“Most of the time, sellers think their house is in worse condition than it actually is because they’re living in it and seeing it every day,” says Eli Joseph, a top real estate agent in Hartford County, Connecticut who sells homes 64% faster than average agents in his market. “They just need assurance that the house is going to sell and that someone is going to buy it in that condition.”
Let’s get into the nitty-gritty of how to sell a house that needs work, and take a look at the potential buyers who might be interested in a fixer-upper or a home that feels like it’s frozen in time.
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It’s natural to wonder how a home that needs TLC can compete with turnkey properties, especially when the median sales price of an existing home has soared in the last few years.
Maybe you haven’t maintained your home regularly or you’ve inherited a house and want to sell it. Regardless, your house doesn’t have to be perfect. It just has to show the potential for buyers to make money, build equity, or obtain the lifestyle they want within their budget.
Possible buyer #1: The real estate investor
What’s a real estate investor?
Real estate investors can be individual house flippers, small or large-scale rental landlords, or even house-buying companies such as We Buy Houses.
You may have also heard of tech-enabled cash buyers (often called iBuyers) such as Opendoor, Offerpad, and HomeLight, that use technology to value homes and make near-instant offers. HomeLight’s Simple Sale platform, for example, can help you get a no-obligation, all-cash offer for your home in 24 hours, and close in as few as 10 days.
How do they operate?
These buyers usually pay with all cash and prefer to buy homes off-market. Many will purchase homes as-is, meaning the seller isn’t expected to do any work to improve the home’s current condition.
For this type of buyer, a purchase is generally all about how the numbers shake out since they don’t plan to live in the property. Would the costs of buying and rehabbing the property allow the buyer to resell it at a decent profit? Alternatively, would the cash flow cover their expenses should they aim to rent the property?
What do they look for in a home?
Daniel Close is a real estate investor in Louisville, Kentucky with over 15 years of experience. He says his main calculation is a home’s value after the cost of repairs. In Louisville’s starter-home range of about $150,000 to $200,000, he aims for 80% after-repair value, or ARV. In general, investors offer about 70% of a property’s ARV for a house they plan to flip.
Close also considers how the home might appeal to future buyers. “I look at the neighborhood a lot. Is it trending in the right direction or the wrong direction? What’s this neighborhood going to look like in five years or 10 years?” he says. “Room layout is a big one for me. Is the flow appropriate? Do I have to knock down walls, or redo a bathroom? Do I need to move the kitchen or the bathroom? That’s a lot of money.”
Possible buyer #2: The bargain hunter
Who are the bargain hunters?
This type of buyer would love to live in a specific location but hasn’t been able to land their dream home, either because they can’t afford the average home prices there or because someone else — like a cash buyer — has snapped it up first. This buyer may be a first-timer who is unable to tap into existing equity to buy a new home or a DIYer who isn’t afraid of a house that needs some TLC.
How do they operate?
While most buyers would prefer a move-in ready home over one that requires renovations, deal-hunters, by contrast, go against the grain. They are likely to ask their real estate agent to share listings of a lower price point for the area that may require some work.
What do they look for in a home?
A bargain hunter is looking for the potential to create their dream home on a limited budget. A house that needs cosmetic updates and some elbow grease to be move-in ready is OK with a deal-hunter, so long as it has decent bones and a location they love.
Close to 80% of homes that went on the market last year exceeded the average buyer’s budget. That means more buyers are having to sacrifice their expectations for a home’s condition to make homeownership a reality.
“They just need the vision of what can be done and how it can be done,” says Joseph. | BidBuddy.com
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