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How to sell a disaster-damaged home

A contractor evaluates a damaged ceiling
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Whether a natural disaster damaged just your home or your entire community, there’s nothing easy about your situation. You might need to find an alternative place to live and deal with lost possessions, and you’ll want to feel safe and settled again as soon as possible. For some, that means selling their home.

Can you sell a damaged home? 

Yes — provided you can find a buyer for it. In this era of all-cash and iBuyers, your pool of potential takers is larger than ever before.

Selling a home that’s been damaged by a disaster means finding an individual or company willing to take on the risks. Some buyers won’t consider flood-damaged homes, for example, because of the potential to unearth water damage down the road. Others avoid homes in fire-prone areas because they don’t want to clean up smoke damage. Some steer clear of termite damage or general disrepair because they believe it indicates a bigger maintenance issue that could prove problematic in the future.

Even if your home needs serious repairs, you can still put it on the market. Generally, the more work your home needs, the lower you’ll need to list it for. 

The right path to selling your disaster-damaged home comes down to these questions, says Jeffrey Belzer of Jeff Belzer & Associates with LIV Sotheby’s International Realty in Ventura, California: “What does the seller want and need, what terms do they need and what timeline do they want to see it happen in?” 

How to sell a damaged house

If the situation isn’t completely dire, you might be able to sell your home the traditional way on the market. Here are six tips:  

Tip 1: Talk to your insurance agent

Because your home was damaged, your homeowners insurance policy plays a critical role in evaluating your options. If you expect a big and timely payout, you might be in a good position to make all of the repairs your disaster-damaged home needs. 

That said, claim payment timelines vary. After the record-breaking Thomas Fire impacted homeowners in his area, it took a year or longer for some to receive their insurance payouts, Belzer says.

After a disaster, some insurers can also choose to refuse renewal for a policy, citing excess risk in the area. So as you consult with your agent, ensure that you — or the future homeowner — won’t run into issues with coverage down the road.

Tip 2: Figure out what you can fix

“Rule of thumb: If someone has the funding to remedy the house, they’re going to get more after the remodel,” Belzer says. In other words, it’s usually better to make repairs before putting your home on the market.

Be sure to get estimates before you start making plans — prices commonly jump after disaster strikes.

“After a natural disaster, things that might have cost you $1.50 to replace per square foot now cost $4 per square foot,” explains Logan Morris, a Realtor in Leesville, Louisiana, and a regional vice president for the National Association of Realtors. “Both the labor and the materials become scarce.” 

“As you recover, make things as resilient as possible,” adds Adam Rimmer, co-founder and CEO of FloodFlash. “The more of those steps you’ve taken, the more likely it is that you’ll be able to secure sufficient insurance, and then you can say to prospective buyers, ‘Yes, we’ve been hit by a disaster before, but we have adequate insurance so the property can hold its value.’” 

Tip 3: Find an experienced real estate agent

Look to work with a real estate agent with experience selling as-is homes or fixer-uppers. Not only will the agent know how to help your home appeal to the broadest possible range of buyers, but also navigate the trickier parts of selling a disaster-damaged home, such as proper disclosure protocol or repair contingencies.

Tip 4: Be realistic about price

With your real estate agent, settle on a pricing strategy for the home. If major repairs still need to be handled, prepare for a lower list price.

“The home becomes heavily discounted because those things still have to be done,” Morris says. “Buyers become worried about what they don’t know and what they might find out once they take possession of the home.

Tip 5: Stay flexible

In a disaster situation, realize you might need to adapt to uncontrollable circumstances.

“In many cases, sellers who are forced to relocate have very few options except to sell the home as-is with contingencies that they will make repairs as soon as materials are available,” Morris says, adding that an alternative is to go into escrow with a credit for repairs. As repairs are completed, the contractor can make draws against the escrow account. 

Tip 6: Disclose everything

While you want to be flexible for buyers, you should be rigid about one area for yourself: disclosure. Don’t try to hide any disaster-related damage. 

“Rule No. 1 is: Always disclose to be on the safe side — even if you think it’s immaterial or not a problem at all,” Morris says.

“It’s always better to over disclose rather than under disclose,” Belzer says. “When you do that, you’re absolving yourself of the issue that it wasn’t made clear. You really want the buyer to know the condition of the property they’re buying.” 

With full disclosure, a willingness to work with your buyer, and the right real estate agent, you can sell your disaster-damaged home.

Written by
Kacie Goff
Personal Finance Contributor
Kacie Goff is a personal finance and insurance writer with over seven years of experience covering personal and commercial coverage options. She writes for Bankrate, The Simple Dollar, NextAdvisor, Varo Money, Coverage, Best Credit Cards and more. She's covered a broad range of policy types — including less-talked-about coverages like wrap insurance and E&O — and she specializes in auto, homeowners and life insurance.
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