How to Sell Your House Than Needs Serious Repairs
When the time comes to sell your home, if you’re like most homeowners the goal is to list the house, sell it, and move on to the next stage of your life as quickly and simply as possible. But what if your home is a real fixer-upper? Selling a house that needs repairs can really throw a wrench in your plans.
Why? Because trying to sell a house that’s not in tip-top shape means you’re less competitive… and most buyers just aren’t interested in a home that is going to require a lot of work.
The roof shingles are cracked. There’s mold in the basement. There are holes in the walls, and your porch might crumble and kill the mailman at any moment.
Your home is falling apart, and you’re almost positive you can’t afford to repair it.
So now it’s time to get rid of this crumbling abode—but who’s gonna want your (charming) piece of junk? Here’s what you need to know about getting the most out of your fixer-upper when you sell.
Check whether you can afford to fix it up
We’re mostly going to tell you about your options when it comes to selling your home. But first, you’ll want to make sure you can’t afford to fix it up.
If you’re short on cash, check out both the FHA 203(k) loan and the streamlined (or limited) FHA 203(k). These are refinancing programs (that’s right—a whole new loan) that also provide funds for approved renovations. FHA loans come with their drawbacks (lots of mortgage insurance) and benefits (like low down payments), so you’ll want to weigh their pros and cons.
Another option is a home equity loan, or HELOC. Check out the differences, and see if they’re a viable option. But if you really need to sell your house, read on.
Estimate the home’s value
Finding out your home’s value isn’t as simple as subtracting the cost of repairs from your home. You also need to factor in “aggravation costs.” In other words, turnkey homes often sell at a premium to traditional buyers because they don’t have to do any work. If your home needs some sprucing up, you’re likely going to have to incentivize buyers to dig in and get their hands dirty.
Be prepared to sell to an investor Some sellers are particular about who’s going to own their home next. Some don’t want to sell to investment businesses at all. But depending on the condition of your home, you might not have a choice. The more repairs you need, the pool of traditional buyers gets smaller—while the pool of investment buyers gets bigger. A good rule of thumb: If your home needs kitchen or bath remodels, a new roof, or foundation repairs, there’s an 80%-plus chance your buyer is going to be an investor. Plus, if there are serious structural or heating and cooling issues, that could disqualify your home from a number of mortgage programs. That’ll significantly shrink your pool of buyers, but it will make it enticing to all-cash investors. The fastest way to sell your house may be to an all-cash investor.
Getting your house ready to put on the market can feel overwhelming under the best of circumstances.
But when you’re selling a house that needs repairs, the cost and time involved can put your stress level through the roof. (And if that roof is leaking, those repairs can break the bank, too!)
But selling a home that needs major repairs isn’t the same as selling a house that just needs a few upgrades. How do you know when you should fix up your home for sale or when you should sell your home as-is?
Let’s take a look at the differences and explore your options.
Major Repairs vs. Quick Fixes and Upgrades
Begin by performing a realistic assessment of your home’s condition. A great place to start is by comparing your home to similar properties in the local market.
Tour other homes for sale in your area at “open house” events. While you’re there, note the houses’ condition, amenities, and price.
Once you have an idea of what kind of competition is out there, consider the state of the local market. Is it cold (a “buyers market” with more inventory) or hot (a “seller’s market” with less inventory)?
In a buyer’s market, house hunters have more homes to choose from, and that means they can afford to be choosy. For home sellers with a property that needs repairs, a buyer’s market may mean more discerning house hunters.
When there are choices available, many home buyers won’t consider a house that needs work, simply because there are many other options that don’t need work.
In a seller’s market, there aren’t as many homes for sale, so home buyers have to compete for what’s available. This is a better scenario for home sellers, as buyers may not be as picky and may accept a property that isn’t in perfect condition.
Gauging the competition and market conditions will help you decide if you need to invest the time and money into major repairs, focus on just a few upgrades, or skip the repairs and attempt to sell your home as-is.
What Needs to Be Done Before Selling a House?
When selling a home in the traditional way, certain repairs must be completed. Generally, these big-ticket repairs go beyond cosmetics: Rather, they are considered safety issues. In many cases, a home inspection will flag such repairs.
In some states, the law even requires some problems to be disclosed to potential buyers, such as:
Pests such as termites or rodents
Property drainage problems
Before putting your house on the market for a traditional sale, you’ll need to repair any damage caused by termites or mold and eliminate the cause at the source.
These issues are “red flags” that inspectors and (sometimes) appraisers will note when they assess your property.
Most traditional buyers will insist on professional termite treatment. Getting rid of these pests is a process that depends on the severity of the infestation, and may cost several hundred to over $1,000. Repairing damage can take longer and cost more, as you may have to fix both cosmetic and structural problems.
Mold can cause health problems, so you’ll want to take care of it before putting your house on the market for a traditional sale. Professional mold remediation can cost up to $6,000, and you’ll also need to hire a mold inspector.
Aside from these regulated issues, other common repairs may fall into the “must fix” category. Let’s take a look at some of these important fixes.
What are the Most Important Repairs Needed Before Selling?
We’ll start at the top: The roof. In most cases, roof problems must be addressed, as a sound roof is an integral part of a home’s structure. Roof issues can cause safety concerns, as well, so repairs are a must.
Roof repair is among the more expensive home repairs, and not usually a DIY fix. That means professional services are required. Expect a roof replacement to cost upward of $10,000 and take a few days to complete.
Another fix that you just can’t avoid? Repairing or replacing that leaky water heater. Water damage can cause serious problems in your home, so this is one repair you can’t just put off for the next owner.
A new hot water heater, installation, and disposal of the old unit usually costs between $400 and $2,000. Of course, if you have advanced electrical and plumbing skills, you may be able to handle this common repair on your own.
But be careful — a botched job can end up costing you way more than it would to simply hire a professional in the first place.
Electrical issues also require your attention before selling. Outdated wiring and panels pose safety issues and fire risk, so they must be repaired. As most electrical work isn’t exactly DIY-friendly, you’ll want to bring in professionals for this common repair.
On average, replacing an electrical panel costs from $1,200 to $1,700, but can run up to $4,000. This repair takes eight to 10 hours to complete.
Damaged pipes, sewer connections, and septic tanks will require repair. Not only can these problems lead to health risks, but they may also cause serious property damage if not repaired.
Depending on the situation, sewer and septic issues may cost you thousands of dollars. For instance, replacing a septic tank averages about $7,000, while a sewer line replacement may run over $5,000. These repairs generally take several days to complete.
Plumbing problems are another common issue that should be done before a sale. Many older homes experience tree roots growing into the system, or have cast iron or copper lines that need to be replaced.
Pipe repairs can cost thousands of dollars, depending on the amount of work that’s required.
Some inspections may reveal foundation issues . Unfortunately, these are among the most expensive home repairs, but they’re often necessary for a traditional home sale.
Foundation damage may cause problems such as doors and windows that won’t shut, sloping floors, cracks in walls, and water that gathers in basements of low spots. Expect foundation repair to run into the thousands of dollars.
Common Minor Repairs Before Selling
Now, let’s look at other common repairs that many homeowners complete before selling. These may be cosmetic or structural, but they tend to cost less while helping your home attract more buyers.
Painting walls and patching holes and cracks is a relatively low-cost project that has the potential to pay off. A fresh coat of paint makes your house feel and smell clean. Choose neutral colors to appeal to the most buyers.
Replace the caulking in bathrooms and kitchens. Over time, caulk can shrink and become discolored. For an investment of just a few dollars and a couple of hours of time, you can remove old, stained caulk and replace it with a fresh seam.
If you have a few more dollars to spend, you can replace old lighting fixtures. Upgraded fixtures help give your home an updated style. For a budget-friendly option, replace bulbs to brighten your home.
While updating flooring isn’t a cheap upgrade, it can go a long way toward improving your home’s appeal. If new carpet or tile isn’t in the cards, consider having the carpets or grout professionally cleaned for a cared-for appearance.
How to Pay for Home Repairs Before Selling
When selling a house that needs repairs, the big question boils down to this: Does it make financial sense to invest money and time into making repairs and upgrades?
Before you make this decision, you need to know if the potential to make more money on the sale is worth the cost, time, and effort those renovations require.
You’ll also need to consider how you’ll pay for home repairs before selling. If you use cash, you’ll avoid running up credit debt. You’ll also avoid changing your debt-to-income ratio or impacting your credit score right before a home sale.
But repairs are expensive — especially major repairs such as roof and foundation issues, septic system replacements, and plumbing problems, not to mention new appliances, countertops, flooring… the list goes on.
Coming up with thousands of dollars out of pocket is an insurmountable challenge for most homeowners. Plus, that’s cash you won’t have when it comes time to pay for moving expenses or putting a down payment on your next home.
You could take out a personal loan or a home equity line of credit. In most cases, these types of loans have lower interest rates than credit cards.
However, both can negatively impact your credit score, a risk you may not want to take right before attempting to get a mortgage loan for your next home.
Putting repairs on a credit card may be an option. However, interest rates can be high. Your credit score could be impacted, which may interfere with your ability to secure a mortgage loan on a new home after your current home sells.
Each payment option comes with its own pros and cons. Your unique financial circumstances, selling timeline, and current market conditions will help you decide if it’s worth it to pay for home repairs before you sell.
Who Will Buy a House in Need of Major Repairs?
Spend some time learning about your buyer pool before making decisions about selling a house that needs repairs. What types of buyers look for homes that need major repairs?
In reality, most buyers want a turn-key home. But in a hot market when inventory is low, some sellers will be more open to buying a house that needs repairs. Further, there are some buyers who actively seek out “fixer-uppers.”
House flippers, a.k.a.. real estate investors, often seek out homes that need repair. They purchase homes for a low price, renovate the property, then “flip” the house in an attempt to make a profit.
Then there’s the bargain hunter. This home buyer wants to live in a specific area or in a certain type of house, but can’t necessarily afford the market list price.
This type of buyer is looking for a deal, so they’re more likely to buy a home that needs work if it’s in the right location or has the features they seek.
Finally, there’s the remodeler. In most cases, this type of home buyer has the means to buy the house they want, where they want it. However, they enjoy the transformation process, so they seek out houses that need work.
Turning a fixer-upper into a dream home allows the remodeler to start with a blank slate and design their own custom creation.
Weigh Your Options When Selling a Home that Needs Repairs
When it’s time to sell your home, take the time to weigh your options carefully, because even if you’re selling a home that needs a lot of work, you do have options.
After all, plenty of homes for sale need repairs of some kind, and it is possible to sell fixer-uppers. When making a decision, just keep in mind the number of repairs your home needs, the current market conditions, and your unique financial circumstances.
Let’s explore three options when selling a house that needs repairs.
Repair Option 1: Don’t Make Any Repairs and Sell As-Is
There are a hundred reasons why a homeowner may choose to simply put their home up for sale without making any repairs or upgrades.
Maybe the damage is too extensive. Maybe they need to move immediately. Maybe they simply don’t have the funds or time to make the necessary repairs.
Selling a house as-is means that the home is essentially “what you see is what you get.” For a buyer, that means no warranties, no guarantees, no assurances, and no repairs.
For the seller, an as-is listing is often the quickest option to get out of a tough situation. However, selling a home as-is does limit your selling options, so you should expect to receive a significantly lower selling price.
Repair Option 2: Just Enough to Make the Home Desirable
If you have the time and the budget, you may choose to do only the easiest, quickest, or least expensive repairs. In many cases, this may mean projects such as:
updating light fixtures
cleaning or replacing carpets
replacing window coverings
updating cabinet hardware
Completing home improvements before selling will increase your home’s curb appeal, making it more attractive to buyers. And because the house looks good on the surface, this approach may make the larger fixes that are still needed seem less daunting to potential buyers.
Just keep in mind that you’ll still need to price the home to reflect the repairs that are still necessary.
Repair Option 3: Fully Repair the Home
Those homeowners with money and time to spare may choose to complete the full list of repairs. However, it goes without saying that this option will be both expensive and time-consuming.
Homeowners may be able to save some money by tackling some projects themselves. DIY-friendly home repairs may include:
Replacing a kitchen or bathroom faucet
Patching holes in drywall
Cleaning rain gutters
Caulking a tub, shower, or sink
Of course, without specialized skills, many home repair projects are best left to the professionals. From roof and foundation repair to wiring and plumbing projects, bringing in a pro may cost more upfront, but can save you in the long run.
But how do you know which contractor to hire? Start by asking friends, family, and co-workers for recommendations. Once you’ve gathered a list of potentials, make sure each is experienced in similar projects and can provide referrals.
Also, ask for recommendations on neighborhood applications like NextDoor.
You’ll also want to ask how long they’ve worked with their subcontractors and how many other projects they’ll be working on at the same time as yours.
When you’ve narrowed your contractors down to a shortlist, ask for bids. As a general rule, materials should be about 40 percent of costs with a profit margin of no more than 20 percent.
Keep in mind, though, that even the projects with the highest return on investment (ROI) rarely return 100 percent. When choosing where to put your money, consider the ROI home improvement projects:
Partial bathroom remodel (average ROI of 102 percent)
Landscaping upgrades (average ROI of 100 percent)
Partial kitchen remodel (average ROI of 98.5 percent)
Attic bedroom conversion (average ROI of 93.5 percent)
Major bedroom remodel (average ROI of 93.2 percent)
Major kitchen remodel (average ROI of 91 percent)
Replace entry door (average ROI of 90.7 percent)
Porch, patio, or deck addition (average ROI of 90.3 percent)
Basement update (average ROI of 90.1 percent)
Window replacement (average ROI of 89.6 percent)
Pricing to Sell When Selling a House that Needs Repairs
When you decide to put your home on the market, determining the right sales price is key, and it’s both an art and a science. Of course, the price will depend on which repair option you choose.
You’ll also want to consider how long it’ll take to find buyers (a factor that’s also dependent on which repair option you select).
Not surprisingly, investing a considerable amount of time and money it takes to do all the repairs should result in a higher asking price. On the flip side, selling the house as-is will command a price on the opposite end of the spectrum.
Do your research and determine if you’re selling in a buyer’s or seller’s market. Comparing your home to similar, nearby homes will help you make an informed decision.
Next, decide whether you’ll use a real estate agent or go the FSBO (for sale by owner) route. An agent will offer a number of services that you’ll otherwise have to do yourself, such as:
Determining an appropriate price
Listing the home on the MLS
Marketing the home for sale
Negotiating the sale
Completing the paperwork
However, real estate agents will also take a commission, usually about 6 percent of the home’s selling price. This means thousands of dollars less profit in your bank account.
Regardless of whether you sell with an agent or go the FSBO route, a traditional sale means there’s a high likelihood that you’ll have to put money, time, and effort into making your home look more attractive to buyers. From painting to fixing leaky faucets to replacing outdated fixtures and appliances, this equals both work and money.
Plus, you need to consider how you’ll market a home that needs serious repairs. Of course, you must be honest and upfront about your home’s condition. But how do you present a realistic picture of the home without scaring away potential buyers?
It’s a difficult decision. You’ll have to consider the fees and costs associated with each path. Fortunately, there is another — easier — option: Selling as-is to a cash buyer.
Selling As-Is to a Cash Buyer or Investor
If the thought of choosing which repairs to focus on, completing those repairs, paying for the repairs, then marketing a house that’s not in great shape is giving you a stress headache, consider a simpler option: Selling to a cash buyer.
Not only is this the fastest option, but you also won’t have to pay a penny out of pocket or spend any time making repairs and upgrades. In fact, you won’t have to do a single thing to prepare your house for the market.
Easy Outs Homes specializes in buying homes that need major repairs. You’ll receive a firm offer on day one. There’s no need to market the home, and you won’t pay fees or commissions. Best of all, there’s no risk that you’ll sink money and effort into repairs… then still walk away without a buyer.
Contact Easy Outs Homes today to learn how we can help with selling a house that needs repairs.