In today’s real estate market, the demand for homes comes with a few “added extras.” There’s a large demographic of buyers who want a property to make their mark on — with many seeking a “fixer-upper” that they can renovate to meet their standards of living. So, that presents a tricky dilemma for homeowners looking to sell a property with severe repair needs. Some people on the market are open to the idea of renovating a house, but many others are deterred by the concept of finding a problem that could take up a lot of their time and resources.
Let’s be honest: when you sell a home with severe repair needs, you need to understand who your target market is. There are a few pros and cons of selling a house with repairs that you should consider. Here are two of the routes you might decide to travel:
Fix and List it
This solution could enable you to sell a home fast and efficiently. Fixing up and putting the house on the market is a way of increasing your home’s value and casting your net wider into the real estate pool. More buyers will be willing to bite — which could provide excellent financial possibilities. You’ll have a better opportunity of making a sale promptly and without a hitch.
However, the reasons not to do this are equally valid. There’s no guarantee that the potential pricing increase justifies the amount of money you spend doing all the hard work and renovating. You need to weigh how much you stand to gain and lose from this situation — which might be complicated, considering how unsure the current state of play is with real estate.
Sell As-Is
The second option is to continue down the “as is” sales route. This problem could present itself to the low-budget investors among you. It’s a tempting prospect because there’s the possibility of a quick sale without the need for renovations.
That said, you might open yourself up to potential cash buyers but at the price of a high bidding amount. This approach will limit how much your asking price could reasonably be and what your property is realistically worth. Part of it depends on where the local and national market lies with finances and repair demands on properties in your state. Let’s also not forget those who are situational buyers. Sometimes, homeowners naturally want to get rid of their run-down properties, so they pass the buck on to investors or flippers.
Understanding the Fixer Upper Market
A fixer-upper is a property needing significant repairs or renovations before it is livable or ready to sell on the market. Because of this, these homes tend to be cheaper to buy, making them a good investment for those willing to put in the work to fix them up. In many cases, these houses can be fixed and renovated to the buyer’s personal taste, making for a unique opportunity to customize your living space, all while building equity to the home.
For many home buyers, especially first-time home buyers and amateur real estate investors, a fixer-upper is an enticing financial prospect. With the low price of acquisition for the home, the financial barrier for entering the housing market becomes much lower, and this can be very helpful in some areas where mid- to high-tier housing markets are much more active than those at the lower end of the spectrum.
Flipping these types of properties can be very profitable as well. More often than not, an older house that is in need of a lot of work is stuck with an old architectural design or setup, which likely won’t be as appealing to future home buyers. The act of modernizing and getting the house up to code can often cost tens of thousands of dollars in cosmetics (i.e., new floors, new paint, a new kitchen, landscaping the yard, or pressure washing the exterior), but add an incredible $100,000+ in equity to the home on the back end. Not only this, but the home buyer gets to personalize and choose the aesthetic style of most all of the home, as it was basically all bare when they purchased it in the first place.
Assessing the Condition of Your Home
When arranging to have work done, the key areas are typically: the roof, siding, flooring, kitchen, bathrooms, and yard work. Every visible part of a house is essential in its own way. For instance, if the roof appears damaged, one can expect that leaks will put the rest of the building at risk. Siding that has seen better days will lower both its facelift and insulation, and therefore should not be ignored. Always check on these key home issues.
For new homeowners who are taking readings to see the extent of what upgrades they will need, they should look for:
Roof: Missing roof shingles, signs of water damage, or visible sagging.
Siding: Signs of split/cracked siding, lightly warped siding, and/or funguses and mildew.
Flooring: Does it make a sound, flattering color, and does it look like it’s lifting?
Kitchen/Bathroom: Focus on key areas such as, below the kitchen and bathroom sink, near the drainpipe, the base of the toilet, and the bathtub of the bathroom.
Yard Work: Is it presentable? The focus should be on “curb appeal.” Are there weeds growing in the driveway? There should be something landscaped in/around the visible areas of the parameter of the house. However, not so much it seems invasive. Is the fencing falling apart, and how about other structures around?
Remember, you only need to look internally if you suspect potential damage due to what you find while observing the exterior of the house. By going through this list yourself, you’ll be able to weigh the risk-tolerance of what you are capable of as a homeowner.”- Seniorhousing.org
The Cost of Renovations vs. Selling As-Is
Homeowners need to factor the cost for repairs, remodeling, landscaping, and possibly the roof. When coming up with a number for these things, you can get pretty creative, but just don’t be unreasonable. A 20k bathroom and 50k for the kitchen are on the higher ends. You could probably do a bathroom for 10k and a kitchen for 15,000 too, depending on the house. Those higher-end numbers for part of a bathroom and some kitchens in a million-dollar home. When the house is in better than average condition, the number only goes up from there.
ROI – Obviously the ROI on these things do count. A new kitchen could pay off at about 80%, while an additional bathroom might be a higher/lower percentage. These numbers are based on taste, the market, and a number of other factors. usually, you can look at cost versus value charts to see what you need to do to get the house ready for resale.
Selling to Home Buying Companies
The idea of selling to home buying companies can seem like a dream come true. In general, these are “we buy houses for cash” businesses, so you don’t have to worry about the longer, traditional way of selling a home. If you need to abruptly move for a job or had sudden financial issues, using a home buying company can be done and dusted within days instead of the usual several weeks or (yikes) months.
But we’d be totally remiss if we didn’t mention the other side of it. The big “cons” list. The offer to buy will likely be much lower than if you went a more traditional route (an initial loss in cash) because the home buying company, like other realtors, are planning to make a profit (duh). Learn about the pros and cons of selling to a home buying company.
There are certain things to look for when selling your home to a home buying company, like checking to see if the company appears transparent about the process/estimated offer/terms, are licensed/accredited, and have overall positive customer reviews. Also, don’t be afraid to check out similar businesses in your area and see what services each of them brings to the table; you’d have to do the same for the housing market if you were selling your home a more traditional way! So it’s just good practice and definitely beneficial.
Preparing Your Home for Sale
The first impression step is the most important. Remember to work on your curb appeal first. Now, you’ve probably got a lot of projects to take on, but you want potential buyers to make it through your newly painted front door, don’t you? The exterior of a home is the first impression and it needs to be a good one. Mow the lawn, trim the hedges, and place some freshly potted flowers in the garden—a little color never hurt anyone. Include any and all minor repairs. Change outdated light fixtures, replace or clean the carpet, and apply a new, fresh coat of paint (to both the interior and exterior). Time to pull out the camera! This is where you showcase all of the work you’ve done. New kitchen? Take a photo. Updated bathroom? Take that photo. Remember to sell the dream here.
Assess: The first step is to take a good, hard look at your home and determine if you should renovate, or if it’s better to move on and sell. Take a step back, look at everything around your house and what condition your property is in. See what exactly needs to be repaired around your house, and weigh the costs and benefits of said renovation investments. What are the location, real estate trends, and demands for the housing market in your area?
Weigh: What will renovations cost, and how can you tip the scales of your home’s current market value in your favor? Be realistic and work out what renovations are “worth it” in the end. Write everything down on paper and get more house appraisals to get as much information ahead of time. Sell: Consider different selling options out there once you have hit the real estate market. Would you like to go the usual real estate route, or like to try your luck FSBO, selling your house on your own? Do your research before you make such a large decision of “how to sell my house.