How do you sell a home in as-is condition without doing any repairs? You might be asking yourself this question because you have found yourself in a difficult, and not uncommon, situation.
Every year people find themselves in a situation where they need to sell a home as-is. Some common example situations we deal with include:
- Inheriting an outdated home where it would cost a significant amount of cash to update,
- The need to sell a Michigan home while living out of state,
- A home is stuck in probate and repairs aren’t allowed.
The list goes on.
In the Metro Detroit area, it’s common for each city to require an inspection of the property prior to the sale. The inspection will highlight deficiencies that must be corrected in order for a certificate of occupancy to be produced.
These lists, in some instances, are quite extensive and a homeowner doesn’t have the funds to complete all repairs. As a result, a need to sell a home as-is.
Plus, deciding to fix up a home carries a lot of risk. How do you know the repairs you make are going to be financially worth the time and effort?
Will you get a return on your invested money, effort and time? You could spend significant resources trying to fix a home up, only to end up worse off — financially.
What Does It Mean To Sell A Home As-Is?
Selling a home as is means the property won’t be repaired or improved before it’s sold. Often, we are talking about homes that people would characterize as a fixer-upper. The truth is that ANY home can be sold as-is.
An as-is home informs buyers that what they see is what they get. It tells them that they are and will be responsible for any repairs to the home if they chose to purchase the property.
Selling a home as-is is a great option for homeowners who may not have the finances, time or desire to undergo the stress of home remodeling or completing repairs.
It’s great for people who want to sell a home without the risk associated with pouring extra money into the home. Buyers love to purchase these homes because they can get into a home they might not otherwise be able to afford.
So, how do you go about selling a home as-is?
You have two basic strategies — sell to a cash investor or go the traditional route — and we will talk about each of these options in greater detail.
Sell Your Home As-Is With A Real Estate Agent
The most common method for selling any home, even an as-is home, is going the “traditional” route and listing it with a real estate agent. There are several benefits and disadvantages to going this route.
On the negative side, it can seem expensive to list with a real estate agent. Commissions typically start around six percent and it’s not uncommon for an agent to have a seven percent commission on homes that are fixer-uppers. Homes with lower price points, like a fixer-upper, may have a higher commission rate.
On top of that, you will need to factor in Michigan and county transfer taxes, title insurance, and other closing expenses.
Of course, you can make an alternative argument. An argument that is based on the belief that a good real estate agent is worth their cost. A good real estate agent will be able to get you a higher value for your home than you could by going with any other method.
If you plan to sell your home as-is in a traditional way, with a real estate agent, let’s look at a few things you can do to increase your chances of success.
Disclose Defects
When you go to sell a home, even a home as-is, you will likely be required to disclose any defects in the property. I say “likely” because each state has their own legal requirements on what you have to disclose and when you’re required to disclose information.
For example, in Michigan, you’re required to disclose information as a landlord even if you have never lived in the property. On the other hand, transfers pursuant to court order, including probate, don’t often require a disclosure.
Be sure to consult with an attorney when you’re trying to determine whether or not you are required to disclose. When in doubt, it may be best to disclose. That’s not legal advice though. Consult with an attorney for legal help.
A seller’s disclosure document lets potential buyers know the condition of the home and what they are buying. It shows the buyers the problems with the home before you get to inspections. I see the seller’s disclosures as a helpful tool for sellers as it can decrease the odds of buyers backing out of a deal later.
For example, we had an investor client who was looking to purchase a fixer-upper home. In the disclosures, it was stated that there has not been any history of infestation of pests, like mice, termites, bed bugs, etc.
During the pest inspection, it was revealed that there was a mice infestation and there was, at some point, a bed bug infestation. There was no evidence of live bed bugs. There was evidence of dead bugs that had recently been treated. It was odd that the seller “didn’t know” about the bed bugs.
As a result, my client backed out of the purchase agreement. They stated to me that they would have been okay moving forward if it was revealed prior to the inspection.
Price It Right
Anything can sell at the right price. Selling a home fundamentally comes down to two factors. First, get enough people to see the home (i.e. market the home), and second, price the home so that someone wants to buy it.
That’s it.
All of the tips, tricks, and real estate advice on getting a home sold fall into one of those two fundamental ideas.
Pricing an as-is home is a bit of an art form. Typically, a home is valued using a past sales-comparison approach. The problem with pricing an as-is home is that there aren’t similar comparables.
Often several adjustments need to be made. For that reason, it’s a good idea to work with an unbiased real estate agent. An agent that will tell you the reality of the situation and not sugarcoat it just to get the listing.
We recommend finding and working with a certified Pricing Strategy Advisor real estate agent.
Good news is that at the Dolinski Group, we have certified Pricing Strategy Advisor agents on staff.
Sell For Cash As-Is
Selling to a cash buyer or an investor is a great way to skip the renovations and possibly bypass the entire listing process.
There are people and companies out there that will buy your house directly, in cash, at no cost to you. This typically means no realtor fees, no closing costs, and no headaches of repairs.
You are often given the luxury of picking the closing date and working with terms that are much more flexible for you.
Here’s what you can expect: a cash buyer or investor will take a look at your home and ask you a few questions. They will look at comparable homes in the area to determine an “after-repair value” or ARV.
What is After Repair Value?
An ARV is the estimated value your home could sell for all fixed up. From there, they will multiply the ARV by a market multiplier; typically 60 to 85 percent. Last, they will subtract the cost of needed repairs to arrive at an offer price.
Let’s look at an example.
It’s been calculated that the ARV of your home is $200,000. This is the value of your home fixed up. We will assume the home is in a hot real estate market and a desirable neighborhood of Allen Park or Trenton, Michigan. As a result, we’re going to multiply the ARV by 80 percent.
Resulting in a value of $160,000 before repairs.
Assume $35,000 in repairs and you have an offer price of $125,000.
The benefits to selling to a cash buyer or investor include convenience, faster closings, and less hassles. The disadvantages are the price. You’re likely to get more money going the traditional route, but you’re also going to have more costs.
If you’re looking to sell a Michigan home as-is, we may be able to help. The Dolinski Group buys houses directly, in cash. We can provide you with a home evaluation at no cost or obligation to you. Get in touch with us today to see if our cash offer program may be right for you.
Cash or Traditional: Which Method is Best For You?
Is an as-is cash method better for you than the traditional route? Or is it better to go ahead and list your home with a real estate agent?
It depends.
There isn’t a one-size-fits-all solution. You have to consider too many variables and evaluate them based on your situation.
The answer will depend on your resources, comfort levels, priorities, the condition of the home, legal obligations, and so much more.
Of course, you can remove emotion out of the equation and try to boil it down to a simple economic question. You can find out which one will pay more and have a higher return on investment — in terms of money, effort, and time.
Each person places a different value on convenience and time. Only you can really determine if one method is worth it over another.
As a real estate agent company, we can advise you and guide you. We can provide you with the information and material you need to make an informed decision.
And, whatever that decision is, we can help you execute on it.
Cash offer or the traditional route. We can help.
What To Do When Too Much Debt On Inherited House?
There are times when you will run the numbers and neither option really works because there is too much debt on the house.
For example, let’s assume a home has a reverse mortgage (more common than you might believe) and the balance is $125,000.
After getting a cash offer and running the numbers going the traditional route, you learn that you will come up short.
You will only be able to get $100,000 for the home. Leaving a $25,000 liability.
So, what do you do?
This is a complex topic that is worth its own article. You have a few options:
- Sell the home and use other assets to cover the liability.
- Deed the home to the lender using a process called deed-in-lieu of foreclosure.
- Let the lender foreclose on the property.
- Purchase the home yourself using a mortgage.
If you’re in this situation, it’s a good idea to consult with an attorney about your options or contact a real estate agency, like our company.
Ready to Sell Your House As Is?
If you’re thinking about selling your home as-is and want an expert’s advice, talk to our real estate agents. We can help you explore your options — cash or the traditional route — and find the method that works best for you and your situation.
Get in touch with us today to sell your home in Michigan. We serve Southeastern Michigan all of the way to Lansing, Michigan. We cover cities like Trenton, Brighton, Grosse Ile, Lincoln Park, Okemos, and more. If you’re outside of our area, that’s okay. We can connect you to an agent in your area with our network referral program.
