It comes up every now and again. A homeowner who asks me if they shoudl sell their home “as-is.” I can think of several reasons why you might consider selling a home with problems, marketing it in “as-is” condition. The most obvious reason is that there’s no money in the budget to perform the required work. This happens in estate sales where a home in an estate is inherited by heirs. The home may be dated and in need of work, but the estate lacks either the funds or the heirs lack the desire to put the home in best condition for the market. This also happens to folks who need to relocate quickly, or already have relocated and moved, for a job. Often they just want the house off their hands so they can move on fully with their lives.
Although we can all understand why a given seller may need or want to sell a home as-is, I believe that sellers need to know the possible ramifications of doing so. Let’s take a look at a couple of reasons why you might not want to sell your home “as-is,” and what to do if you absolutely must.
You’ll have fewer qualified buyers
When your home is marketed as a fixer-upper, which is what many as-is listings are, you’ll automatically reduce the amount of buyers who can buy your home. For instance, since FHA-backed loans require that certain repairs be made before they’ll fund the loan at closing, your pool of potential buyers typically won’t contain many first-time buyers. This same issue would go for VA home buyers.
Those who are getting a conventional loan may be “getting out of the pool as well” since many conventional lenders also have significant issues lending money for a home that needs significant work. Many conventional lenders will insist that certain items, such as a roof in need of replacement or repair, be taken care of. Insurers won’t insure a home for example if certain systems and features are out of date or dysfunctional.
Then there’s the fact that most buyers don’t have the money to make repairs on a home after moving in, but also they don’t have “the vision” for what the home could be. This keeps them from making offers as they wait for the next listing to come along with a great curb appeal and in a move in ready condition. If you’re not priced for an “as-is” sale that’s an issue. People will pay more for an updated move in ready home. They won’t pay more for one that’s priced like an updated home, but being marketed for sale “as-is.” If you’ve priced accordingly, although your low price will attract the buyer looking for a deal, the reality of the financial commitment after closing to bring the house up to par may prevent them from proceeding with a purchase through due diligence!
Your buyer pool now is limited to primarily cash buyers and most cash buyers are investors – who generally are the most real estate savvy. Investors are out for a bargain, and if you hope to sell your home at all, you may end up taking an offer for far less money than you’d imagined working with the sharks!
You won’t make as much
Today, most homebuyers I work with say they want a home that they can move right into. One that’s move in ready, so to speak. So, why would a buyer want your home? When you consider this question, there can be only one answer. A buyer would want your “as-is” home because it’s cheap. It’s less expensive than the competition to a point where it was worth it to them.
It’s just the nature of real estate, that to sell a home “as-is” you will have to list your home for less than nearby homes that are in better condition. As I mentioned earlier, a low list price will bring out investors and anyone else looking for a bargain. Even at that, be prepared to get beat up over your price, regardless of how low it is, and to sell it for less than you’d hoped.
I’ve seen this over the years. I had client recently spend $10k on their home and it sold for $15k-$17k more than I could have initially imagined due to how it showed after those repairs. The buyer at closing said they saw it and told their agent, “Just get me in that house.” He said he saw the competing listings and could see how no one else seemed to care about their home other than my clients who had truly cared for the home and it was well maintained! Buyers will pay more than the cost of your improvements not to have to do those things themselves. Conversely, if your “as-is” home needs work, they’ll think those jobs will cost “them” five times more than it would have cost you to do those things yourself before selling!
The reality to me, as someone in the real estate industry who sees multiple real estate transactions each month, is that it will be more cost-effective in the long run for you to make the necessary repairs and keep your home in a well maintained fashion so that you won’t have things accumulate on you to deal with all at once when you do get ready to sell. This keeps you away from that dreaded term; “deferred maintenance”
With all that said; If you must sell as-is
I understand however that certain home repairs may be out of the question, due to financial considerations, and some sellers simply must sell their home in its current condition. 3 tips that might help you;
First impressions matter more in real estate than in almost any other venture in life. Giving attention to increasing your home’s curb appeal with some fresh paint goes a long way and it relatively cost effective. Having a good deep cleaning inside. Trust me, even the worst home will look better. The smell of “clean” is always a good first impression! The “freshness” of a little trim paint goes a long, long way to at times overlooking blemishes on a property that might need to be updated.
Today as never before, most buyers will decide whether or not to view your home while house hunting online, so paying attention to cosmetics makes for listing photos that will be sure to draw them in! Sure, they’ll know that there is something wrong or ‘not move in ready’ potentially with the home (“as-is” advertises that point), but if it looks clean and fresh, the perception will be that whatever is wrong with it can’t be all that bad. As always, getting more people to view the home in person is the name of the game when it comes to selling quickly.
Consider a pre-sale home inspection
Every homeowner feels they have a good idea of what’s wrong with their home, but there may be more, or less, than you think. A pre-listing home inspection will give you the definitive answers you need and will go a long way in showing buyers that you’re not only earnest in your desire to be completely honest about the home’s condition, but that inspection may remove fears in their minds as to ‘what might be’ wrong. They’ll have a detailed report that you can provide along with the disclosure to relieve any fears or anxiety about what “as-is” might mean.
Most importantly, through suppling the buyer with the inspection results before accepting the offer, you and your agent may be able to weed out those that will eventually back out per their own due diligence.
Disclose, disclose, and disclose some more …
Don’t ‘short’ the process and go halfway like some do! Protect yourself by disclosing all known issues concerning the home (including those that pop up on the pre-listing home inspection) as required in your state’s seller property disclosure. Make sure on any “yes” answers to questions that you explain in detail what disclosure items you’ve found over the years and if you fixed something, definitely say so. Explain when and how you resolved the issue. Disclose every, last, thing.