How Can You Sell a House with Water Damage in 2024?

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.

Has your house been damaged by leaking pipes, groundwater, or flooding? Are you considering selling it, but don’t know what to do? We have put together a comprehensive guide to help you out with this process. Whether your house has water-stained ceilings or black mold from a wet basement, this guide is packed with information on selling a house with water damage.

3 Available Options to Sell Your Home with Water Damage

1) Sell to a Real Estate Investor

Signs such as “We Buy Ugly Houses” are found in every city across America. Have you ever wondered who owns these signs and why they buy damaged homes? Due to difficult circumstances—such as divorce—many homeowners need to sell their homes quickly. Some homeowners think how to sell their old house in need of major repairs when they don’t have money for them, while the majority of buyers want a nice home with no problems attached.

Private real estate investors have established house buying companies for those facing such difficulties. Regardless of condition, these home investors buy homes for cash—with real estate transactions that are quick and easy.

How to Find the Right Home Investor

Legitimate house buyers have sophisticated tools to help them make the right cash offer based on market trends. They will not make low ball offers, hoping to take advantage of a stressed seller.

Unfortunately, some house buyers call themselves professional investors when they are not ethical in their business practices. Find out about the integrity of house buying companies before you ever ask for an offer.

Take the time to seek and request cash offers from several reputable companies. If you sell your house to the first home investor who makes you an offer, you may not get the best offer available. Different home investors will value your home differently. Don’t limit the cash you get for your house. Shop around and compare the cash offers from multiple companies.

Only accept an offer from a home investor when you are comfortable with their terms and convinced of their reputation.

Benefits of Selling to an Investor

The buyer in a traditional sale will probably move into your home—making the transaction not only financial but also emotional. If they discover black mold from water damage, for instance, the buyer who wants a place to live will want to walk away.

Investors have no emotional interest in your property. They will base their offer on what it will cost them to repair and resell your house at a profit. If mold is discovered, for example, investors won’t walk away. They will factor the cost of mold remediation into their cash offer.

If your house has serious water damage, you don’t have to worry about how to pay for expensive repairs when you sell to a real estate investor. You sell AS IS—no matter what the condition is. Even selling a condemned property isn’t difficult if your buyer is an investor.

Selling to a house buying company also makes sense if you have an immediate need for cash. You sell it fast, and you are paid in cash.

Investors usually roll their costs into their cash offer. You won’t pay any realtor fees. And you typically won’t pay any closing costs. The closing is quick and easy with minimum paperwork.

Drawbacks of Selling to an Investor

For the right homeowner the quick cash sale to a real estate investor is the perfect solution. But keep in mind that this convenience comes at a price. The offer made by investors will be always lower than the market value.

However, this is a standard practice when it comes to getting paid in cash as well as receiving that cash quickly. There is a huge value there for those who want to sell their home Fast, AS IS and get paid in Cash. If you are not willing to compromise on price, you probably need to consider the traditional way of selling your home, which in most cases, won’t allow you to sell Quick, AS IS and for Cash.

That being said, if you choose to sell to a cash house buyer, you must confirm the integrity of the company. Many companies are scammers who prey on sellers who have not done their homework.

2) Sell with a Real Estate Agent

Real estate agents facilitate negotiations between you and the potential buyers of your home. In a typical traditional real estate transaction, you have an agent and the buyer has an agent. Since both agents are paid only when your house closes, it motivates the two agents to work together to bring you and the buyer together.

How to Choose the Right Realtor

From your standpoint as the seller, the right realtor is the one who will get you the most money for your house. Make sure your realtor understands the housing market in your area. If you want to sell quickly, a good realtor will help you set an asking price that will motivate buyers to act quickly. If you are not in a hurry, they will help you raise the asking price—but not so much as to turn off potential buyers.

Benefits of Selling with a Realtor

A good real estate agent will help you set a realistic asking price for your home considering its location, condition, market demand and other important aspects. They will help net you more money than a “for sale by owner” transaction or an investor cash sale. In a hot housing market you might even get offers above your asking price. But in a slower market, it might take months for you to get the best price for your property.

A traditional sale will expose your house to more buyers by listing your property on a local Multiple Listing Services (MLS) database. Only the licensed real estate agents have access to the MLS, which is a good overall advantage.

However, buyers often make unreasonable demands before closing. As an example: the home inspector finds some faulty wiring that needs to be replaced, but the buyer insists that the entire house be re-wired. A good realtor can negotiate away those unreasonable demands. Unfortunately, buyers that look for a home to live in, usually won’t even consider houses with a water damage because it is too costly to repair such damage as well as requires too much hustle.

Drawbacks of Selling with a Realtor

Your realtor will want you to stage your house for the best presentation. You may have pre-listing repair and decorating expenses. Also, if you have small children, it means a quick house cleaning every time you have a showing.

Frequent house showings are good for selling, but difficult for sellers. Your realtor will tell you to vacate the house before showing—to give potential buyers the freedom to discuss your house without self-consciousness.

If your asking price is high for your area or if you live in a slow housing market, it could take months to sell your home, especially if the property has problems.

Remember, the seller is responsible for the majority of the fees in traditional sale. Both your own and the buyer’s Realtors will charge you 5% to 6% of your home’s final sale amount. Sometimes fees can be divided between you and the buyer, but normally both Realtors’ fees, all closing costs and additional (often hidden) fees are also your responsibility.

The water damage you know of will have to be repaired before closing. You will also have to fix any other problems the home inspector finds before closing. If you don’t, the buyer will demand price concessions, or they will walk away from the contract. Many buyers will want to get out of the contract if on the home inspector’s report is mentioned about “black mold” or “wet basement” even if you agree to fix it.

3) Sell It Yourself

“For Sale by Owner” signs are a common sight across America. The seller sets the asking price. The seller does the advertising, showings, and just about every other process until closing. If the seller wants to pay for assistance, several third-party websites will help with advertising. And the seller can use real estate agents in a limited capacity.

Benefits of Selling on Your Own

The biggest advantage of selling your house yourself is the potential to save money. Because FSBO transactions cut out the realtor commission, you stand a better chance of making the most money by selling it yourself. Of course, this means that you should do your homework on the local real estate market and understand all necessary details to set the correct price.

Drawbacks of Selling on Your Own

The number of traditional buyers willing to purchase houses with water damage is extremely limited, which means your home can sit on the market for years waiting for a buyer if you don’t make all necessary repairs. But you can’t change the home problems history. Even if you have fixed past issues to the point they cannot be detected, those issues should be disclosed to every potential buyer.

Otherwise you risk future legal actions. It is important to protect yourself by getting the right disclosure and release papers to sign with the buyer. You will need to find out what forms you need and where to get them.

You need to learn how to convince the buyer that your price meets the home’s condition. For example, selling a house with black mold is difficult not only because of the need to take mold removal and prevention measures, but also because the toxicity of mold is a hot topic in mass media. Mold can be remediated—as well as the underlying cause. But unless you are proficient in negotiations and learn how to prove the past water damage isn’t a problem anymore, you will have a difficult time convincing a traditional buyer that they have no future risk of mold toxins.

You may not save any money by selling yourself. FSBO homes typically sell for less money than homes sold with a real estate agent. Their commission can often be made up with a higher selling price than you could get with a FSBO sale. This is especially true for property with water damage—when considering a good Realtor’s negotiating skills with potential buyers.

It is difficult for a seller to know how to price a house with water damage. You could set the asking price too high and never get an offer. Or you could sell quickly—only to find out later that you discounted your house too heavily for the water damage.

And just as it is with a traditional sale, to get the best offer for your house, besides making repairs, you will need to invest time and money in staging it. Plus you will have to show your FSBO home yourself. And it can be difficult to stay emotionally detached when a potential buyer is picking your house apart right in front of you.

If Your House Has Been Flooded

Types of Flooding

The word “flood” brings to mind images of homes partially submerged in the muddy water of a river that has overflown its banks. But homes are flooded from other natural disasters as well. For example, houses with poor drainage can be flooded by a heavy downpour. What these two examples have in common is the source of the water. Any time water enters a house on the ground level it is called groundwater flooding.

The second type of flooding is caused by water entering a house above the ground level—because of either a natural disaster or a mechanical failure. An example of a natural disaster is a roof blown off by a windstorm, exposing the interior of the house to flooding by heavy rainfall.

But a mechanical failure can be equally damaging. On a day when no one is at home, an upstairs toilet can flood a house in a few hours. If a house is severely damaged by water, it makes a difference where the water came from. Insurance companies differentiate between the two types of flooding.

Homeowner’s Insurance vs NFIP

If your house has flooded because of a mechanical failure or a wind storm, contact your insurance agent as quickly as possible. With the right insurance contract, you might only be responsible for the policy deductible.

The typical homeowners policy does not cover groundwater and surface water flooding. Flood insurance has to be purchased through an insurer participating in the NFIP. Immediately after any flooding, contact your insurance agency to see if you have flood insurance to help with restoring your home.

If you don’t have flood insurance, the water damage after a flood will be your complete responsibility to mitigate. Act quickly to minimize your losses.

Minimizing Losses

After flood water is no longer standing, secure first those belongings which cannot be replaced. Then secure replaceable items, such as wood furniture, that could be restored. It is common for flood victims to rent storage spaces for spreading out items to dry.

Send washable items to a professional cleaner. Discard items that can’t be washed, such as bedding and upholstered furniture. As a rule of thumb, throw away anything that could have absorbed water but can’t be cleaned. Flood water has many harmful substances. Don’t risk your health.

Remember to keep all receipts for all services and purchases resulting from the damage: it will help you get the most out of your insurance.

Contact FEMA to see what assistance is available to you. Check on other financial resources—such as loans from banks or family members. Charitable organizations help flood victims with food, home furnishings, and cash. After you have pooled your resources with any outside resources, put together a budget.

If you have enough time and budget, you can hire contractors to make your house livable again. As long as you can live in your house, you still have the three selling options listed in this guide. But if your house is unlivable, consider selling your house to real estate investors for cash.

Seller Disclosure of Flood and Smaller Water Damage

If your house has been flooded by a windstorm or because of a mechanical failure, disclose this in writing to any prospective buyer. Failure to disclose water damage is not always a requirement, but is always the smart thing to do.

If you know that there’s water in the basement eight months out of the year, disclose it upfront to any potential buyer. Don’t wait to sell your house until the dry months of summer to try to cover up the problem. A leaky basement not disclosed in July can become a legal nightmare a few months later.

States such as New York and North Carolina have historically been “buyer beware” regarding water damage. It’s up to the buyer to do their own research. But a more recent law in New York requires sellers to disclose property with water damage, including property in a flood plain. To add to the confusion, if the seller doesn’t want to disclose this information, the seller can merely credit the buyer $500 at closing. By contrast, Louisiana requires sellers to disclose any flooding or drainage problems with a property.

As you can see, rules for disclosure are confusing. Don’t risk legal action against you. Full disclosure is always prudent. Do it in written form, so after the transaction the buyer will not be able to sue you dishonestly claiming you’ve never disclosed anything.

Don’t try to hide water damage. It usually has residual signs, such as odor and/or discoloration. If either the home inspector or the buyer picks up on those signs—and you haven’t mentioned them—they will become suspicious of the integrity of the transaction. On the other hand, maybe your repairs are so thorough that there are no signs of previous water damage. Disclosing those repairs won’t necessarily damage the deal. It could in fact elevate the buyer’s confidence in you.

Specifics of Selling a Home in a Flood Zone

We have an entire article dedicated to selling a house in a flood zone. But let’s go over the basic details here.

How Location Within the Flood Zone Affects the Home Value

According to FEMA, there are three main categories of flood risk:

1. Moderate to Low-Risk Areas
2. High-Risk
3. High-Risk (Coastal)

Mortgage lenders require flood insurance for property located in “high-risk” flood zones. But please note that nearly 25% of all NFIP flood insurance claims lie outside of areas labeled “high-risk.” So flood insurance is advisable in all flood zones.

The added cost of flood insurance adds to the expense of owning a home in a flood zone. Couple that with the existing water damage to your home, and the value of your property decreases to any potential buyer.

FEMA continually changes areas in the floodplain registry. And just because your house wasn’t in a floodplain last year doesn’t mean it isn’t this year. This way, the home value can suddenly change if a house is included or excluded from a FEMA flood zone map, including the change of your area’s risk category within the flood zone. That’s why some jurisdictions even require disclosure for houses near a flood

plain.

Flood Zone Disclosure

If your house is in a floodplain, you may have special disclosure requirements. As mentioned before, some states have “buyer beware” real estate transaction laws where the burden of discovering problems falls to the buyer. In these states the buyer has to determine if the house is in a flood zone, and if there’s been previous water damage. The buyer’s home inspector can help with this process. But other states require that the seller fully disclose this information.

As a rule of thumb, any facts about a property that could affect the price paid and the desirability by a buyer should be disclosed. Simply stated, tell the buyer what you would want to know if you were the buyer.

If you have a water-damaged home in a flood zone, you have a more difficult situation than an immaculate mountain property in a hot real estate market. But you are not without options.

If you have the time and the cash reserves to sell your house yourself, contact your state government’s real estate division. Get all disclosure forms applicable to your situation. And if any of those forms don’t disclose everything you know about your property, write out the remaining disclosures.

If you have the time to sell your house with a Realtor, it will be the realtor’s responsibility to provide you with the right disclosure forms. You can still get sued, but the Realtor would also be at risk.

And if you don’t have the time or the desire to deal with the water damage repairs or the disclosures, sell your property to a reputable cash house buyer. You can just walk away from the house with cash in hand. Private real estate investors buy houses AS IS—freeing you from any worries that your water-damaged house will come back to haunt you.