Can You Sell a House with a Failed Septic System?

Let’s go over the different aspects of trying to sell your home without a working septic system. Not only knowing the do’s and don’ts of selling a home in bad condition can save you time and effort, but it also can be the only solution if you don’t have the money for the repair or replacement of your septic system.

In rural areas, where many remaining septic systems are located, there may be a market for your home “as-is”. People who have grown up there may want to buy a nearby home so they can stay in the area. However, this probably doesn’t represent a large part of the buying public.

Because of liability issues, most brokerage firms are not interested in listing a house for sale with a significant problem like this. Especially in the seller’s market, agents aren’t looking for listings with issues that property owners aren’t willing to resolve.

Realtors are primarily looking for listings that will sell quickly, with minimal concerns, and for the highest price. Because their compensation is commission-based (percentage from the final selling price), this impacts how quickly and how much they get paid.

While it may be possible for you to find a buyer who will be willing to take on the responsibility for repairing the septic system, it will almost certainly mean that they will need a lot of cash.

Mortgage lenders will insist that the collateral for their loan can be easily sold in the event that the borrower defaults. This means that the home has to be functional with all systems in good working order. As the septic system is one of the most important ones, it would have to be fixed before closing.

Most buyers only have enough cash for their down payment. They don’t have the funds to make major repairs, and so they look for homes that are “move-in ready”. If they do have the cash, it would not be advisable for them to fix problems with a property that they do not own yet.

You’re looking for a buyer to whom you will sell your house for cash and who wants a property that needs to be purchased “as-is” and then fix the problems themselves. This is exactly what real estate investors do on a regular basis.

Real estate investors fall into two main categories. The first are sometimes called house-flippers. They will fix up a house for immediate resale. House-flippers are looking for short term profits.

The second group are long term investors who want to hold the property and rent it to tenants. This group is looking for long term rental income with a possible sale down the road.

Both types of investors benefit from buying homes that need work. They are professionals in repairing properties themselves. This saves them money compared to a homeowner having to pay someone to repair their property.

An investor’s business model calls for buying homes below market value due to considerable repairs or remodeling that they can handle for themselves. Even a condemned house can be sold pretty easily if the seller targets investors as potential buyers.

Finding a buyer who purchases properties for investment can be the easiest way to sell your home “as-is”. If you are interested in learning more about how selling to a real estate investor works for homeowners, you may also want to read our article Selling Your House to a Real Estate Investor the Right Way.

Depending on the state, it may be illegal to sell a property that will be used as the buyer’s primary residence unless it is safe and sanitary to live in.

Investors in your area will be familiar with your local building codes. It may be possible to sell your home as an investment property. If not, an experienced real estate investor where you are located will have dealt with this before.

They will have a plan for making repairs using their funds before the title is transferred. For example, an investor can issue you a loan backed up with your home’s equity. You will then use this money to repair the septic. Once it’s done, you will sell the house to the investor.

What you do and do not tell a potential buyer of your home are considered consumer protection issues and are regulated by the states. Your state’s disclosure regulations will apply to you as the property owner whether or not you are working with a broker.

Failing to disclose a material fact about your property will be considered just as serious as if you had lied about it.

You should put any property disclosures in writing and have prospective buyers sign a copy for your records. Many states have a disclosure form that you can or must use.

Pros of Selling the House As Is

Obviously the biggest advantage of selling your house “as-is” is that you can pass on the problem to the buyer. You avoid:

• spending your cash upfront for repairs
• finding someone to do the repairs
• comparing quotes
• overseeing the work
• waiting on the sale of your house to recover your expenses

If an individual homeowner who’s buying your house attempts to do this, you will be adding more time and uncertainty to an already long process.

An experienced real estate investor pays cash, performs their own inspection, and is not scared off when major repairs are needed. They can close quickly, even when there are serious problems with a property such as a bad septic system.

Selling directly to an investor will also let you avoid many other costs of selling a home such as broker commissions.

Cons of Selling the House As Is

When selling your house “as-is”, you will not net as much money as if you made repairs (as well as reasonable improvements) yourself and then sold the property. A buyer, whether an investor or future homeowner, will discount the price for the cost of repairs and for their time and effort in having the repairs made.

As for the investors they will have a formula for calculating their offer to you. They should go over their calculations and explain their offer when they present it to you. For example, if the investor is going to resell the property, apart from the estimated cost to repair the septic system, they will also discount the price for the amount of expected profit.

If after weighing the pros and cons you see that selling your house as is to a real estate investor is your likely solution, you are welcome to request an obligation-free cash offer from HouseCashin — a national platform that connects home sellers who need to sell a distressed property fast and easy with reputable real estate investors throughout the USA.

After receiving your cash offer request, we will connect you with a number of reputable investors (vetted based on our quality standards) in your area, to let you choose from their offers and pick the one you like best.

The other option that you have when selling a house with a bad septic system is to have the repairs made and then sell your house. Once your home is in good working order, you can use the traditional methods of selling your home:

• listing it with a realtor
• selling it for yourself (‘For Sale By Owner’ or FSBO route)

The average cost of repairing the line leading to your septic tank from your house will be from $1,000 to $4,500. If your tank needs replacement, the average cost is from $3,000 to $10,000. If your leach or drain field needs repairs, it can cost anywhere from $2,500 to $15,000.

The difference in your cost can be the size of your house, the type of soils on your property, and changing building or environmental codes.

Making sure that you properly fix your septic system can involve your local health department, state environmental department, or even the federal EPA.

The regulations in your area may have changed since your system was originally installed. There may be added requirements such as a reserve drain field, or use of an alternative system if too many septic systems are now in use in your area.

If you don’t have “as-built” drawings showing the exact location of your system, your septic contractor may have to disturb more of your property in order to carefully locate the system components.

These factors can increase the cost of repairing or replacing your septic system.

If your system needs repairs, it can take from 2 to 5 days. It may take longer depending on the weather.

If you have to replace your system, you should schedule for 2 to 3 weeks. A new system will require permitting, which might include soil testing. Inspections are part of the process and your county inspector’s availability can increase the time it will take to complete the work.

Pros of Repairing the Septic System and Selling the House

You should certainly get a higher price for your house with a working septic system than without it.

Bear in mind that normal market value for an existing house assumes that all systems on the property are in good working order. You may recapture the costs of minor repairs in the higher sale price. However, if you have to completely replace your system, you may not get an increase in price that is equal to your costs.

Cons of Repairing the Septic System and Selling the House

Many people don’t have the funds available to do the work necessary to put their septic system in good working order.

Pulling the cash from savings may create difficulties if other needs arise before you can sell your house and recapture those funds.

Unlike working with professional local real estate investors, selling your house the traditional way, with a real estate agent specializing in your area, will also involve closing costs such as realtor commissions (to learn more about closing costs, read our in-depth article Cost of Selling a Home with a Realtor) .

You should subtract these from the market value to calculate your net proceeds from a sale. This will make it harder to receive a dollar for dollar repayment of your repair costs.

Many people can’t devote the time needed to oversee an extensive repair or replacement of their septic system. It may also require a lot of time doing landscaping repair after the septic work is done.