Are you trying to figure out how to sell a house in poor condition?
In this guide, we’ll go over:
- Different levels of physical conditions you house could be in
- How to decide what to do with your house
- Things to know before making repairs
- Your options for selling your house, no matter the condition
Let’s get started…
What is a Property in Poor Condition?
People will often say that they saw a house in ‘poor condition’, but that can mean multiple different things. The condition of a house can range anywhere from needing simple cosmetic updates, to being structurally unsafe. Let’s talk about the different levels of physical conditions a house can be in.
Needs Cosmetic Updates and Repairs
These are things that don’t involve major repairs, but could still cost you a good bit of money to update and fix. This means that most likely the bones of your house are still good. Common things that we see that need to be updated are:
- The Kitchen – Cabinets and Hardware, Countertops, Rusted Stove, and Leaky Faucet
- The Bathrooms – Leaky Shower Head and Faucet, Vanity and Cabinets, Dirty Shower, Peeling Paint
- Old Light Fixtures
- Just an Overall Dirty Interior
- Dirty, Stained, or even Peeling Floors or Carpets
- Peeling Paint or Wallpaper throughout the house
- Overgrown or Mishandled Landscaping
- Exterior Damage to Siding or Faded Paint
We usually call these things the ‘lipstick’ of a house.
These are things that an inspector would see, but would just write in their report (more on this later). However, an Agent or a potential buyer might consider your house to be in bad condition if they saw these issues.
Obvious Damage and a Lack of Maintenance
These are things that could mean major repairs are in the near future for your house.
- Electrical Problems, such as light switches not working
- Plumbing Problems, such as some leaks throughout the system, or broken faucets
- Roof Damage, such as small leaks that can lead to water damage
- Outdated and Damaged Kitchen (That could still work)
- Outdated and Damaged Bathrooms (That could also still work)
- Struggling HVAC System
- Broken Light Fixtures
- Visible Foundation Issues, such as Exterior Cracks, or Window Separation from Bricks
- Damaged Flooring
- Wood Rot, which can be known by bouncing floors, or Piers and Beams being attacked by Termites
These issues pose major problems, and potential buyers will be wary about buying your house. If you have a property with these issues, you might have to fix them before it can be sold because a buyer’s lender might not be able to finance the property.
There is a whole list of things that can make a home totally uninhabitable. This list includes things like:
- Extreme foundation issues
- Major chimney damage (If your house has a chimney)
- High levels of Radon
- Broken HVAC system
- Electrical issues, such as frayed or exposed wiring, or even just outdated electrical systems
- Plumbing issues, such as a broken water heater, or leaky pipes that have caused water damage
- Termite damage that has gone unchecked for a long period of time
- Black Mold
- Asbestos and Lead
These things are dangerous enough that it is unsafe to live in the home, no matter what caused them. If you have a property with these issues, you will probably have to work with a cash buyer or investor because normally, a buyer’s lender won’t lend money on a property with these issues.
Now I have an idea of where my home falls on a scale of physical condition. What should I do next?
This might sound like a pointless step that you just want to skip over, however this is probably the most important step.
Think about what you want to do.
How much time do you want to spend on the house?
What is the easiest solution for you?
Is it worth my time to put any work of effort into this house?
What will happen if I don’t do anything about this house?
Do I even want to make repairs to my home?
If I do decide to make repairs, what all would I have to do?
Take time to think about these questions and figure out exactly what you want to do.
Before you take time to think about exactly what you want to do, understand that there are really only 4 main options:
- Make repairs and sell the house
- Make repairs and keep the house
- Don’t make any repairs and sell the house As-Is
- Don’t make any repairs and keep the house
What if I decide to make repairs?
If you do decide to make repairs to your house, there are few things to know before spending any of your time and money on renovations.
Current Market Conditions
Look at the market you’re in right now. Is it a Seller’s Market, or a Buyer’s Market?
If you’re in a Seller’s Market, then homes will be selling quickly at or above listing price, the price of homes will be rising, and there aren’t a lot of houses on the market.
If you’re in a Seller’s Market, then this means that you have a better chance of selling your home without needing to make any repairs or renovations.
If you’re in a Buyer’s Market, then homes will be selling slowly at or below list price, the price of homes will be falling, and there are usually plenty of houses listed for sale.
If you’re in a Buyer’s Market, then it is probably a good idea to make repairs and renovations, unless you want your home to sit on the market for months and eventually sell for much less than expected.
Look at the neighborhood you’re in. What do the houses around you look like?
Is there a mix of properties that are in good shape and some properties that are similar to yours? If there are multiple properties that are similar to yours, then it might make more sense to sell your house so you don’t have to do any repairs.
Are all the other houses around you completely clean and renovated? If all of the houses around you are new and renovated, you might want to make repairs before selling your house so you don’t lose as much money.
Before spending any of your time or money on repairs, you must look at the Return On Investment (ROI) for each repair you can make. It makes sense to spend $1,500 on an improvement to make an extra $10,000 when you sell the property. It doesn’t make sense to spend $10,000 improving your house just to get an extra $8,000 on the sale price.
You need to figure out what improvements will give you a positive ROI.
If you’re going to continue to live in your home for the next several years, it might make sense to update the kitchen or bathrooms now.
If you know you’re going to move out soon, it might make sense to only do cosmetic lipstick repairs, like Exterior Paint, Clean up the Landscaping, or update Old Flooring.
A very important point to understand is exactly what a home inspector does. A home inspector describes your home’s physical condition and any immediate or potential problems. Inspectors do not rate your home as being in ‘Poor Condition’ or ‘Good Condition’, or ‘Pass’ or ‘Fail’.
The inspector’s role is to help the potential buyer understand the full cost of ownership if they decide to buy your house.
In most cases, the buyer’s lender is going to require an inspection before the house can sell. Inspectors can usually find things that you didn’t even know were problems, and you might have to disclose those problems to buyers.
Buyers will also use an inspection during negotiations to get a lower price. You can also negotiate whether or not you make repairs, or you can even decide not to do the deal at all.
If you decide to sell the house As-Is and not make any repairs, you should be upfront and explain that to any potential buyers.
What if I decide to keep the house?
If you decide to keep the house, we recommend that you invest in repairs and make sure the condition of your property doesn’t worsen anymore.
If you need to, call an inspector or somebody who specializes in a problem the property has, and ask them what to do.
We wouldn’t recommend keeping a property that’s already in poor condition, and not making any repairs or updates. Your home will slowly lose value over time and eventually you’ll come back here and try to figure out what to do.
What are my options for selling? What does ‘As-Is’ mean?
If you decide to sell your home, you have 3 main options: Listing it as For Sale By Owner, Selling the house to a Cash Buyer, or Listing the house with a Realtor. Each option has its benefits, which we discuss below.
What does ‘As-Is’ mean?
When you do decide to sell, you also have the option to sell As-Is. This means that you don’t put any of your time or money into repairs and cleaning, and you just walk away from the house As-Is.
Option 1 – Sell the house For Sale By Owner
This could be a good option whether or not you make any repairs to the property, and if you still have the time and patience to deal with this process.
If you list the house FSBO after making the right repairs, you’ll probably get real buyers wanting to see the property, or agents asking if you want help listing it or if they can list it for you.
If you list the house FSBO and decide to sell it As-Is, you’ll most likely start to get offers from investors, fix-and-flippers, people looking for their next project, or even house buying companies.
Option 2 – Sell the house to a cash buyer
This is a great option if you don’t want to deal with the property at all and just want to get rid of your house As-Is.
There are both national house buying companies, and local house buying companies. Almost all of them provide the same service of buying your house fast with cash. These companies offer you the speed and convenience of not dealing with the house anymore.
One thing to know is that offers from these companies are usually lower than what a realtor would list your property at, and that’s because house buying companies offer a quick, convenient sale so you don’t have to worry about your Poor Condition Property anymore.
If you decide to go with this option, there are a few things that you should look out for when picking a cash buyer to work with:
- Real reviews from people they’ve worked with in the past
- Real people behind the company
There are definitely scammers out there, which means that you need to make sure you’re working with an actual company.
If you find the right company to work with, then this option will, by far, save you the most amount of time and be as easy as possible.
Option 3 – Sell the house with a realtor
This is a great option if you make repairs to the house, but don’t want to deal with selling it yourself. Of course, you don’t have to do any repairs and you can still list with a Realtor.
Depending on the condition of the house and whether or not you make any repairs, a good Realtor should at least present you with the idea of selling to a cash buyer or an investor, or even refer to a cash buyer or investor.
If you decide to list your house with a ‘not so great’ Realtor and it’s in poor condition, you’ll probably end up getting offers that are lower than the list price and the Realtor won’t spend as much time on your property as they would on a more ‘prime’ listing.
Any property can sell in any condition, but you have to decide if you’re going to make the repairs, or if you’re going to sell the property to somebody else who’s going to make the repairs.
The main things to keep in mind when deciding what to do with your house are the amount of time and money you want to spend on your home, the current market conditions, and your location.