How to Sell a Nice or Bad House Located in a Bad Neighborhood in 2021
Even though the information on this web page is provided by a qualified industry expert, it should not be considered as legal, tax, financial or investment advice. Since every individual’s situation is unique, a qualified professional should be consulted before making financial decisions.
This extensive guide shows you two ways of selling a house in a bad location—the easy one and the hard one—and explains the pros and cons of each. If you prefer the hard way, our article also offers you 12 effective tips to sell your home in a bad neighborhood.
To have your property finally sold, read on.
2 Available Options to Sell Your Home in a Bad Location
#1 The Easy Way: Selling to a Real Estate Investor
Who are real estate investors?
Real estate investors are people or companies whose business is buying real estate and making profit from it. They either keep the property and rent it for income, or they sell it for a profit.
Investors’ business model leads them to look for and purchase properties that homeowners often see as difficult or undesirable. This is why it’s easier to sell a great house in a bad neighborhood or even a property in bad condition to an investor than to a homeowner.
If you want to learn more about how real estate investors work, you can also read our in-depth guide How to Sell Your House to a Real Estate Investor the Right Way. And here, let’s make an overview of how this course of action works for you as a homeowner.
Advantages of selling to a real estate investor
Real estate investors prefer properties that can be bought below market value. They find more of these opportunities in bad neighborhoods. They are actually looking for houses like yours. It may take much longer to find a homeowner who wants your property than to find an investor who wants it.
Homes needing repair or updating are often bought as-is by investors. Investors are comfortable managing the repair process themselves and have sub-contractors that they use regularly. This saves you time and out of pocket expenses.
An experienced investor will know by looking at your property if repairs are needed. They also know the costs, the After Repair Value of the property, and their desired profit. They don’t need third parties for inspections or to help with negotiations. This means that they can close quickly on the purchase of your property.
Investors either use cash or “hard money” loans for the properties they buy. This removes the underwriting, appraisals, regulations, and approvals required for a conventional loan, all of which can add time and uncertainty to the process.
By eliminating traditional financing, an investor can close very fast, often in just a few days, and with very little paperwork involved. You will probably have to have a deed prepared, but most details of the transaction will be handled by the investor.
Disadvantages of Selling to a Real Estate Investor
The cost of repairs, and their profit margin will be priced into the investor’s offer which will be under market value. You may be able to get more for your property if you can afford to wait a long time to find the right buyer. But, if the neighborhood in which your house is located is deteriorating, you may wait a long time to sell while your property’s value continues to go down.
How to Find the Right Real Estate Investor
A lot of people spend time searching on the internet. If you look for an investor that way, do a search for “sell my house fast”, or “cash home buyers”. You want to find investors who are active in your area, so always include your city and state in the search.
Research the investors that you find and look for reviews away from their website. Select a few that appear to be reliable, interview them, and ask them to make an offer.
The other way is to use the convenient form for requesting a cash offer from HouseCashin to get an offer for your home. HouseCashin has done all the research and screening of investors throughout the USA for you. HouseCashin provides multiple offers from local reputable investors that meet HouseCashin’s standards for integrity and reliability.
#2 The Hard Way: Selling to a Future Homeowner
This method of selling a house is more familiar to most homeowners. It may bring you higher offers on your home, but it involves a lot more time and work on the part of the seller. This is considered the traditional way to sell your home.
However, there is nothing traditional about trying to sell a nice house in a bad neighborhood. Depending on your circumstances you may not have enough time to use this method of selling your home.
To market your home to the public, you can either use the services of a broker or you can try to sell it yourself. This is called listing “for sale by owner” or FSBO. Even if you opt for selling your house yourself, you will most likely end up working with a broker who represents the buyer and whose commission you will have to pay as the seller.
Advantages of Selling to a Future Homeowner
In normal circumstances, selling to someone who plans to use the house for their residence can bring you a price that is closer to what you think it is worth.
Selling your house to a future homeowner will give you the option of using the services of a real estate broker. A good broker is trained to help you determine an accurate price for the house that reflects it’s true market value.
You should carefully select your broker. If you can, ask people you know who have sold their home for a referral if they liked their broker. Interview several real estate brokers to find the right one for you.
Disadvantages of Selling to a Future Homeowner
Selling to a homeowner takes time. When selling a home in a bad neighborhood, it can take even longer. Unlike a business transaction, buying a home for your family is an emotional experience. Even a great home that has been lovingly cared for will take longer to sell in a distressed neighborhood.
Homeowners can rarely buy a home without a mortgage loan from a lender. A lender will require home inspections, pest inspections, an appraisal, a credit check of the borrower, and time to process and underwrite the loan. After all that time, you could end up with the buyer being turned down for the loan.
The closing costs are higher when selling to a homeowner. As we mentioned, at least one broker is usually involved: one (buyer’s broker) when you are selling “by owner”, and two (buyer’s and seller’s) when you are hiring a broker to list your property and market it.
That means you will have to pay commissions that can cost between 3% and 6% of the purchase price of the home.
A home inspection will almost always find some items that need to be repaired or updated and sometimes it finds quite a lot. These are upfront expenses that the seller is expected to pay prior to getting the money for the home at closing.
Homeowners are advised to leave their property entirely when prospective buyers are touring the home. Sometimes this happens with little or no notice. If your broker wants to hold an open house event, you will need to be prepared to leave for the day.
12 Tips to Sell Your Home in a Bad Neighborhood When Going the Hard Way
#1 Learn What Your State Requires You to Disclose
Real estate disclosure regulations are governed by the states and can vary widely across the country. In real estate, misrepresentation by omission can carry the same penalty as deliberately misleading a buyer. You should make yourself aware of your state’s disclosure laws and be careful to comply.
If a buyer discovers a problem with the property after the sale that should have been disclosed, the seller can be sued. This can result in substantial financial penalties, possibly even a full refund of the purchase price to the buyer.
All states require disclosure about facts that are material to the purchase of a house. This includes things like structural defects, mold, asbestos, or water damage. Most states have a disclosure form that addresses these and other issues.
In addition, real estate licensing regulations will require that if there is a problem that should have been obvious to a professional, your broker will have to disclose it to the buyer or buyer’s agent whether you told them about it or not.
Future events, if known to you or your broker, such as major highway construction next to your neighborhood or a landfill planned nearby may require disclosure. Businesses that emit odors or even farms may have to be disclosed.
States differ on the need for disclosure when there has been a death in the home. Some states require disclosure if a death occurred within the previous three years. Others consider it material only if the death was violent such as murder.
What if you are selling a house because of neighbor problems? If it’s just noisy neighbors, it may not be considered a permanent problem that needs to be disclosed. But if you have neighbors bringing down property values by repeated bad behavior or improper use of their property, it may be something you have to tell the buyer.
#2 Choose a More Attractive Route to the Property
Make sure that prospective buyers see your neighborhood at its best. When you give directions to your home, have people come through the most attractive entrance and drive down the best streets.
Start your directions by using a local shopping center, a well-known store, or a restaurant as a landmark. Being close to shopping and dining can be a plus for your neighborhood.
Place these directions in the MLS listing, and avoid placing direction signs along less attractive access routes.
#3 Find and Highlight the Good Sides of Your Neighborhood
Maximize the strengths of your neighborhood. This will help your target audience zero in on your property.
Is your area close to major highways, or does it have easy access to mass transit for commuters? Is it in a desirable school district that families want, or close to medical services that appeal to seniors?
Can you easily reach shopping districts by car, or are you within walking distance of shops and dining? Are the neighborhood amenities in good condition, or are you close to good parks and entertainment?
Find the best features of your neighborhood, whatever they are, and highlight them.
#4 Fence Your House
If you feel that your home is superior to those around you, separate your yard by installing a fence or shrubs.
This will also bring an added sense of security. Older buyers will appreciate having a quiet haven in which they can relax. Young families will feel safer letting their children play in the backyard.
It will also make your property stand out to pet owners.
Try to obscure the view of less desirable properties from inside your home if you can.
#5 Make Home Improvements and Repairs
The expression that you only get one chance to make a good first impression certainly applies to the sale of your house. Starting with the importance of curb appeal, and continuing through a tour of your home, buyers want to see a house that has been cared for.
There is a difference between repairs and upgrades. Make sure that any upgrades you make are appropriate to the value of the house and the neighborhood.
The object is to have a house for sale that is safe, functional, and up to date.
Resolve Safety Concerns
Major problems with a house have to be corrected. For one thing, a lender doesn’t just approve the borrower, they approve the collateral as well. They will not approve a home with major issues that affect the structure of the house or the safety of the occupants. This is especially true of an FHA or VA loan.
Physical issues with the structure may include a foundation that is cracked from settling or a roof that leaks. Other items that will have to be addressed are any electrical, plumbing, or gas utility problems. Environmental and health-related concerns that have to be remediated include the presence of mold or radon gas.
The buyer will certainly have an inspection done and the sale of the property may depend on what it says. An inspector will find any issues that you didn’t address and the buyer will have the right to back out of the purchase if they are not fixed.
Most homebuyers don’t have the funds to buy a house as-is and fix problems themselves. They may only have enough money for the minimum down payment for a loan. In order to sell your home, major repairs will have to be performed by you.
Improve the Interior
The focus of interior repairs and renovations should be whether the property is maintained, functional, and up to date. Functional obsolescence can negatively impact the appraised value of the property.
The primary areas of concern are the kitchen and the bathrooms. Plumbing leaks cause unnecessary water bills and wood damage and have to be fixed. Outdated cabinets, counters, and fixtures will put your property at the bottom of most buyers’ lists. Unfortunately, replacing these items can be costly.
A less expensive option is to re-paint your cabinets instead of replacing them, and change the door knobs and pulls. There are a lot of choices for counters, and even the least expensive choice should be an improvement over old counters such as Formica. Kitchen and bathroom faucets don’t need to bust your budget. Simple new faucets will add a new look to your home.
Light fixtures and ceiling fans are other items that can change the look of your home without costing a lot. You can install them yourself with little trouble.
Paint and carpet are going to show the most wear and tear and may need replacing. Most people can paint walls for themselves, and online tutorials will help you save time and errors. Decent carpet paired with upgraded padding can make your home look and feel luxurious.
Improve the Exterior
Unless your roof sustained damage at some point, you probably haven’t done anything to it in years. The buyer’s inspector will carefully examine your roof and may have negative comments in their report.
To avoid unexpected problems while under contract, you should have an experienced roofer do an inspection. If they say the roof is okay, then you’ll have their report to counter the buyer’s inspection.
You may already have noticed moisture or fogging inside your windows between the panes. Over time the seals wear out on double pane windows and the window will need to be replaced. This is a common item on inspection reports. If you have a listing broker, there is a good chance that they have a company they’ve used in the past that can do the work.
Homes with siding need to be inspected for cracked wood or damaged vinyl. If you have vinyl siding, a good power washing will improve the look of your home.
Even brick homes need regular maintenance of the wood trim of the house. If you haven’t kept up with that, you may need to repair or replace some rotted sections of wood.
Unless you’ve done it recently, wooden decks and fences should be cleaned, stained, and sealed before listing your home. Broken or rotted planks or pickets should be replaced.
#6 Declutter and Stage the House
Sellers need to make it easy for potential buyers to see themselves living in the home. Think of your house as a model home. Making your house look more presentable is called staging.
Staging your home can make the difference if you want to sell your home more quickly. Statistics show that the sooner you sell your home the higher the price will be.
Many home sellers don’t stage their home. When you stage yours, you’ll have a big advantage over your competition. If staging brings you a better price for your home, it will be well worth the time and money.
Seriously consider hiring a professional to stage your home for sale. It could be the best investment you’ve ever made. If not, search out information on how to stage your home yourself.
A professional will show you how to declutter your home which opens up more space. You want buyers to be able to move easily through your home and to visualize their own furnishings there.
#7 Clean Your Property’s Surroundings
You’re not just selling your house, you’re selling your neighborhood as well. No matter how hard you work on your house and yard, if the surrounding properties and approaching streets look bad, it will hurt your efforts.
It may be delicate to ask your neighbor to clean up their property so that you can sell yours. Offer to do it for them. If they’ll let you mow and trim their yard.
Pick up trash in the immediate area and along the streets that lead to your home. Sometimes there are lots nearby that were never built on. Cut down any weeds and clean them up as well.
#8 Set a Competitive Price
Your home’s value is as much about the market you’re in as it is about your property. The value of your home depends on the price of similar homes in your immediate area that have sold recently.
If you overprice your home, some buyers won’t want to see it and you will get fewer showings. Other properties will sell first and your home will sit on the market. The longer your home is on the market, the less likely it is that you will get a good price for it.
You need to make sure that you price your home realistically and competitively. An experienced broker can help you with this.
#9 Hold an Open House
Holding an open house will often attract potential buyers who are not working with a broker and don’t have access to information about the home. An open house makes it easy for them to see the property for themselves.
Neighbors are always curious about homes for sale. Invite them and ask them to be positive about the area when speaking to buyers. The more you get for your home the better it is for their own property. Tell them they can choose their neighbors by inviting their friends who may be interested.
Having more people in the house shows buyers that there are other interested parties.
#10 Choose the Right Day and Time for Individual Showings
Avoid scheduling showings of your home at times that you know from experience may be a problem. If your neighbors down the street have a loud barbeque every Sunday afternoon, then try not to have showings then.
If it is difficult to turn left out of your neighborhood at rush hour, plan to have showings earlier or later in the day.
If there is a school nearby, or a large business around the corner, the end of the school day or the time for a shift change can cause traffic problems. Prepare to have buyers come at some other time.
#11 Offer a Courtesy to the Buyer
Buyer incentives can be a great marketing tool to help get your property noticed and visited.
Start finding ways to make extra money like garage sales to help pay for incentives. You may make enough to be able to buy down the buyer’s interest rate.
One of the most cost-effective buyer incentives is a buyer’s Home Warranty. They usually cost between $300 and $500 for one year’s coverage.
Check with your local city or county housing authority to see if your neighborhood qualifies for special programs for home buyers. If so, you can advertise that your property qualifies for this assistance.
#12 Consider Seller Financing
Seller financing can help sell your home more quickly because you’ve added buyers who couldn’t get traditional bank financing. The downside is that now you are taking the risk instead of the bank.
With seller financing, you become the lender. Since you are taking on more risk than a bank, you will charge a higher interest rate. The buyer will, however, save on closing costs.
You will need to rely on your attorney to advise you throughout the process and to provide all the needed loan documents. Everything has to be done legally so that you are protected in case of loan default.
If the buyer defaults, the eviction process will cost you legal expenses and time. However, you will keep all down payments and loan payments and can resell the house. Many people have done well by financing properties this way.