Definitive Guide to Selling a House in Bad Condition if It’s Old or Damaged and Needs Major Repairs in 2020
If your home is in bad condition, how do you go about selling it? This definitive guide takes you through the issues you will encounter as you plan the sale of a house in a poor condition. Read on to get detailed answers to your questions, as well as additional information.
3 Available Options if Your House For Sale Is in a Poor Condition
1) Sell Your Fixer-Upper As Is to a Real Estate Investor
Who Are Real Estate Investors?
Have you ever wondered who puts up the signs that say "We Buy Ugly Houses in Any Condition" or “We’ll Buy Your House for Cash”? Hint: it’s not first-time home buyers looking for a cheap place to live. For years, real estate investors have used such simple advertising technique to find houses with problems. These companies that buy homes fast and in any condition pay cash to homeowners who need to sell their distressed properties quickly. After purchasing houses with damages, they fix issues and resell properties for a higher price to make a profit.
How to Find the Right Real Estate Investor
Take the time to find the right property investor for your situation. Read reviews about the top real estate investors in your area. Meet with three or four of them, request a cash offer on your home from each and compare the amounts. Make sure the investor you choose has a long history of satisfied customers.
Advantages of Selling to a Real Estate Investor
If you have a damaged house to sell, a real estate investor will buy it AS IS. Even if most buyers would consider the home a junk house, a real estate investor will buy it—no matter what the problems are. When you accept the investor's cash offer, you are relieved of any responsibility for the house's current condition, as long as you disclose all known problems with your home.
Since no realtor is involved when selling to an investor, you have no commissions to pay. You pay no closing costs when selling to an investor. At closing, you will not be surprised by any hidden fees.
An investor will pay off any delinquent house payments, tax liens, or other financial obligations as a part of their cash offer.
Unlike a conventional real estate transaction, selling your house to an investor is quick. You won't have to wait for a potential buyer's loan approval. And you won't have to deal with a home inspector or any other middlemen. The investor takes care of all the paperwork.
Normally, you have an all-cash offer within 24 hours of meeting with the investor. If you accept, you are paid that same amount of cash for your home in only a few days. The money you receive at closing has no deductions for closing costs or hidden fees.
Because the investor buys your house with cash, the entire real estate transaction is shortened. You don’t need to wait for your buyer to get approved for a mortgage, hoping that no problems will arise in the process. You don't have to go to the courthouse and dig through any paperwork. You have almost no responsibility for any of the paperwork. The investor takes care of the details of the sale.
Disadvantages of Selling to a Real Estate Investor
The cash offer from an investor includes the costs of repairing a damaged house. The investor also factors in all the other expenses they anticipate, as well as their interest. Consequently, the cash offer you receive from an investor will be lower than your house's fair market value. However, this difference can be considered as a payment for the saved time, instant cash, risk and liability. In addition, for people in difficult situations, such as those who’re trying to stop foreclosure, as a payment for providing the last and only solution to their urgent problem.
The regulation of real estate investors is minimal. Therefore, you have to avoid unscrupulous investors who try to take advantage of distressed homeowners with old houses in bad condition. For example, if a home buying company makes a cash offer close to the market value of a house, this may be a “bait and switch” fraud. The scammer will waste the seller’s time, finding numerous excuses to postpone the sale, and then will manipulate the exhausted victim to significantly reduce the price.
2) Sell with a Real Estate Agent
Who Are Real Estate Agents?
When a homeowner hires a real estate agent, the agent works on the seller's behalf to find a buyer for their property. Realtors typically want an exclusive contract (for 6 or more months) to sell a house. The Realtor does all the marketing and negotiation necessary to sell the property even though majority of the real estate agents don’t do much of that except putting your home to the local MLS website.
How to Find the Right Realtor
To find the right realtor, get recommendations from family and friends who have recently sold their property. Make an appointment with three or four of those realtors. Have them inspect your house and suggest an asking price.
Experienced Realtors know what similar properties are selling for in your area. Consequently, their suggested asking prices should be about the same. Avoid any Realtor who recommends a much higher or much lower asking price than the others—they don’t understand the market in your area.
If none of the Realtors stand out from the rest, choose the one that you think will work the hardest to sell your house.
Advantages of Selling with a Realtor
A real estate agent helps you set a realistic asking price—without undervaluing your home. A Realtor advises you on the repairs necessary to attract a buyer. They will connect you with reputable contractors to help with any needed repairs.
Real estate agents have access to the multiple listing system (MLS). The MLS exposes your property to the largest possible pool of potential buyers.
If your house needs updating, a Realtor makes recommendations for updates that will have the maximum appeal to a potential buyer. The Realtor also shows you how to stage the house for the best possible presentation and works on your behalf to help you get the most money for your house.
Disadvantages of Selling with a Realtor
Selling your house through a realtor involves more people than the other options. And the more people involved in the process, the longer and more expensive it gets.
Most Realtors will tell you that they can't sell a house in bad condition. An old house with problems is not attractive to most buyers. It’s also cheaper, which means the Realtor gets a lower commission. So if you have a difficult house to sell, your Realtor may refuse to list it until you make the recommended repairs. And hiring contractors is both costly and time-consuming.
Once your house is ready to show, you must make sure it stays that way. If you have children in the home, it can be challenging to keep the house ready for showing on short notice. Open houses and constant showings disrupt daily life.
You are responsible for paying the Realtor’s commission (on average 6% for both seller’s and buyer’s agents together), a portion of the closing costs, and numerous other fees. While many of these costs are predictable, others are not. Hidden fees are usually an unpleasant surprise at closing.
Just like in any industry, some Realtors are fraudulent, so if choosing one, it’s important to check their reputation.
3) Sell It Yourself
FSBO (For Sale by Owner) signs are common in every neighborhood. While selling a home by owner has the highest potential for the most money, it is also the most challenging—especially if the house needs a lot of work.
Advantages of Selling on Your Own
If you want a hands-on role in selling your old house, and if you are knowledgeable in selling real estate, an FSBO sale can be a good option. You have control over the entire process. Even the sign in your yard can be designed to your liking.
With an FSBO sale, you pay the least amount of money to the third parties—both direct and indirect payment.
- You avoid the direct payment of a Realtor’s commission.
- You avoid the indirect payment of an investor’s expenses (through acceptance of a below-market offer for your house.)
If you are a good negotiator, you are in a position to negotiate the best price with a potential buyer.
Disadvantages of Selling on Your Own
Establishing an asking price for your property is not a simple task. An online pricing calculator, like Zillow's Zestimate, can be helpful, however. But to come up with a realistic asking price demands searching through a recent history of sold properties in your area. (For a fee, a real estate agent can help you with this and other issues.) Keep in mind that if your asking price is too high, buyers won't respond to your advertising. If your asking price is too low, you could sell your house for less than you need to.
If you try to sell an old house in a bad condition, you will attract very few buyers. On the other hand, fixing up the house can be costly and time-consuming.
All marketing expenses are your responsibility. Some marketing options, online and offline, are free. Other, fee-based, marketing is available for FSBO sales too.
You need to stage your house for showing to potential buyers—just as in a traditional sale. But in a FSBO sale, you must show the home yourself—adding to the disruption of your family when the house is your residence.
If you find a buyer who offers to take the house AS IS, you must carefully disclose the condition of the house. But you must also sign the necessary disclosure and release papers with the buyer. Otherwise, you could be subject to a future lawsuit. At a later date, the buyer could convince a court that you failed to disclose a significant problem with the house.
Even if you make all the necessary repairs, you must convince a prospective buyer that the underlying problem won't reappear again. And make sure to sign the required disclosure and release forms with the buyer so they can't potentially sue you if a new problem arises.
Finding all the necessary disclosure and release forms is daunting. It is wise to hire a lawyer for this research unless you are working with a Realtor who can also help to protect you from such liability.
The sale price in a FSBO sale is often lower than the amount a realtor can get for your property.
Most Common Types of House Damage and Difficulties they Pose for the Seller
According to the Termite Infestation Map developed by the US Forest Service, most of the U.S. states have some risk of termite infestation. Orkin, a well-known pest control company, says that termites damage approximately 600,000 homes annually in the U.S. Consequently, any termite history should be disclosed in a real estate sale.
The Scope of Damage
Termites work out of sight, and the damage they cause can be unknown for many years. Termite infestations are common in older homes—especially if those houses are in bad condition. As a general rule, termites weaken wood—causing it to collapse eventually. Any inflexible material attached to the wood, such as tile, brick, or plaster—breaks apart over time.
A termite infestation weakens load bearing walls. When exterior walls sag, for example, cracks develop in interior plaster/drywall and exterior brick/stone. When termites weaken floor joists, floors become springy—often sagging more than an inch or two.
How Much Does Termite Damage Repair Cost?
Spraying to kill existing termites usually costs from $250 to $850. The cost is charged by the linear foot ($4-$7 on average). But the price of hiring a professional exterminator is not the total cost of a termite infestation.
Wood framing holds a house upright like bones hold a human body. When termites eat away much of that framing, the structure of the house weakens. As long as damaged wood can be removed and replaced, a termite infested house is repairable. But these repairs are costly.
The siding and sheathing on the lower part of exterior walls must be taken off. The undamaged portion of the house must be supported with jacks while the damaged wood is removed and replaced. On average, Americans spend about $3000 to fix damage caused by termites. But the most severe cases can cost $10,000 and more.
If a brick or stone house has severe damage, it may not be cost effective to fix the damage at all. In such cases, the termites can be killed to stop any further damage, and the house can be lived in as long as no building codes are violated.
What Is a Termite Contract and Do I Need to Have It to Sell My House?
Think of a termite contract as an insurance policy issued by a pest control company. The homeowner pays a fee to a pest control company, which warranties the home against termite damage.
State governments do not require termite contracts for a real estate transaction. But normally, mortgage lenders require the contracts before issuing a loan to a buyer.
Who Pays for a Termite Inspection for Home Sale—Seller or Buyer?
It depends on the customs in your state and your real estate purchase contract. But normally the buyer is responsible for a termite inspection. The average cost of a termite inspection is less than $200. The buyer is also responsible for any other pest inspections.
If termite treatment is necessary, the seller must pay the costs. And the seller is responsible for repairing any termite damage unless the buyer accepts the house AS IS.
Most lenders require a termite inspection report at the closing. Lenders want a clean inspection report. They don’t want to loan money against a house that could become worthless due to termite damage.
What Is a Termite Letter and how Much Does It Cost?
A termite letter is a document that confirms that the house was inspected for any signs of wood destroying insects and organisms. If the inspection revealed any infestation and/or damage, the letter recommends the appropriate treatment.
When a termite letter is requested in conjunction with a termite inspection, many pest control companies provide the letter at no additional charge. Otherwise, termite letters average less than $200.
If you had a fire in your house, a potential buyer would want to know what caused the fire. No one wants to buy a property that is still at risk because the owner didn't fix the initial problem.
For example, a fire in your house started when 15 amp wire overheated on a 30 amp breaker. After repairing the fire damage, rather than fixing the wiring problem, you decided to "be careful" about the load you put on that circuit.
In such an instance, fully disclose the cause of the fire and let the buyer know if you didn't fix the root cause of the problem.
The Scope of Damage
Repairing fire damage is more than repairing or replacing burnt objects.
- Firefighters probably damaged doors, windows, or the roof to access the fire.
- The water used to put out the fire soaked into building materials, causing water damage and creating the potential for mold growth.
- The chemicals in fire extinguishers left toxic substances on exposed surfaces.
- Smoke and soot that spread beyond the actual fire left stains and odors throughout the house.
- Any openings in the roof may have allowed rainwater to soak the house, causing further water damage.
Estimating Fire Damage Repair Costs
Fixing the fire damage itself involves replacing the burnt parts of the home and rebuilding any necessary framing. Almost half of all home fires start in the kitchen, and the price of replacing an entire kitchen can be as high as $50,000. Fire damage in other areas of the home is less costly to repair.
The second largest expense is fixing the damage from smoke and soot. Fire damage restoration companies are experts at cleanup. They clean and deodorize air ducts. Specialized equipment is used to remove stains and odors. They typically charge per square foot cleaned. And the average cost of cleaning up smoke and soot damage is between $2000 and $6000.
The water used to put out the fire mixes with the ashes and damages carpeting, drywall, and other absorbent surfaces. The average cost of cleaning up water damage is $1000-$4000. Wet surfaces must be dried out quickly because of the potential mold growth.
Additionally, the chemicals in fire extinguishers leave harmful residue on exposed surfaces. They also contaminate interior air. These chemicals have to be contained by sealing over them with a protective coating or neutralizing them with additives. The average cost of cleaning up chemical damages is $1000-$2500.
What to Do After a House Fire?
If you house is fully insured, you should contact your insurance company as soon as possible and follow their recommendations. If you don’t have a fire coverage, here is a summary of what you need to do.
First of all, cover any roof openings or broken windows (the fire department does not secure your house from the weather).
Have an inspector determine the extent of the damage. Then, get bids from several contractors to fix the damage.
If the cost to repair your house exceeds 2% of its value, many real estate experts recommend that you sell the house AS IS. Otherwise, you may not recoup your investment.
Foundation and Structural Problems
Concrete contractors have a saying: "There are only two types of concrete—concrete that has already cracked and concrete that hasn't cracked yet." A crack in a concrete foundation is not a cause for concern as long as it is tight. However, if you can stick a finger in a cracked foundation, the building may have structural damage. Foundation issues can significantly devalue a house.
The Scope of Damage
Cracks in block or stone foundations are usually a bigger problem than cracks in poured concrete foundations. The reinforcement bars (rebar) in a poured concrete foundation help to keep the wall level even when the concrete cracks. Block foundation walls do not contain horizontal rebar, and stone foundations have no rebar. When a block or a stone foundation has large cracks, the top of the wall may no longer be level.
Regardless of the type, if the top of the foundation wall has settled, the entire structure settles with it. While the framing typically doesn't break, the plaster, drywall, brick, and other coverings attached to the walls will crack and break apart.
A house with sagging exterior walls frequently has damage from water penetrating the interior at the eaves. Cracked foundations also invite pests such as termites, mice, and snakes.
How Much Does Foundation or Structural Repair Cost?
The price for an inspection of the house's foundation usually costs less than $500. By contacting a foundation repair company, however, you can get a free inspection as a part of their repair estimate. Just keep in mind that such inspections may not be objective due to the work they stand to gain. Talk to at least two other companies.
If the top of the foundation wall is still level, cracks can be repaired at a minimal expense (less than $2000). Repairing cracks, however, does not guarantee that water cannot penetrate the foundation and leave a wet basement or crawl space. Drying out a crawlspace or basement has more to do with draining away groundwater than it does with repairing cracks.
The foundation may need major repairs that require excavation, new concrete, and new drainage—ranging in price from $5000 to $7000.
How Do Foundation Repairs Affect Resale Value?
Buyers are sensitive to foundation issues. They know that a house is only as good as its foundation. A typical buyer will expect the home to be discounted by more than the actual cost of repairing the foundation.
Keep in mind that even if repairs are made, you need to be good at negotiating to convince your buyer that the problem won't appear again.
Mold, Flood and Other Water Damage
Time is your enemy in selling a house that has been flooded. Unless the house was completely dried out, toxic black mold could have begun to form within 24 to 48 hours after the flood water receded. Buyers know this and shy away from houses with a flood history. Even water standing in a basement will deter most buyers.
The Scope of Damage
Flood water leaves behind:
- wet floor coverings
- wet sheetrock, plaster, or paneling
- wet sub-flooring
- wet framing
Some of these materials (such as sheetrock) cannot be dried out but must be removed and replaced. And black mold will start to grow on any of these materials almost immediately.
While not as severe as flooding, a wet basement is indicative of poor lot drainage. In some cases, no solution is possible due to the location of the lot. Mold and mildew grow on damp surfaces in areas of high humidity.
In addition to mold problems, prolonged exposure to moisture causes decay in the house’s framing structure.
If your house has mold, you might be interested in reading our definitive guide to selling your house with mold problems. If your property has been damaged by water leaks or flooding, learn more about your options from our guide to selling a water damaged home.
How Much Does Water Damage Restoration Cost?
Flood damage is challenging to repair. Since mold can form in a day or two, a DIY cleanup takes too long.
The average price charged by professional cleanup crews to clean and dry out a flooded home is approximately $7 per square foot. This price does not include any repair or replacement of building components, such as doors, windows, and roofing.
Because of all the variables, it is impossible to come up with an average cost for fixing a leaking basement. If the foundation needs significant repairs, the cost can be several thousand dollars.
Mold remediation in areas that are easily accessible, such as a crawl space, can cost up to $4000. But mold that has to be removed from the interior of walls, ductwork, and attics can double the price.
You only need to be concerned about asbestos if the house you want to sell was built before the early 1980s. Undisturbed asbestos in your older house poses no health threat. But any airborne asbestos is a deadly toxin.
The Scope of Damage
Three major diseases are caused by breathing asbestos fibers.
- Lung cancer
Even though asbestos is highly regulated in the U.S., asbestos-related diseases are blamed for thousands of deaths annually (asbestos-related diseases can take years to develop after the initial exposure).
If it weren't for the associated health risks, asbestos is an excellent building material. But asbestos that is not entirely contained can become airborne—and extremely hazardous to the health of anyone living in the home.
How Much Does Asbestos Removal Cost?
Asbestos does not have to be removed from a house if it poses no health hazard. For example, if underlayment and ceramic tile overlay an old tile floor containing asbestos, the asbestos poses no threat. But the asbestos should be disclosed to the buyer, which is still a problem.
In other cases, asbestos encapsulation is a cost-effective alternative to removal. For example, overlaying a popcorn ceiling containing asbestos with new drywall is less costly than paying an asbestos abatement contractor to remove the ceiling.
When asbestos must be removed from the house, expect to pay at least $60 an hour per person for an abatement crew. Set up and cleanup are a big part of the cost. For an accurate price, you must get a bid from an asbestos abatement contractor for your particular situation.
Is It Legal to Sell a House with Asbestos?
As long as the presence of asbestos is disclosed to a buyer, it is legal to sell a house with asbestos. Make sure to sign the necessary disclosure and release documents with the buyer.
When a House Needs a New Roof
Over time, a leaking roof will cause extensive water damage. But if the roof has not been leaking, the condition of the shingles has little to do with the condition of the home. For example, a brand-new house in the path of a severe hail storm can need a new roof within days of completion. Before replacing a roof, consider the house's overall condition.
If you have any insurance on the house, you normally don't need to pay for a roof inspection. Your insurance company's adjuster will take a look at the roof at no cost to you. If you have no insurance on the house, a roof inspection will cost less than $500.
How Much Would Roof Replacement Cost?
Replacing a typical roof with new asphalt shingles is a straightforward process:
- Choose the quality and color of the shingle you want to install.
- Ask three or four reputable roofing contractors to give you a quote.
- Select the contractor that offers the best value.
The average cost of an asphalt shingle roof for a medium-size house is $5,000 to $10,000.
Should You Replace a Roof Before Selling Your House?
When deciding whether to replace a roof, consider the following:
- If insurance will cover part of the bill, it is always advantageous to sell a house after replacing the roof.
- If the roof is the only problem with the house, and if you have enough money for replacing it, then do it. The difference in the selling price of the house with a new roof will more than cover the roof cost (for the typical buyer).
- If the house needs many other things replaced besides the roof, you will probably not get an increased sales price that’s high enough to recoup your costs.
As long as they are operational, old windows in an old house won't deter a potential buyer. Old windows don't scare a buyer like black mold or a cracked foundation.
Companies that sell and install replacement windows make impressive claims about the increased value they add to the home. But the overall condition of the house must be considered before deciding whether to replace the windows.
How Much Does Window Replacement Cost?
Replacement in an existing construction is more expensive than installation in a new construction. The window cost is higher because replacement windows have to be manufactured in custom sizes. The replacement labor is also significantly higher.
The cost to replace an average size window with a vinyl replacement could approach $500. As windows increase in size, so does both the window and the labor cost.
Is it Worth Replacing Windows Before Selling a House?
If the windows in an old house are falling apart, the house is most likely falling apart as well. In such instances, it is not cost-effective to replace only the windows. The expense of replacement windows cannot be recovered with a higher selling price.
If the windows look bad but still open, consider some caulking and painting. The replacement of operational windows, no matter how old, can seldom be justified financially.
What Fixes Are Mandatory After a Home Inspection?
Before agreeing to list a house that needs a lot of work, a reputable real estate agent will point out any problems that buyers won't accept unless fixed. If you decide to sell the house yourself, you must also understand what issues buyers won't usually accept—even at a discounted price.
The traditional buyer won't buy a house:
- If the issues are perceived to be a potential threat to the health and welfare of the occupants.
- If the problems appear to be a potential threat to the integrity of the house.
Threats to the occupants are:
- Mold and the risk of disease
- Electrical problems and the risk of fire
- Asbestos and the risk of lung problems
- Radon gas coming from the ground and the risk of cancer
Threats to the integrity of the structure are:
- Structural problems, such as a broken foundation
- Termite infestation
- A leaking roof
- Lot drainage issues
These types of problems deter the traditional real estate buyers, but not investors. A real estate investor buys your house AS IS. No home inspection is necessary, and no repairs are needed.
Seller's Disclosure Laws
What Is a Seller Disclosure in Real Estate?
A seller’s disclosure statement is the printed declaration of all the issues you wish to disclose to the buyer.
In most U.S. states, it is illegal to conceal significant defects in a house. But it is not enough to casually mention those and other problems to a buyer. Put all disclosures in writing.
Can You be Sued After Selling a House?
A seller’s disclosure statement won’t protect you from being sued, but it will protect you from being sued successfully. To win a lawsuit, the buyer must prove to a court that you failed to disclose property defects.
How Long After You Sell a House Are You Liable?
If the seller and buyer signed the necessary disclosure and release forms for the home, seller liability stops at closing. The seller has no responsibility after closing to respond to a buyer’s complaint about the property. The buyer can still pursue legal recourse against the seller, but the court will likely throw out the lawsuit.
The maximum time after a real estate closing during which legal recourse can be pursued is called the Statute of Limitations—and varies by state. After the statute of limitations has run out, the buyer can no longer initiate a legal action against the seller—even if the seller concealed a serious condition.
As an example, for fraud or contract breach in a real estate contract, the statute of limitations is:
- Three years in California
- Three years in Arkansas
- Four years in Texas
- Four years in Ohio
- Six years in New York
- Six years in Tennessee
What Has to Be Disclosed when Selling a House?
If your house was built before 1978, lead paint has to be disclosed according to federal law. For all other issues, what has to be disclosed can vary—not only by state but also by county and city.
States such as Louisiana and Mississippi require disclosure of property in a flood zone, as well as any resultant water damage or mold.
Texas law requires sellers to disclose hazardous materials and substances such as asbestos and radon gas.
California has the most stringent disclosure laws, requiring disclosure of foundation repair and repair of any other structural damage from natural hazards.
Full disclosure (in written form) is always the best practice in any real estate sale.
Should I Sell My House As Is or Fix It Up?
The answer depends on your situation and the type of sale you choose based on it:
- If you decide to list it with a Realtor, the real estate agent will want it fixed up. You will sell your house for market price, but it will take from a few months to a year if there are no complications.
- If you decide to sell it to a real estate investor, off the market, the investor will want it As Is for a reduced price, and you will sell it in a few days as long as there are no complications with the title.
- If you decide to sell it yourself, for the market price, you’ll have to repair it or find a buyer who is willing to pay enough to cover your costs for fixing it up (the most challenging option).
How Much Does It Cost to Fix Up a House Before Selling?
To bring an old house up to standard by repairing and replacing any problems could cost anywhere from a few thousand dollars to more than the cost of a new home of the same size.
Any statistic for a complete remodel that gives you an “on average” price per square foot would not be useful. The high estimates and low estimates would be too far apart to give you a meaningful average.
Each issue, such as a leaking roof or a cracked footing, has to be priced separately. Check our approximate estimates for different types of problems described previously in this guide.
How to Skip Repairs and Sell an Old Fixer-Upper That Needs a Lot of Work AS-IS and Fast?
If you have a house that’s so run down that you don’t know what to do with it, HouseCashin, America’s largest platform for off-market properties that connects home sellers and real estate investors can help. Give us a call at (877) 355-1244. We will buy it from you AS IS. Even if your house is falling apart, we will buy it and you won’t have to lift a finger or pay a dollar to fix your property. When you request our fair cash offer on your home, you can skip all those costly repairs and take the cash in hand in just a few days.