Selling a house in poor condition is a challenge that many real estate investors face. It is not easy to convince someone to buy a house with a cracked foundation, potholed driveway, dingy floor or a leaky roof.
So, What Exactly Do We Mean by a ‘House in Poor Condition’?
Also known as a lemon in industry lingo, a house in poor condition is one that needs work beyond cosmetic repairs and minor updates. It could fall into one of the following categories:
- Fairly good, but in need of updates – This is a house that has some deferred maintenance or general repair issues, but is in generally ‘fair’ condition. Such a property could be characterized by an outdated kitchen, cluttered interior, stained floors, outdated bathrooms, peeling paint, weathered exterior, and outdated light fixtures.
- Visible repairs needed – Inhabitable, but with more serious problems such as electrical issues, roof damage, plumbing problems, foundation issues, faulty HVAC, damaged flooring, and non-functioning faucets.
- Totally uninhabitable – Such a real estate property has multiple issues that make it uninhabitable including severe roof damage, black mold, termite infestation, serious foundation problems, asbestos or lead issues and severe chimney damage.
How to Sell a House That Is in Poor Condition
Wondering how to sell your house in poor condition? Here are some tips for selling a house that needs repairs:
1. Sell as-is to a real estate investor
You must have seen signs that say ‘We’ll purchase your house for cash’ or ‘We purchase ugly homes for sale in any condition’. There are many savvy investors in the real estate market that are always looking for a distressed property that they can buy quickly for cash. After buying houses in poor condition, they fix the problems and resell them at a higher price.
If you don’t have the money, time or motivation to fix up your house, you could consider selling a house as-is to a real estate investor. All you need to do is provide full disclosure about any known problems. The buyer will then take responsibility for any repairs required. Since there is no real estate agent involved, there are no commissions to be paid. In addition, you will not incur any closing costs. As part of their cash offer, the real estate investor will typically pay off any outstanding tax liens, house payments, and other financial obligations.
Unlike traditional real estate transactions, selling a house to a cash buyer is very fast. Since the real estate investor is buying in cash, you will not have to wait for the buyer’s loan approval. In addition, there is no real estate agent, home inspector or appraiser involved. The investor handles all the paperwork.
Usually, an investor will make a cash offer within 24 hours after meeting you. If you accept it, you will receive the full payment within a few days. This payment will not have any deductions for closing costs or hidden fees.
However, you need to be wary of unscrupulous investors that will want to take advantage of you when selling a house in poor condition. Such investors will manipulate you to accept a cash offer that is way below the home’s fair market value.
2. Sell by yourself (FSBO)
The other way of selling a house in poor condition is to find buyers yourself. This strategy is commonly referred to as For Sale By Owner (FSBO). Unlike selling to an investor, For Sale By Owner is a hands-on approach that requires your total involvement. You will be responsible for setting the asking price, listing your property, advertising, hosting open houses, negotiating, and closing. If you have experience in selling houses, this is the perfect option for you.
You can advertise your home on real estate listing sites such as FSBO.com, ForSaleByOwner.com, Homefinder.com, Homesbyowner.com, and Craigslist.org. Alternatively, you can get listed for free on property listing websites like the Mashvisor Property Marketplace. On this listing platform, investors and agents can actually set a filter to view only properties for sale that need repairs. This means your property will be front and center for the right audience. Potential buyers will also be able to analyze the investment potential of your property based on metrics such as cap rate, cash on cash return, rental income, and cash flow which can help you move the property more quickly.
When selling a house in poor condition by yourself, working on a few low-cost, cosmetic fixes before listing can significantly boost the value of your property. For example, you could repaint the interior, replace old faucets and lighting fixtures, refinish existing cabinets, and replace broken windows. With these simple improvements, you can add several thousand dollars to your asking price.
When listing your home, be sure to downplay the negatives and highlight the positives. For instance, you could mention major selling points such as the school district, amenities like restaurants and parks, and attractions like beaches or mountains. Some buyers might find it to be a good deal simply because of the location. Just remember that by “downplay” we don’t mean to hide the negatives during the selling process!
3. Sell with a real estate agent
If you don’t have any experience in selling a house in poor condition, working with a real estate agent would be a good idea. An experienced realtor will be familiar with the selling prices of similar houses in your area. As a result, they can help you set a realistic asking price for your property. A good agent will also advise you on what improvements you can make to make your home appealing. They will even refer you to reliable contractors that you can work with.
When it comes to listing, an accredited real estate agent can get your property added to the MLS property listing. This will give you exposure to a large pool of prospective buyers. When a potential buyer makes an offer, your agent will negotiate on your behalf to ensure that you get a good deal.
However, finding a real estate agent for selling a house in poor condition is not easy. Most agents will refuse to list it until you undertake the recommended repairs and renovations. And the commission for a real estate agent is usually about 6% of your home’s sale price.
Selling a house that needs repairs can be a very time-consuming and frustrating process. Compare the home selling tips above and decide what works for you. And if you are able to sell in a seller’s market, you may make a handsome profit!