Selling a House In Poor Condition: 3 Ways to Get a Fair Price

Defining poor condition | Options for selling a house in poor condition | Option 1: Sell as is | Option 2: Make minor repairs | Options 3: Invest in major repairs | How to decide which repairs are worth making | Where to find a buyer

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.

One of the key decisions to make when selling a home in poor condition is whether to sell as is or put some money into repairs to attract a larger pool of buyers (and hopefully a higher price).

We talked to top realtors and investors about how to approach that decision, as well as options for getting a fair price no matter what shape your home is in.

What does poor condition mean in real estate?

A home in poor condition can mean anything from a house that is outdated but otherwise livable to one that is uninhabitable and may need to be torn down. At the very least, a poor condition home will fall short of other properties in the area that have more curb appeal.

Home is uninhabitable

Homes that are uninhabitable — or close to it — suffer from issues that make them dangerous to live in. Uninhabitable homes may sometimes be referred to as teardowns, although many can be renovated and made livable again. They usually have at least one of the following issues:

• Severe roof damage
• Severe foundation issues
• Major plumbing problems
• Bad electrical wiring
• Pest infestations
• Black mold, lead, or asbestos
• Broken HVAC systems

Properties in need of such extensive repairs generally only appeal to cash home-buying companies and investors looking to purchase homes at a bargain price.

If the home is located in a highly desirable or up-and-coming area, an investor may decide to renovate or rebuild it. Otherwise, the amount you get for the house may depend on the value of the land beneath it.

Major repairs needed

Many homes in poor condition need major repairs that can be expensive to fix, but are otherwise habitable. Some common repairs that may put a house in "poor condition" category include:

• Electrical issues
• Plumbing problems
• Functioning, but damaged roof
• Damaged or extremely dirty flooring
• Minor foundation issues
• Older but functioning HVAC
• Extensive clutter due to hoarding
• Excess dirt or grime due to lack of maintenance

While these types of houses are livable, they suffer from issues that could become hazardous if left unfixed. For this reason, buyers of homes needing major repairs may have trouble getting approved for financing.

Homes in need of major repairs may be desirable to investors and cash buyers since they are usually available at a bargain. Putting some sweat equity into renovations can dramatically increase their value. Depending on the difficulty of the repairs, some traditional buyers may also be open to purchasing homes needing major repairs.

Home is outdated, but livable

Outdated homes or ones that suffer from normal wear and tear may not look great, but the issues are usually only cosmetic. These houses are perfectly habitable and just need some updating, such as:

• Kitchens
• Bathrooms
• Flooring
• Exterior and interior paint
• Finishes and fixtures
• Landscaping

Buyers won’t typically be at risk of their mortgage approval falling through simply because a house needs some updating, so there is a larger buyer pool for outdated homes. However, outdated homes can put off buyers looking for a move-in ready property.

On the other hand, investors — including iBuyers — are often keen on purchasing outdated homes since they may require only minimal repair work to add value and turn a profit. With a larger pool of investors and bargain hunters interested in the property, you may receive more competitive bids, so long as market conditions are right.

Options for selling a house in poor condition

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.

Option 1: Avoid repairs and sell as is

If you don’t have the time or money to invest in repairs — or the amount of money you need to invest in repairs is higher than the potential value they'll add to your sale price — then your best option may be to sell your house as is.

A key benefit of an as-is home sale is that it typically closes faster, since the main buyers are cash investors with the ability to purchase a property without applying for a loan. 

Even though buyers of as-is properties come in with the expectation that "what you see is what you get," you'll still be obligated to follow your state's disclosure laws regarding notifying the buyer of any known defects with the property. And buyers can still try to negotiate if additional issues are found during an inspection.

When selling as is, buyers will definitely factor repair costs into their offer price, but that doesn't necessarily mean you'll be giving away your home.

For example, Dan Belcher, CEO of Short Sale RE, had a client who needed to sell a home fast. “We weighed putting money into repairs versus listing it as-is and disclosing the issues upfront to potential buyers. The numbers showed that even with fixes, they wouldn't recoup the investment through a higher sale price.” Belcher’s client opted to list as-is and ultimately got multiple offers.

Where to focus your efforts when selling as is

When it comes to maximizing your listing potential with an as-is property, it's good practice to put at least some effort in the presentation. However, "there's probably no need to do much beyond removing clutter and doing a basic cleaning," says San Francisco-based realtor Cythia Cummins. 

These minor fixes can often be done on your own for cheap, but if you choose to hire a professional, here are some of the costs you might encounter:

Options 2: Make low-to-moderate-cost repairs and upgrades

Repairs that require minimal cash or time upfront can bring in a larger pool of potential buyers, which can drive up competition and your final sale price. However, there's a risk of sinking too much money into projects that may not pay off. 

"Oftentimes I have seen sellers pour money into a property just so they can sell for top dollar," says Lee Harbaugh, a seasoned realtor based in Arlington TX. "The problem is, those sellers don't always recoup their investment. For example, spending $50,000 on new windows is not going to allow you to sell your home for $50,000 more. Sellers might get an additional $5,000 - $10,000 at best." 

Harbaugh emphasizes knowing your local market and understanding which repairs are worth making.

“Sometimes all it takes is some new paint and a deep clean," says realtor Suzanne Seini, who recently helped a client whose home had been on the market for two months without any offers. "We pulled the home off the market, updated the flooring and paint and added new staging," recalls Seini. "The home sold in less than 30 days over the list price with multiple offers." 

If you opt to make repairs, here’s how much some of the most common home improvements may cost you on average:

Keep in mind that if your home is uninhabitable or requires major repairs, investing in minor fixes could be a waste of money. Such homes may only attract investors, who are less likely to be impressed by a fresh coat of paint or new landscaping. You should talk to a realtor first to find out which repairs will have the biggest impact.

Options 3: Invest in major repairs

Large-scale repairs require a significant investment, and for the most part, realtors are less bullish on sinking that kind of money into improvements before selling.

"If a house needs a costly renovation, such as full roof replacement or new HVAC, it’s better to leave the house at its current stage," says Boston-based real estate broker Seth Williams. A residential property with a dilapidated house attracts home flippers, while a new HVAC won’t bring a greater ROI."

For perspective, here the average costs of some common renovation projects:

While a full-on renovation may not make sense for your bottom line, you may still get a decent result by removing obvious flaws to help buyers see the home's potential.  

For example, realtor Barry Lebow was hired to sell a house that had a lot of deferred maintenance and clear evidence of hoarding. Rather than a full-on remodel, he stripped it to the studs — including ripping out the carpet, kitchen, and bathrooms — so that buyers could see that the house was structurally sound. He also ordered a  pre-inspection and took care of minor issues like bad outlets himself.

“If I had tried to sell it as it was, the offers would have been terrible," said Lebow. "Once stripped, the buyers could see the potential and that most of the bad stuff had been dealt with." He and his client ended up receiving 11 offers and selling for $200,000 more than the home's previously estimated value.

How to decide which repairs are worth making

The value that you extract from a home in poor condition will depend on not only the state of house itself, but also its location and how it compares to others around it.

Even specific repairs can offer a varying return on investment (ROI) in different markets. For example, while fiber-cement siding replacement has an 88.5% ROI nationwide, in Seattle, where the rainy winters make good siding especially valuable, the ROI is 151.3%.[1]

"The key is to understand what components of home upgrades buyers are willing to pay more for," says Harbaugh. "If you don't understand your local real estate market, chances are you will spend money on repairs that you won't get back in the sale of the home." 

To determine which repairs are worth your investment, get quotes from multiple contractors. Then, ask a realtor or two for a comparative market analysis to see what your home may sell for both with and without the repairs.

» FIND: The Best Real Estate Agents Near You

Should you finance your home repairs?

If you don’t have enough savings to cover the cost of home repairs upfront, you may be able to take out a loan or line of credit. However, financing repairs may not make sense in the long-term, especially when you consider interest and loan fees. It depends on the expected return on investment.

“I usually advise against home equity loans for repairs unless the ROI is guaranteed to exceed the loan cost, including interest,” says Jave Blackburn, CEO of WeBuyAnyHouseAsIs. Other real estate professionals we talked to felt similarly.

"Before taking out a loan," says real estate broker and investor Chris McGuire, "it's crucial to evaluate the estimated repair costs and compare them to the potential increase in the sale price."

Conventional financing options

If you do decide that financing repairs make sense, some of the most common loans for home repairs are personal home improvement loans, home equity loans (i.e., second mortgages), and home equity lines of credit (HELOCs).

Each option offers different benefits and tradeoffs.

Home prep services

As an alternative to taking out a home loan, you can also look into home prep programs available through local real estate brokerages and contractors.

"Today, there are various financial arrangements available for sellers to address repair costs without upfront payments," says realtor Josiah Carter. For example, "many contractors are willing to defer payment until closing, which can be conveniently settled through the title company."

"There are also several presale concierge services which will hire the workers and get the projects done and take payment from the proceeds of the sale," advises Los Angeles-based realtor Tamar Asken. 

Often, these programs are offered interest-free to the home seller. "I believe this is often a better solution than financing the repairs from a home equity loan, but a homeowner will have to compare the options for their project and market and see which makes more sense," says Asken.

Where to find a buyer for a house in poor condition

If your home is truly in poor condition, your buyer pool is typically going to include inventors, developers, and bargain hunters. The best place to find them depends on:

• If you want to sell quickly
• If you want to sell for more money

If you need to sell your home quickly, seek offers directly from cash buyers

Cash buyers include companies or individual investors looking to purchase properties as long-term investments or short-term "flips." Since they pay all cash and target distressed homes, they typically make offers without any contingencies.

A major benefit of selling to a cash buyer is that they can close in as little as 7–10 days.

"When I go to look at a house," says longtime real estate investor Don Chambers, "we can usually set a price and agree to a deal within an hour. If we need to negotiate, we can do it right then."

With a traditional listing, says Chambers, all communication has to go through agents, which can greatly slow the process.

Once the deal terms are agreed to, continues Chambers, "I try to close in four days. That's the minimum amount of time it takes the attorney to complete the title work, but you have to stay on top of them. So I usually put two weeks on the contract and tell [the seller] it'll be as fast as I can get the title work done."

While a cash buyer like Chambers can help you sell quickly, he'll be the first to admit that you'll get more money putting your house on the market. 

"I tell everybody, just get an agent and you'll get the most money," says Chambers. "The only time you should sell to a cash buyer is when you have some reason when you need to handle it fast."

Don't accept the first offer

https://listwithclever.com/real-estate-blog/home-value-estimate-websites/If you’re considering a cash buyer, get multiple offers before signing a contract. You should also have an idea of what your home is worth as is on the open market. Each buyer has their own investing strategy, which can result in substantially different offers on the same house. Comparing offers with your home's potential list price is the best way to make an informed decision.

If you want to sell for more money, list with an agent

If you're not strapped for time, listing with a realtor will get your home the largest possible audience of potential buyers. While many buyers want move-in ready homes, plenty are looking for bargains, including homes that need some repair work but are otherwise livable.

"Even if the house needs work, you can still get an agent, and then you'll get a lot of people looking at it and it'll raise the price," says Chambers. Sometimes the price difference can be significant.

For example, realtor and investor DJ Olhausen recently sold a home in San Diego that needed $70,000–$100,000 in repairs to make it fully livable. The seller had received an offer of $515,000 from an investor, but Olhausen advised putting it on the market for a couple of weeks to test the waters.

"The house went on the market on a Thursday and we had over 10 offers in hand by the following Monday," recalls Olhausen. "We took professional photography, held open houses, and I personally reached out to all of my investor friends to try and stir excitement over the property. By the time we were ready to review offers, we had five offers over $600,000, with our top offer being at $675,000."

Choose your agent carefully

When selling a home in poor condition, you want to be especially thorough when vetting the agent for the job. 

"Anyone can list a home for a lower price," says real estate broker Elisha Lopez, "but an experienced listing agent will have a pool of waiting buyers to pull from. If investors and other buyers are looking for a home in a certain neighborhood, they might be willing to pay top dollar no matter what the condition of the house is. 

By contrast, says Lopez, "a new listing agent who doesn’t have a strong buyer network could compare the home to other recently homes in the same condition and lower the sale price by 10-20%.”

» LEARN: How to Find the Agent That's Right for You

Be sure to disclose any known issues with your home

Keep in mind that you’ll need to be upfront about your home’s condition in your listing. This includes informing the buyer of 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:

• The presence of lead paint
• Structural problems
• Defects in the plumbing, HVAC, or roof
• A history of flooding, fire, or infestation

Apart from the legal liabilities of withholding information about your property, many mortgage providers won’t approve financing for buyers purchasing homes in need of extensive repairs. Disclosing your home’s condition helps you avoid deals falling through due to financing problems.

Consider working with a discount broker

Even with the broader exposure afforded by a traditional listing, you’ll likely still have to take a price cut depending on your home’s condition. You'll also need to pay for realtor fees out of the proceeds. 

To save money, finding your agent through a low-commission brokerage could be a good idea. Discount brokerages, which include companies like Redfin and agent matching networks like Clever, offer many or all of the same services as a traditional brokerage, but with a lower commission rate.

For example, Clever can match you with multiple agents from some of the best brokerages in your area, all of whom charge a commission of just 1.5% through our network — half the traditional rate. You’ll still get the support of a top local agent, but you could save potentially thousands on fees. 

You can compare agent proposals to see what they suggest for your listing, and decide for yourself whether to move forward or explore other alternatives. Simply tell us about your property, and get agent proposals sent straight to your inbox.

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