”, disappeared for two weeks, and showed back up one day. Due to the delay, the flooring was discontinued in the US and we had to fly it in ✈️ from Canada!
Moral of the Story: Keep a careful eye on contractors to avoid being taken advantage of.
I could sell for so much more if the buyer doesn’t think he has to fix the roof. I’ll just keep that attic leak to myself. The central AC didn’t work for a few weeks. Seems fine now. They probably won’t notice.
We’d all love to sell property for as much as possible. It’s tempting to not mention hidden defects.
Unfortunately, the law doesn’t allow this.
Selling “as-is” does not remove the obligation to disclose latent property defects.
Disclosure of known property defects becomes particularly important when selling a house that needs work (due to invisible defects). It could turn out you’re selling a tear-down house if foundation problems were hidden.
Concealing problems intentionally to get a higher sale price can lead to you being responsible for the costs of repairs and other damages due to the undisclosed defect.
According to Find Law:
In general, you have an obligation to disclose potential problems to a prospective buyer that could affect the value of the property you’re trying to sell. In addition, it is considered illegal in most states to deliberately conceal major defects on your property. Several states have begun requiring property owners to put their real estate disclosures in writing.
In most areas, owners are required only to disclose information within their personal knowledge that was not readily observative. Owners do not need to hire an inspector to uncover every potential flaw.
How should you properly disclose a material defect?
States often require written disclosures. Florida’s disclosure form asks “Yes” “No” and “Don’t Know” on a series of questions involving structures, systems, appliances, pests, drainage, flooding, plumbing, pools, and sink holes. Here is a sample “Seller Disclosure” provision:
Legal protection is stronger with written disclosures.
Check Nolo’s index on seller disclosure in each state or contact a local attorney for applicable laws.
House Heroes Team: Our Recommended Disclosures
Our company has purchased houses in need of major repairs since 2013. Check out this list of material defects that we’ve encountered that you should consider when you’re conversing with a buyer.
- Roof leaks or defects
- Plumbing or drainage problems
- Water damage
- Window cracks or malfunctions
- Code Violations
- Basement flooding
- Heating and cooling defects
- Toxic Materials (asbestos, lead)
- Environmental risks (flood zone)
- Faulty electrical wiring
- Foundation cracks or instability
- Infestation (rodents, termites)
- Noisy or disruptive neighbhors
- Paranormal activity
- Deaths on property
Any buyer can offer any amount on paper.
Got an offer that you can’t refuse? If it’s too good to be true . . .
High prices are exciting – but entirely meaningless unless supported by a fair written contract. Contracts can be drafted with unwarranted “loop holes” letting buyers cancel without repercussion.
Keep these four contract terms on your radar when selling a house that needs repairs: escrow deposit, inspection period, appraisal contingency, and financing contingency.
Watch the video breakdown or read on to get info on NEED TO KNOW contract terms . . .
Is the buyer making a serious offer or wasting my time?
The answer to this question depends on the “escrow deposit”.
An escrow deposit (also known as “earnest money” or “good faith” deposit) is a payment made by the buyer to prove the buyer’s offer is serious and that they will hold up to their end of the bargain. The deposit is held in neutral escrow account upon both parties entering the contract.
Escrow deposits are negotiable, but typically 1-2% of the purchase price.
Here’s Brendon Deismone take on the escrow deposit:
The deposit is a good-faith gesture to the seller, indicating you’re serious about buying their home. Once deposited, this money can’t be moved or touched without written consent from both buyer and seller. Upon the close of escrow, the earnest money deposit is applied to the balance of the down payment.
Escrow deposits are important: they are the seller’s financial “remedy” upon buyer default.
Should the buyer “back-out” or fail to close without justification, the escrow deposit is transferred to the seller. Buyers making a small escrow payment lose very little stringing you along and then canceling at the last minute.
Small deposits are particularly troublesome when your selling a house that needs work. Buyers get “cold feet” that repairs are too expensive or time consuming. If they only put in a few hundred bucks down, there is no incentive to “follow through” with the sale.
Best Practice: Insist on at least 1% escrow deposit and confirm it was deposited.
Sample “Escrow Deposit” provision:
How long does the buyer have to cancel due to property condition?
Check the length of the “inspection period”.
The inspection period is the agreed upon amount of time for the buyer to inspect the house. Buyers may “cancel” for any reason during inspection. Average inspection periods last 15-day.
Land Century explained:
In real estate, an inspection period is the time frame during which buyers have the opportunity to perform their due-diligence on the piece of property they intend to buy. It gives buyers an opportunity to inspect the property, and if it doesn’t meet their standards, they can either cancel the contract, or renegotiate the terms. If the contract is canceled, the buyer doesn’t lose money in the process.
Inspection periods are a “hot button” issue when selling an older house. Property defects are bound to pop up (a lot!) examining a fixer-upper.
Buyers prefer a longer inspection to allow enough time to estimate renovation costs.
Sellers want a short inspection to close ASAP without wasted time. Sellers have to re-start the entire process again if the buyer cancels.
Best Practice: Negotiate a fair inspection period memorialized in the written contract.
Sample “Inspection Period” provision:
Can the buyer cancel if an appraiser says the house is not worth the offer price?
Buyers may cancel due to a low appraisal if the contract has an “appraisal contingency”.
The appraisal contingency protects the buyer. If the property does not appraise for the specified amount, the buyer may cancel with the return of their escrow deposit.
Appraisal contingencies are necessary for buyers with mortgage financing. The house serves as the loan’s collateral. The appraisal allows the bank to confirm the house’s value is enough to cover the debt should the buyer default.
Selling a house in “as-is” condition means it probably needs work. Mortgages are not available if a house has notable property defects. Cash buyers do not need an appraisal because the house is not securing any loan.
Best Practice: Cash offers don’t need an appraisal contingency. Mortgage financing does.
Sample “Appraisal Contingency” provision:
Can the buyer cancel if he can’t come up with the money?
Contracts with a “financing contingency” allow the buyer to cancel with the return of their escrow deposit if they can’t fund the purchase. The sale is “contingent” on the buyer securing financing.
Financing contingencies serve to protect buyers should they fail to qualify for a mortgage.
Cash buyers rarely ask for financing contingencies. Selling a house “as-is” for cash without this contingency makes sense. If a buyer has cash, there is no need for a contingency based on cash being unavailable.
If you’re selling a house “as-is” that needs work, buyers usually make cash offers (banks don’t lend on fixer-upper properties). Since cash offers don’t need the financing contingency, the clause is unnecessary for handy-man property.
Best Practice: Mortgage buyers need financing contingencies. Cash buyers of “ugly houses” don’t.
Sample “Financing Contingency” provision:
Selling a house that needs work is a big decision.
We’ve collected insights from various real estate professionals – check out what they had to say below!
Pam McKee is an Agent Partner with Keller Williams Realty. She has been selling real estate on the North Shore since 2014 with over 500 closed transactions.
I recommend having the house professionally staged to highlight the best features and draw the eye away from any short comings. Also considering obtaining work estimates and providing them to buyers – buyers often think things cost more than they actually.
It’s also important to price the house in accordance with the condition and acknowledge property defects in the listing information so offers will already reflect the need for work. Choose an agent that will be enthusiastic and “sell” the great things about the house and location. Consider a Home Warranty produce (such as American Home Shield) that will cover the needed repairs (i.e. appliances, heat, a/c, weather heater). Consider a home equity line of credit to complete repairs prior to listing since most buyers will pay a premium for a move-in ready home.
Shawn is a real estate investor operating in Atlanta, Georgia. He is experienced in purchasing investment properties, including rentals and fix-and-flips.
If you do not have the time, money, or patience to make any repairs to the house at all, you could always sell it “as is”. Work with your Realtor to make a list of everything that you think needs to repairs. If you are unsure, look at listed homes in your area that are similar in size. These updated homes will give you an idea of what repairs you will need. When selling your house “as-is” you will be selling at a discount. The individual who buys the house will need enough of a discount to make all the repairs needed. Selling to a family who wants to renovate their house to get a cheaper upfront price is one approach. The other is to sell to an investor who will flip the house. The investor will need to account for Realtor fees, repairs, and business profits.
A homeowner needs to weigh the benefits against the price reduction. This is where a lot of people get stuck. You will not have to manage contractors, buy materials, or spend up to tens of thousands in repairs. People often believe that if they renovate their house that they will get more money out of it. This is not the case. For example, if you spend $10,000 on a renovation, you don’t necessarily add $10,000+ in value to the home.
Kuba is the founder of REIkit.com, a real estate technology executive, and an investor realtor.
A tip to sell a house that is in poor condition that people often overlook is to actually not repair it and sell it as-is.
If you have a house that needs substantial work, and you find yourself in a position where you don’t have the funds to repair the property to get it into a condition that makes the house sellable on the market, you may want to consider selling your property off-market in its current condition to a real estate investor. While you might not get top dollar for your property, you can benefit from an all-cash offer with a quick closing, as quick as under 7 days.
The best way to find real estate investors who are able to provide you with a quick cash offer is to search the Internet for local companies that offer cash for houses using the keywords sell my house in “your city”. You should then contact several of these investors and have them issue offers on the property, selecting the one that offers the highest valuation. Tip: Don’t be afraid to negotiate and ask for concessions, such as for a longer or shorter closing date, extended time to move out, or even for help with your moving costs.
Michelle is a licesned real estate sales person in New York with Triple Mint. Prior to real estate, she served in the financial services industry.
Sellers always need to understand a buyer’s perspective. From a buyer’s perspective, for an apartment that needs renovation, it comes down to what will be the apartment’s value after the renovation, and if the buyer ‘underwater’ at that point. The seller needs to consider that and price enticingly. I am working with a buyer now that would like to purchase a home that they can design and make their own.
On a low-floor, one-bedroom unit in Murray Hill, around the corner from the Queens tunnel, we were quoted a renovation estimate of $150k-$200k by two independent contractors. Looking at the recent sale prices for low floors in the building, and considering the actual renovation estimates, even if our lowest offer was accepted, my buyers would be in the hole by roughly $65k after renovation. We walked, and we found a high floor one-bedroom with views that is priced much more appropriately.
Sissy has been named “Number 1 in most expensive homes sold” by the Houston Business Journal. She is the author of “Simple and Sold” with 30-years real estate experience.
Is this house photo ready? If not, that’s when you know a house needs work. Here are some tips I gathered in the past thirty years.
A paint job does wonders for a home especially if there are bright colors involved, a majority of people like neutral tones because it brings out space. Landscaping does wonders for a property especially if there are one too many trees, or dead bushes surrounding the home. The open space concept is becoming a trend with families/individuals wanting an easy flow of space.
At minimum consider the following: replace all burned out light bulbs both inside and outside the house – good lighting is key; pick up throw rugs and runners in entryways, kitchens, and bathrooms so that the flooring is clearly viewable; and clean windows, carpets, and floors.
The Foundation Experts have over two decades experience providing foundation repair and waterproofing, and concrete and masonry repairs.
If you are trying to sell a house that needs work, know that foundation problems could reduce the selling price of your home by a considerable amount. If foundation issues are found during a home inspection — and they are not likely to go unnoticed. Consider taking two routes. You could fix these issues before you put your house up for sale, which could be pricey depending on the size of the problem. Alternatively, you could significantly lower the selling cost of your home, and market your home to those looking to buy fixer-uppers. There is a large market for fixer-uppers, however, that is because of the big discount they receive in the purchase and the profit they can make once the renovations are complete.
Chris Mayberry Fit Guy Buys Houses
Chris is a real estate agent and investor in Washington D.C., Maryland, and Virginia. He is passionate about helping friends, family and clients achieve fitness goals they set for themselves.
When selling a home that needs work or renovations, it is important to know what repairs need to be made. The first step that I would recommend would be to hire a general home inspector. A home inspector can inform you on all of the problems that you have in your home. Once the inspection is final, retrieve a copy of the report so that you can give it to potential home buyers. Home buyers will appreciate the inspection report and the fact that you are being transparent about the work that needs to be done in your home.
Author of “How To Get Approved for The Best Mortgage” and Mortgage Millions Mentors coach.
As a licensed mortgage loan officer for over 15 years, I cannot over emphasize how it helps to have a home ready to sell. A home inspection and address the notes concerns will reduce the amount of repairs needed for the lender as well as the negotiation between the buyer and seller. If you don’t have the option to fix the repairs before you list the property, team up with a realtor with expertise in marketing this type of property. The realtor can have a sphere of influence with investors who can purchase the property for cash not subject to general lender requirements, or with first-time buyers looking for a fixer-upper.
Consider enlisting a lender who specializes in rehab loans, such as the FHA 203K or the Fannie Mae Homestyle Renovation loan. These loans are great options for the borrower to purchase the property “as is” and allow the buyer to finance renovations.
Thomas is a tax accountant, author, and co-founder of Deducting the Right Way, an online resource for small business do-it-yourselfers.
From a tax standpoint, the repairs you make to a primary residence right before you place it on the market won’t help with taxes if your expected gain from the transaction is less than $250k/$500k (single/married).
When you’re under that threshold, you won’t owe tax as long as you meet the other factors of the principal residence exclusion. However, if you’re selling an investment or rental property, then it’s a different set of circumstances. All the repairs and improvements reduce your taxable gain in one form or another.
Jeanie is a real estate professional with Real Ventures, Inc., an investment company that buys residential property in Georgia.
For houses in need of moderate renovations, fix what’s within the budget. Defects will likely come up during inspection. Don’t lose a sale because of a broken tile, wonky fan, or missing brick on the front steps. Make sure the fix is done right. Buyers are comparing your house to others – don’t give them a reason to offer elsewhere.
If the house is in a trendy area downtown, implementing tech like, a Ring doorbell, a Nest thermostat, or a Simply Safe security system are great bonus items that make your house memorable. Consider painting custom colored rooms to neutral colors and don’t forget to patch any holes or neglect the door and window trim, updating faucets and cabinet hardware, and possibly changing almond colored switches, outlets and, face plates to white ones.
If the house is in really bad shape, the first question to ask is if spending the money will net more than what it could sell for as is. Otherwise, what’s the point? Start with estimating the house’s potential value after repairs. If renovations net significant return after making them, then do it. Don’t bother with the hassle there is low return on the time and money. The headaches aren’t worth it. Consider a home equity to update the house to current buyer standards. Evaluate each decision based on the amount of return for the amount invested.
Nick is buy and hold investor in San Antonio, Texas. He also flips houses and is growing to create a larger owner finance portfolio.
Our tip for selling a house that needs work is to make sure you consider all of your options. Specifically, the options of either making the needed repairs and listing your house with a realtor or avoiding the repairs and selling directly to a cash buyer. If you spend the time and money to make the repairs yourself, you are more than likely going to get a higher sales price for the property. The other option is to try to avoid repair costs and other costs associated with a traditional sale and sell the property as-is to a cash buyer.
Which is right for you? You can start by asking yourself questions like can I afford to make the repairs myself? Are there other things in my life that are causing me to need to sell this property quickly? Would it be more beneficial to me to make these repairs so that I can walk away with more money? The answers to these questions may be different for everyone and only you can make the best decision for you and your family but, our tip is to explore all your options before you decide how you are going to sell your property that needs a lot of repairs.
The sun will rise. Death and taxes. Buyers “backing out” when a house needs work.
You can count on each of those!
There are a few reasons “as-is” sales consistently fall through:
- Mortgage Not Approved. Banks won’t lend on houses that need too much work. If the inspection reveals notable defects, the mortgage likely won’t be approved.
- Low Appraisal. Houses in disrepair get a lower appraisal price than comps in better condition. Buyers cancel when appraisal comes in lower than the amount specified in the appraisal contingency.
- Renovations Too Costly. Making offers is an inexact science. Thoroughly inspecting a house can take days or even weeks depending on level of rehab. High costs that surpassed the buyers initial “ball park” estimate will lead to cancellation or re-negotiating price.
- Months To Renovate. Renovating a house from top to bottom can take over 6-months. Buyers may have made an offer believing rehab work was simpler. It may even turn out your selling a tear-down house.
Vetting a buyer before accepting the offer saves time, stress, and frustration.
Here are some key considerations (and an opportunity for us to show off a bit 😄)
Experience Rehabbing Property. Has the buyer purchased a “fixer-upper” before? Good chance an overwhelmed buyer will back out if they have no history with ugly houses. Check out our Case Studies to see 10 fixer-uppers 🔨 we purchased.
Cash Proof of Funds. Anyone can write an offer amount in a contract. It doesn’t mean they can get that money to you. Ask for a bank statement proof of funds showing the cash. Give us a call at (954) 676-1846 for our proof of funds.
Testimonials & Reviews. Check out if the buyer has online testimonials and social media reviews (HINT: click here to see our video testimonials). Past is the best predictor of the future. If others had a good sale experience, there is a good chance you will too.
Better Business Bureau Accredited. Better Business Bureau is the “gold standard” for a company willing to put their reputation on the line. The BBB reviews the company’s online and corporate history before approving. The House Heroes Team is A+ Rated!
We Buy Houses (In Any Condition)
Call Us (954) 676-1846 or Fill Out This Form For Your FAIR Offer.