🔑 Key Takeaways:
Selling a house in poor condition can be a big challenge. Often, these homes struggle to attract offers because they aren't up to the standard that most buyers expect.
The term "poor condition" can be used to describe homes in a variety of states, but they'll typically fit into one of three categories:
- In need of repairs
- Almost uninhabitable
The key to making a good decision when selling a home in poor condition boils down to determining what shape your home is in and whether it's better to put time, money, and energy into making repairs or just sell it in its current condition as is.
Unfortunately, there's no one-size-fits-all solution. The best advice is to talk to a real estate agent that can help you understand your options and what’s best for your situation.
Before you decide to sell your home, you should determine what condition your home is actually in. This will help you get a bigger picture of whether:
- You should make changes to your home before listing
- You should sell without making any repairs
Making major repairs to an almost uninhabitable home costs a lot of money upfront. You may be able to recoup some of your investment when the house sells but you'd be out thousands of dollars in the interim.
If you don’t have the money to put towards repairs, you should consider cutting your losses and selling as is. You may get a lower price for your home, but you won’t have to shell out any money to upgrade your house.
Even if you have the funds to commit to repairs, it’s best to speak to a local real estate professional about your situation before making a decision. They'll likely be able to help you identify which projects will net you more money for your home, and which aren't worth the cost.
Homes that are almost uninhabitable usually have issues including:
Severe foundation issues
Major plumbing problems
Bad electrical wiring
Hidden mold, lead, or asbestos
Making minor repairs to your home before you sell doesn't require a lot of upfront costs and may help your home stand out from the crowd. If you're really concerned about keeping costs low, you could even make the needed changes yourself.
Some common defects include:
- Some electrical issues
- Some plumbing problems
- Functioning, but damaged roof
- Minor foundation issues
- Failing but functioning HVAC
Fixing these issues could bring your home up to the standard that most buyers and lenders expect. Mortgage lenders will only lend to buyers who plan on buying a home that meets their standards.
You stand a greater chance of meeting both of their requirements if you repair what you can before you list your home.
Homes in good working condition that are outdated may be viewed poorly by potential buyers, meaning they’ll offer less money for your home. However, this depends heavily on the state of your local real estate market.
Updating an outdated home could give you a return on investment and help you rake in a higher sales price. However, if inventory is low and demand is high in your local real estate market, outdated homes may sell almost as well as homes with recent renovations.
Items that are typically in need of updating include:
- Exterior and interior paint
- Finishes and fixtures
To help save on costs, you may be able to make some of the easier changes yourself.
Before you sell a home in poor condition, you have an important decision to make: are you going to make repairs or sell as is?
Committing the time and money to improving your home before you sell could net you a higher price and a quicker sale. However, there's also a chance that you won't recoup your investment.
The best decision for you depends on your specific circumstances. Below, we detail the advantages and disadvantages for each option.
Sellers who do not want to make repairs to their home should sell it in its current condition as is. The buyer understands that you will make no repairs or changes to the house before it sells.
As is homes are often purchased by investors or cash buyers. They try to negotiate the price as low as they can go — sometimes offering as much as 50% below the fair market value of your home.
Conventional buyers may also target homes in as is condition if the house isn’t too dilapidated to qualify for a mortgage.
Advantages of selling as is
Disadvantages of selling your home as is
Advantages of selling as-is
No costly repairs
Homeowners who sell their homes as is don’t have to worry about making any repairs to their homes.
And while cash buyers and investors won’t care about the condition of your home, traditional homebuyers will want to know exactly what they can expect. This means they may want home inspection and appraisal contingencies — which can significantly lengthen the transaction process.
Owners who are selling as-is are also less likely to grant the buyer repair credits towards closing costs. These credits aren’t an out-of-pocket expense but do reduce a seller’s net earnings from the sale.
Homes can be sold quickly
Homes that are sold in as is condition can close in as little as two weeks.
This makes it particularly enticing for cash buyers and investors who are looking to make a quick profit. Since there are no contingencies or financing involved, it’s just a matter of signing off on the paperwork and exchanging the deed for money.
Disadvantages of selling as-is
Homes sell for less money
Homeowners who list their homes in as is condition can expect to get lower offers than other homes listed on the open market.
The words “as is” typically signal to buyers that there's something wrong with the property. Cash buyers and investors tend to take advantage of this to get a lower bargaining price — they usually pay about 60 cents on the dollar for homes in disrepair.
Homes receive fewer offers
Homeowners selling as is may have a smaller pool of buyers willing to take on the challenges of updating a property in poor condition.
Most first-time buyers will steer clear of homes that are selling as is since most government-backed loans will not lend to homes in bad condition.
If a seller cannot find a buyer, their home could linger on the market longer than anticipated and sometimes have the opposite effect of what is intended with as is sales — saving time and money.
🔎What are disclosures?
Sellers are legally required to disclose any known problems of a home when selling as is. This includes telling the buyer any known issues or repairs that need to be made to the house.
Each state has specific requirements for what sellers are legally obligated to disclose. These typically include:
If you misrepresent your house to the buyer, you could be held liable for recovery of damages based on fraud and deceit claims.
Low-cost repairs can be a great way for home sellers to boost the value of their home, without having to commit too much cash and time upfront.
However, if your local real estate market is currently favoring sellers you may find that even homes in poor condition may sell at asking price, even if no repairs are made.
Looking at market conditions and your competition can help you identify what repairs are worth making. This can be done by analyzing real estate trends across online property sites or consulting with a local realtor.
Advantages of making minor repairs
Disadvantages of making minor repairs
Advantages to making minor repairs
You can make the repairs yourself
You could save up to thousands of dollars by making any minor repairs yourself.
If you don’t want to make these repairs yourself, that’s okay too! It may only cost a few hundred dollars out of pocket if you choose to have someone do the work for you.
You can make the repairs fast
Minor repairs may take a few days to complete, whereas major repairs could take weeks or months. You could quickly make changes to your home before listing it without investing too much time or energy.
Disadvantages to making minor repairs
Repairs may not lead to a return on investment
While making minor repairs can help make your home more attractive to buyers, there’s no guarantee you will receive a higher return on investment (ROI).
Most buyers have certain expectations when it comes to purchasing a home. It’s possible that the changes you make may be considered more of a necessity in their eyes to bring their home up to a higher standard. In this case, potential buyers would not offer you a higher price for your home.
Repairs still cost money
While most minor repairs are substantially cheaper than major repairs, they still cost some money.
It’s important to consider what funds you have available to make repairs and stick to a budget. Otherwise, you could end up spending more than you initially expected.
Homeowners who plan to make major repairs to their homes should consider:
- Whether the money you pour into your home for repairs is worth the investment
- How much the repairs could boost your property’s value
Home sellers that upgrade their homes don’t generally recoup the entire cost.
Advantages of making major repairs
Disadvantages of making minor repairs
Advantages of making major repairs
Boost your property value
Making major repairs to your home could increase your property’s overall value.
While you may not get an exact return on investment for any repairs you make, you should be able to get a higher price for your home since you are bringing it up to a standard that traditional buyers expect.
Attract more buyers
Investing in major repairs could potentially attract more buyers for your home.
Since you would be making significant upgrades and repairs, first-time buyers would be able to make offers on your home. They would be able to secure financing from a mortgage lender because your home would meet the standard criteria for borrowing.
Disadvantages of making major repairs
Time and money
Making minor repairs can take months to complete and cost tens of thousands of dollars. There’s no set number of how much you could pay for major repairs and no guarantee for a full return on investment.
Before you start making any changes to your home, it’s important to identify which repairs will bring you the greatest return on investment.
Here’s a look at the return on investment you could expect if you were to replace your roofing with asphalt shingles:
$16,300 (when the home is sold)
Total return on investment (ROI):
If your home is in severe disrepair and in need of several major repairs, consider selling to a cash buyer or an iBuyer to cut your losses.
Financing your repairs 💰
Financing home repairs doesn’t have to come straight out of your own pocket. There are plenty of options available that could help you spruce up your home for buyers.
Type of Loan
Pros of Loan
Cons of Loan
Home Improvement Loan
You don’t have to use your house as collateral
Interest rate is based on your credit score
Home Equity Loans
Can be repaid over several years
Home is used as collateral against the loan
Home Equity Lines of Credit (HELOCs)
Must have sufficient home equity to borrow money
Home Improvement Loans
A home improvement loan is an unsecured personal loan that can be used to cover any repairs or upgrades to your home.
Since they are unsecured, you don’t need to use your house as collateral, and you don’t have to have any equity to qualify. Interest rates and qualifications are based on credit scores and employment history.
Many homeowners choose to use home improvement loans because funding can come through quickly.
Home Equity Lines of Credit (HELOC)
Home Equity Lines of Credit (HELOCs) are revolving lines of credit that have shorter repayment terms. You can qualify for lower interest rates than you would for unsecured personal loans because you must have sufficient home equity to borrow.
If you fail to make your payments on time, the bank could foreclose on your home. The monthly payment can also fluctuate depending on market conditions.
Home Equity Loan
Home equity loans are often referred to as a second mortgage. The loan is paid out in a lump sum that can be repaid over several years in regular fixed monthly payments.
These loans use your home as collateral — meaning if you fail to pay, the bank could foreclose on your home.
Home equity loans offer less payment flexibility compared to other options. They are best for borrowers who want something steady since the interest rate is locked down.
Homeowners who are looking to sell their home in poor condition can narrow down their options by deciding:
- If you want to sell quickly
- If you want to sell for more money
If you need to sell your home quickly...
Cash buyers offer homeowners the opportunity to get all cash for their home and close the transaction in as little as two weeks.
Cash buyers include companies or investors looking to purchase property as an investment to flip for a higher profit. Since they pay all cash and target distressed homes, they typically offer to buy the house quickly and without any contingencies.
Owners who sell to cash buyers won’t have to make any repairs to their home since they buy it as is. The downside is you may lose out on tens of thousands of dollars since cash buyers typically make offers far below market value.
While they may offer fast and easy service, cash buyers are primarily looking out a good deal. Clever can connect you with an agent that can help you figure out how much your home is worth, free of charge without any commitments.
Sellers who want to close on their home quickly should consider selling to an iBuyer. These companies utilize technology to quote how much they would be willing to purchase a property for.
iBuyers will typically make offers close to the fair market value of your home. The tradeoff is that they won’t buy houses that need many repairs.
Owners should consider selling to these companies if they want a quick sale and aren’t against making minor upgrades to their home.
» LEARN: More about selling to an iBuyer.
If you want to sell for more money...
List with an agent
Listing with a realtor is the best way to attract offers from traditional buyers, who typically pay full market value for your home.
One caveat is that they'll typically only purchase homes in decent to good condition. This is because most government-backed mortgages will only lend to borrowers who buy a home in stable condition with no significant need for repairs.
Traditional buyers are best for sellers who want a higher offer on their home and aren’t in a hurry to sell.