Dear Real Estate Adviser,
I owe nothing on my house and would like to sell it, but it is in poor repair. I don’t have the funds to bring it up to market price.
Should I sell to an investor group? How do I get the most out of a deal like that? Can I ask for time in the home after the sale?
You are talking about selling a house “as-is,” and the majority of as-is purchasers are investors, but not all. Since you’re the outright owner of a valuable asset, there is no sense in throwing away money in such a sale, even if the place is a little rough around the edges.
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So for starters, you should know that the assortment of “ugly home” investment companies out there will only pay you only about 60 percent on the dollar, based on comps of similar homes in excellent condition.
If you call one, odds are that you’ll only reach an individual who is just bird-dogging opportunities for a larger investor or group that applies a strict cost model to every deal.
Selling a house as-is
On the other hand, individual investors typically will pay a little more and perform work themselves, in part because they don’t have to pay a middleman. In general, the “pros” of selling to investors are a faster closing, no agent commission and few, if any, closing costs.
Not that you should forgo an agent who can go after conventional buyers. When you’re selling a house as-is, you might talk about a commission below the standard 6 percent, split with the buying agent if there is one, or do a fee-paid arrangement. Agents who handle short sales have the most experience with as-is homes.
Selling a house as-is doesn’t excuse you from disclosing known defects. Nor does it shield you from any liability for misrepresenting the condition of the property. Your disclosures won’t obligate you to perform any repairs. You should make the fact clear from the beginning that you aren’t able to repair anything for buyers.
The buyer will no doubt pay for an inspection. Realize that most mortgage lenders will insist that a home not have structural, safety or health issues before they can lend money on it.
Keep clutter to a minimum
Even if the place is a bit battered, that doesn’t mean you shouldn’t keep it as orderly and clean as possible, both outside and in. Keep the yard mowed and resolve to be ready for viewings at all times. Keep surfaces clean, beds made, dishes put away and as much clutter as possible stored and hidden.
Know what your bottom price is going to be and be ready to make a quick counteroffer. If just a thousand or two stands in the way of a deal, you always can relent and trim your price accordingly.
It’s not uncommon for the seller to stay in the house for a short time in a “post-closing possession.” But buyers don’t like these because it creates a landlord-tenant situation with a potential for abuse. Don’t expect to be given anything longer than a 30-day lease.
The bottom line? You should shoot for a price of 75 cents to 80 cents on the dollar, depending on what needs to be done at the house of course. The lower number is more appropriate in a tough sales market while the higher one is more apropos in a seller’s market. In a $150,000 home, that’s still a discount of $30,000 to $37,500.
RATE SEARCH: What if you decide not to sell? Find the best rates now to refinance.
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