How to Sell a House That Needs Work
There can be various reasons you don't want to spend much on your property. Maybe you inherited the property, took a risk by buying a distressed property, or you just simply have any more budget to spend on the repair. Whatever might be the reason, if you keep the house with you without selling, you will end up paying a lot to just maintain it.
In an ideal situation, you want to renovate the home, make some cosmetic changes and make it look appealing so that you can attract potential buyers. But, in some cases, you are left with no option but to sell it as is. If you want to sell your house as-is, you cannot expect even a reasonable price from it as buyers are not ready to buy an old house that needs to be renovated. In this blog, we will discuss ways to sell a house that needs work. Let's try to understand where you stand and what the options are left for you.
Ways through which you can sell your home
Renovating and making little repairs to your home is one aspect; you also need to find out the ways through which you can sell your home.
Know about your buyer pool:
You are most likely selling your home to a fix and flip investor or some bargain hunters. The fix and flip investors are nothing but the real estate investors. They buy a home renovate it just to sell for a higher price. This is their main motto. To sell to them, you don't need to spend any money and renovations or repairs, and you can spend as is. All these buyers look for is whether they can sell it for a higher price than they bought from you. They look for how the home would appeal to the buyers, whether they need to move the bathroom or kitchen or whatever it is.
If you want to sell your house to a real estate agent, you need to spend some time cleaning up the house. Do what you can to make it look good and give the assurance that the property can be renovated within a limited budget. Spruce up the property by scrubbing the bathrooms, arrange for a dumpster to get rid of junk, and do everything you can. Also, ensure your property smells good because a bad smell can be the reason for someone not to buy your property. After this, get your real home value estimates and collect contractor estimates so that you know the true value of your home for bargaining and negotiation purposes.
The bargain hunters are the people who wanted to buy a brand new house in their preferred location but couldn't afford it. They want the home to be on a limited budget so that they can spend on renovation themselves. All they look for is whether they can renovate the house and make it look the best or not.
If you are selling your property to bargain hunters, collect expert opinions and know the true value of your home. Clean up the entire house, including the yard, to ensure the house is clean and smells good. If you can, make some small and affordable repairs. Fix patchy leaks, broken doors, clean grout, add some landscaping, treat stains on your carpet, etc. You can do all these with a very limited budget. If you leave it to the seller, they quote this and ask to reduce the price even more, which might not be the ideal option for you.
Tempt buyers through renovation loans
Mentioning renovation loans is a great way to draw the attention of a potential buyer. If buyers consider this approach, they get access to funding from the total loan amount. Buyers can get higher amounts of loans, but the downside is that they need to have a good credit score. If the credit score is bad, they are most likely to get a lesser amount or no amount in some cases. Mostly the buyers need to put some money down, and the renovations will need to get approved by the lenders depending on what will be the best step to increase the value of the home.
Focus on the brighter side
Old homes have their pros and cons. To get the best price without spending much on repairs, ensure you focus on the positives of the home. Older homes are typically spacious and have character features like hardwood floors, high ceilings, etc.; this would help them stand apart from newly built homes. The closet size, patios, garage, and other storage spaces can contribute to the increase in the price value. The older homes are also built with quality materials and good craftsmanship, which helps to increase the longevity of the home.
The location of the home also plays a huge role in deciding the price. If schools, restaurants, and other local amenities are nearby, then it is a positive sign. More companies, job opportunities, and other development would build the interest of potential buyers to buy the house.
Best possible ways to sell your home.
When you decide to sell the house without spending much on the repairs, try to find out what all ways you have.
Try to find out the current condition of the home.
If you want to know the real condition of your house, a home inspection could be the best option. A home inspector will check the entire property starting from the roof to the basement, including the exteriors and interiors of the whole property. If you don't do this, the buyer can ask for a deduction in price quoting the repairs. The deduction can be big because you don't have the money it takes for repair. So, once you're sure of the repairs costs, you can negotiate the prices accordingly. A home inspection would hardly cost $300 to $500.
Estimate the net proceeds
To find out how much you are going to make by selling, look at the potential selling price and the cost price. Real estate agents would say that they can sell your home for a much higher price if you list your home. But often, there are many more hidden costs associated if you sell it the traditional way. In the other case, if you sell your house directly to a cash buyer, there will be zero additional costs associated. If your house needs major repairs, the money will be deducted from the cost price, and the leftovers would be your net proceeds. To get a better perspective on whether to hire an agent and sell it or buy it from a cash buyer, let's find out the net proceeds in both cases.
To find out the net proceeds, you need to find out the realistic sale price. Check the other houses in your locality which are similar to your house in terms of space. Unless your house doesn't need any major repairs, the price would always be lower and not the same as the other houses in the locality. If your house hasn't had updates to bathrooms and kitchens within the ten years of listing on the MLS, then it would sell for around 15 to 20 percent lower than expected. For example, if the good-conditioned house sells for $30000, then your house, which is in bad condition, would sell for around $240000.
The next step to calculate the net proceeds is to cut down the repair costs that the buyer needs to spend. Because the buyers usually expect the sellers to reduce the price to accommodate repair costs. For instance, let's say there is a roof or a foundation repair, then you will need to reduce the price by at least one or two percent. If your realistic asking price is $240000, then $235200 would be the actual sale price.
Now comes the transaction costs. When you sell your house through an agent, you need to pay money to the agent and also the company that is handling all the finances, which includes all the paperwork. This would be somewhere around 6 to 8 percent of the actual sale price. So, if your sale is $235200, then we reduce the transaction costs, it would be around $218700. You also need the holding costs, which are the mortgages, taxes, and other maintenance costs. Holding costs are nothing but the time you hold the house with you till you find a buyer and sell it. This process takes around two months. Let's assume the two months of holding costs would be somewhere around $3500. So, subtract this from $218700, and we get $215200. Thus, your net proceeds cost would be around $215200.
How to fix the price?
The other big task is to fix an appropriate price for your property that needs work. This will have a huge impact on how you get to sell your property. If your price is too low, it will be hard to increase it later. If you price it too high, it takes time to find the buyers. In both cases, you will lose some money.
Pricing an old and distressed property can be tricky because if you do small renovations, spruce up the entire space and then increase the price by a big margin, it might not work because most of the house flippers are seasoned real estate investors who know the true value of the property. On the other hand, if the price is too low, you will get a lot of buyer leads, and you will be tempted to buy the property immediately. Later you might regret your decision because you sold it for a relatively lower price. In any which way, you would incur a loss. So, to get the real value of your home. Consider your surrounding homes and localities, or you can even use a home value estimator to get the most suitable price. Note that there will always be some degree of inaccuracy that you have to bear with. Now, from here on, take your estimated price to a property appraiser. An appraiser will assess the condition of your home, consider various other factors and then decide a price. This price should be good to go.
Things you need to vary of while selling an old home that needs work
You need to abide by some legal rules and regulations when you are selling your old house that needs work. A buying inspection will be taken place when you sell your property as-is, which needs you to disclose the material defects in the property. These defects can consist of leaks, non-working appliances, mold growth, and a few others that need to be addressed in a written agreement. They may even ask you to take up the responsibility of repairing these aspects before they buy the house. The buyer can still negotiate the price based on the repairs and defects of the house, and you still have the right to decline their requests. However, this would allow the buyer to turn down the offer as long as it falls within the set period given in the agreement.
Selling an old home as-is is difficult, but little research on how you can do it can get you a reasonable price for the home. There are many ways through which you can get the best value out of your home, as discussed in this blog. The learnings that happen during this entire process would help you gain some knowledge in real estate. If at all you want to start your next business in real estate, you are well-equipped to go.
How do you sell a house that requires a lot of work?
If you want to sell your house for a good price, then it needs to be in condition, and this is obvious. But, because of some reasons, you may not be able to repair the house and sell it as-is. In this case, you are not left with many of the options. But there are a few options that you can try. Some of them are:
Do the basic cleaning: You can consider deep clean, pro carpet cleaning, and landscaping maintenance. In this way, you can improve the curb appeal of the home with very minimal costs.
Do some cosmetic fixes: You can consider doing some low-cost cosmetic fixes which would help you to make your home more appealing to potential buyers. For instance, fixing the roof, HVAC, or some other appliances could be a tough task, but you can consider painting the interiors, replacing the old facets and outdated light fixtures, etc.
Invest in major repairs: If your home is in very poor condition, then it would be too much to expect that the buyer would buy it for a good price. In this case, you might not need to spend on every repair but the one that appears straight away when someone visits your home. You can consider replacing floorings appliances and updating the kitchen and bathroom, etc.
You can also consider hiring a real estate agent who is an expert in handling this kind of situation. Although you spend some money on hiring them, they can show you the best possible route to sell your house that needs work.
What should you not fix when selling a house?
There are a few components of your home which you may not need to fix because they don't add significant value in increasing the price. Some of them are:
Cosmetic repairs: Cosmetic issues like upgrading the landscape and changing the paint colors may not be the ideal option. It's best if you leave them to the buyer so that they can customize them based on their interests. Also, you should consider how much time and money is needed to fix issues like floor cracks and outdated bathrooms. Focus on immediate and must-have repairs than vanity repairs.
Minor electrical problems: Electrical issues sound serious, and it is to a certain extent. Sparkling lights and dangling light fixtures are serious concerns, and you need to address those issues before listing. However, a few electrical issues can be ignored. Almost every house has a wobbly socket or light switch that is not so harmful and then can be fixed by tightening them enough.
Halfway repairs: If you cannot afford the complete repair, then do it halfway. It wastes your time money and doesn't solve the problem completely. It's better to disclose the repair to the buyer than do a patch job for a low cost.
What is worth fixing before selling a house?
There are a few components of your home which, upon repairing or renovation, would help to improve the curb appeal and overall look of the home. Some of them are:
Interior paintings: This is one of the easiest and cheapest ways to improve the aesthetics of your home. With an attractive color combination, you can attract potential buyers. Neutral and lighter colors are mostly preferred when selling a home because they improve the look.
Minor Kitchen renovations: The kitchen is one of those places that most people look at keenly because it is the most used space in the house. Some minor kitchen renovations like painting, countertops, and lighting can be done within a budget and also help to improve the appeal of the home.
Lighting: Good lighting can make the home more inviting and appealing. You can find some affordable lighting options online.
You can also invest in minor bathroom repairs and focus on the overall functionality of the home. In this way, you can attract buyers and finish the repairs within a limited budget.
How do you sell a house in bad condition?
If you want to sell your home for a good price, then it needs to be in decent condition. But if you have no other option but to sell it in bad condition, then you can do a few things like investing in low-cost cosmetic fixes, cleaning and sprucing up the entire space and investing in some other repairs that are on a limited budget. Here you have to understand that you cannot sell your home in bad condition and expect good money, instead invest in some minor and budget-friendly repairs that would improve the curb appeal and overall appeal of the home. In this way, you can sell a house that is in bad condition.