Selling a house “as is” doesn’t have to mean heavy financial losses if you know what you’re doing.
On one hand, you are risking taking a hit on the value of the house. On the other hand, you need to sell and you might not have the cash to make the necessary repairs.
Fortunately, you have options.
The first thing you have to understand is what selling “as is” actually means. Once you’re clear on the definition and what’s required from you as the seller, you can dive into strategies on how to sell fast if you need to, or maximize your sale price by selling with a real estate agent.
What Selling “As is” Means
When you sell a home “as is,” it means that you will not make any repairs to the house once it is sold. For the buyer, what they see is what they get.
This doesn’t mean there isn’t still an inspection period. In fact, there is more importance placed on the inspection when a home is for sale as is.
It also doesn’t mean that you are completely absolved from any responsibility.
You, as the seller, must still follow the disclosure laws in your state. If you misrepresent your house to the buyer you may still be on the hook for any expenses that you tried to hide.
You’ll also want to make sure that buyers know you are selling as is with the right to inspect. This is extremely important. If you use a real estate agent make sure they communicate that clearly to the buyer. Buyers tend to freak out when they here “as is”. You need to put them at ease by letting them know that they can change their mind after if they don’t like the results of the inspection.
Now that we got the definition out of the way, we need to figure out the how you should sell your house. The first thing you’ll want to do is gauge your local market.
Understanding Current Market Conditions
When you’re setting out to sell your place as-is, you need to take a survey of the current market conditions in your area to figure out your next move.
But how do you determine the market conditions in your area?
The first thing you need to understand is that your market is your specific neighborhood or city and the type of house you are selling.
The market conditions for a single family home in your condition could differ from the market conditions for a multi family home.
1) Use Forums
Forums can be a great place to get some opinions from people that live in the area you are trying to sell the house. They can really come in handy when you’ve inherited the house and you don’t know much about the local market.
One of my favorite forums is city-data.com
Head over to the city-data forums and enter in the name of the city
You should make an account so you can put up a post of your own.
2) Home Value Estimators
There are a few sites online that give out home estimates. You have to take most of these with a grain of salt–they tend to be inaccurate by as much as $15,000.
They can be a useful tool but take the number with a giant grain of salt.
3) Ask a Real Estate Agent
This is going to be your best bet for getting a real, honest and accurate valuation of your home under any condition. Agents have access to the real numbers and can run comparative analysis quickly. Simply asking them their opinion on the market in the area can put a great reference point for you.
Once you’ve assessed the market conditions in your area, you’ll want to dive deeper into the pros and cons of selling to a wholesaler, investor, or with an agent.
Selling to “We Buy Houses Cash” Companies
Here is a a word of caution about the “we buy houses cash” businesses that seem to be all over Google and all over your neighborhood.
In order to make a profit, they can only give you between 60 and 75% of the actual value of your house. You are almost always better off selling your house for a well-below retail price and attracting buyers that have been staring at retail prices all day on the computer before seeing your listing.
If you absolutely must sell your house extremely quickly, it would be a wise investment to take a day or two and just reach out to investors in your area. They are typically individuals (not companies with marketing budgets and costs) and they have cash.
Selling to an Investor
Talking to investors is always a good idea when you are trying to sell a house as-is fast. If you don’t know any real estate investors in your area already, don’t worry!
You can use meetup.com to find out where they hang out. Simply go to meetup.com and type “real estate investing” in the search for your local area:
You can either go to the meet up, or try to make a connection with a few online by checking out their profiles and finding contact information. It’s always better to go meet them in person if you can.
Before you make the in person connection , ask a real estate agent to describe the current market conditions to you,such as is it a buyer’s or seller’s market.
If they say it’s a seller’s market, you’ve got the green light to sell with a real estate agent knowing you can get a decent price and sell fairly quickly.
If they say it’s a buyer’s market and inventory is starting to pile up, you may want to consider schmoozing a bit more and ask them what they think about your particular situation. If you can get multiple investors interested in your property, you can get them to bid each other up which will help your bottom line.
Listing Your House with a Real Estate Agent
Selling your house with a real estate agent is going to net you the greatest returns. If you have even just a little time to sell it, you should definitely sell it through a realtor. The only downside is it takes more time. If the buyer requires financing, that is going to be the main hold up. It typically takes anywhere from 30-60 days to close a deal with financing.
If your agent finds a buyer that has cash, you can close the deal a lot quicker. Within a week depending on how fast the title company can act.
If it’s a hardcore seller’s market in your area, it’s worth it to just put the house up for sale with a realtor–whatever the condition. You’re bound to find a cash buyer that is ok with a little fixing up and you may not see too bad of a loss if multiple parties find themselves competing to buy your home.
You’re not always going to find a cash buyer though so you’ll want to know a little bit more about what happens when someone interested in your house needs a loan.
Bare Minimum Repairs for Lenders
If your house isn’t up to code, banks may find it “non-lendable.” This will cut out any buyer that can’t pay cash. The buyers that are left are mostly investors and they will want a hefty discount.
This means you will lose an inordinate amount of money if you don’t make the repairs.
The things that will need to be repaired before a bank will loan on a house are the things that make a house “livable” or “habitable.”
Here are some things that will throw a red flag up to lenders if they are in bad shape:
If you are reading this blog post, chances are it’s the roof you’re most worried about. It’s expensive to fix and there is a huge grey area in most cases. The roof still works, but it’s nearing the end of it’s life–judging just how close to the end of it’s life and whether or not it will trigger a red flag from a lender is tricky.
If you are able to come up with the money to get the roof fixed, you should.
Roof repairs bring an ROI of 75%–making it one of the best investments you can make for the value of your house. Combine that with the fact that buyers will overestimate on the cost of the repair if they had to do it, and you have a profitable investment.
If you don’t have the cash to make the repair but you will make a profit from the sale of the house once it closes, you have the option of putting the cost for the repair in escrow contingent on a successful closing. That way, you don’t have to shell money out of your own pocket without the guarantee of successful sale.
It goes without saying, but you need to have proper climate control in a house for it to be considered livable. In areas with a harsh winter, banks will normally not loan on a house that doesn’t have heating.
A study done by the National Association of Home Builders found that the average lifespan for a heating system is 15-20 years for “forced air” systems and 13-21 years for hot water radiators.
The general rule of thumb is to replace a unit when it’s beyond 3/4ths of its predicted lifespan, and the repair will cost more than 1/3 of the replacement.
As long as the heating system is actually working, you should be in ok shape if you’re selling your house as is.
3) Safety Concerns and Water Supply Issues
A bank won’t lend on a home that has a compromised water supply or inadequate plumbing.
Things that might seem small to you could end up throwing your house into the “non-lendable” pile if they trigger a safety concern.
Outdated outlets are another big worry for house safety concerns. Take stock of anything that me be considered hazardous around your house and take care of anything you can afford to fix.
Some Buyers Can Still Get a Loan
If the house still is in serious need of repair, you may be in luck if the buyer is using an FHA-insured rehabilitation loan.
The Federal Housing Administration, also known as the FHA, started insuring loans all the way back in the 1930’s as a response to the Great Depression to get homeownership moving again. FHA loans are popular because their requirements are less strict than a conventional loan.
People with credit scores as low as 580 and a 3.5% down payment can qualify as long as they are buying a house they will be living in.
The loan buyers will use for your fixer upper is called an FHA 203k loan. The lender will loan enough money to cover the purchase of the house, as well as the amount it will take to cover the repair.
The lender expects for the loan to come out to be about what the house would be worth on the market completely repaired.
So all is not lost if a buyer needs financing and your home isn’t lendable through traditional avenues.
Now that you know your options, let’s look at how you can generate maximum interest and value for your house.
Maximizing Your Return
Don’t Take Low Ball Offers
Don’t feel pressured to take the first offer that comes your way if they are trying to lowball you. Understand your market and establish a floor price that you are willing to take. Confirm with a local real estate professional that the numbers you’ve come up with are reasonable and stick to them.
Get an Inspection Before Putting the House on the Market
Getting an inspection before putting the house on the market is one of the smartest moves you can make in your situation. It puts all of the cards on the table from the beginning and shows potential buyers that you are being completely transparent with the flaws in the house.
It also helps to alert you of any potential problems before an issue comes up with a buyer. It gives you time to make a repair or have a plan when a buyer makes an offer. Knowing the extent of the damage and what it’s going to take to repair it can set up to make the right decision early on.
Set Your Price Low To Encourage Multiple Bids
Have you ever wondered why people will sell stuff at an auction without a reserve or a very low reserve?
They’re not crazy, it actually works.
A study in the American Economic Review found that 42% of auctions exceeded the fixed list price of the exact same item online–even when that fixed-price item was on the same webpage as the auction.
Even as far back as ancient Rome, scholars would debate whether an auction should be void if the buyer was infected with “Bidder’s Heat.”
Setting your price slightly low can encourage more interest and might even spark a bidding war. A few parties bidding against each other can net you more money in the long run.
Of course, you’ll want to confirm with a local real estate agent that your area is ripe for a bidding war before taking the plunge. Just don’t go overboard with lowering the price.
You’ve been armed with the strategies you need to succeed at selling your home as is, whether you are selling to an investor, wholesaler, or on the MLS. Remember, just because you are selling “as-is” doesn’t mean you have to take heavy losses and it doesn’t mean you are absolved from all responsibility.
Make sure you disclose all known issues with the house, understand your local housing market by networking with investors and real estate professionals, and maximize the leverage you do have to ensure you get the most money possible from the sale.