How to Sell a Fire-Damaged or Completely Burned Down House
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.
The emotion and trauma of a house fire can make it tough to determine where to start when selling your home. Obviously, fire damage significantly narrows down the pool of potential buyers.
But, as a real estate investor with over 20 years of experience in selling and buying properties, I can assure you that selling even a completely burned house is still doable.
In this article I will suggest two ways you can choose from to sell your fire-damaged home. Each way has its specifics, advantages, and disadvantages.
Let’s go through the details carefully and see what your options are.
Selling Your House After a Fire
2 Options for Selling a Fire-Damaged Property
When considering how to sell a burned house, you have two choices:
- Restore your property to market condition and sell it to the general public
- Sell your house as-is
Restoring your house will take time and money, but may result in a better price. Selling your home as-is will relieve you from the burden of restoration, but it may not net you the same amount of money as restoring your home.
Your individual decision will be impacted by factors that you may not have considered. There are advantages and downsides to both options that you need to consider carefully.
The details of your situation and how they affect your options will lead you to the best result for you and your family.
Challenges of Selling a House with Fire Damage
A home fire is a very frightening event. Realtors report that buyers are sometimes hesitant to look at homes that have suffered a significant fire. They are afraid that it could happen again. This can be a big factor if you are trying to sell in a strong real estate market.
Any hesitancy on the part of buyers can cause your home to go unsold longer than the average days on market (DOM) in your area. The longer your house is on the market, the lower chance you have of getting offers close to your asking price.
Since most buyers need to borrow a large part of the purchase price, their lender will need to be assured that the home has no problems. You will need to show that the cause of the fire has been fixed and that the house is fully restored.
Do You Have to Disclose Fire Damage when Selling the House?
Real estate disclosure rules are set by the states, and they are getting more and more strict. Consumer protection has been an increasingly important area of public policy ever since the recession of 2009.
In order to know if you can sell a house that was on fire without disclosing that fact, you will have to check the regulations in the state where the property is located.
Most states have disclosure forms that a seller has to sign that describe the condition of the property. If the form doesn’t specifically ask about fire damage, it will likely ask if the seller is aware of any material damages done to the home. This would include fire damage.
No matter how the form is worded, or whether a form is required at all, failure to tell a buyer about something as serious as a fire could create liability on your part. You should consult a legal advisor before going down that path.
Non-disclosure of past fire damage is not recommended.
Option 1: Sell Your Fire-Damaged Home As Is
A home with substantial damage from a fire can be difficult to repair completely. In addition to the damage caused by flames, there could be damage caused by smoke and soot. There may also be damage caused by the water used to put out the fire.
Repairs of this magnitude may go beyond your insurance coverage and your financial means.
If you can sell your home as-is, you can avoid the time, money, and inconvenience of restoring your home.
Are There Buyers Willing to Purchase a House Damaged by Fire?
The idea of selling a damaged home as-is is something new to most homeowners. This is done all the time across the US. Who are the buyers for fire-damaged homes and where do you find them?
The number of buyers who are looking for fixer-upper homes to live in has grown in the past few years. Most of those, however, are looking for homes needing minor repairs or remodeling.
Those buyers usually rely on a mortgage loan for most of their funds. Residential mortgage loan programs don’t fit this type of purchase.
A project like this will take a buyer who has the experience to deal with fire damage and cash for the purchase and repairs.
Professional real estate investors are experienced in the purchase of residential properties that need major repairs. They can either make the repairs themselves, or they manage crews of licensed professionals that they know and trust. This enables them to restore homes like yours for less money than it would cost for an average home buyer.
Investors use cash for the purchase and repair of investment properties. This means that they can move without the delays and uncertainties of the loan approval process.
Real estate investors are looking for houses like yours so that they can leverage their construction experience and resources into investment profits. Their goal is to end up with a property for which they paid less than the eventual market value.
They will either “flip” the property, which means they sell it right away, or they will keep it to rent to tenants.
Generally, contacting an investor is a go-to option for selling a house in poor condition as is.
Advantages and Disadvantages of Selling a House As Is to an Investor
If you don’t have the time and money to restore your home, selling your house as-is to an investor can be a good option.
- When you sell your house as-is after a fire, you no longer have to go through the time-consuming and expensive process of restoration. You can sell your house even if it’s condemned to an investor without doing any repairs or cleaning.
- Since investors pay cash, you can be certain of a timely closing. When a lender is involved, you don’t know whether the borrower and your property will both be approved until late in the process.
- Investors can close very promptly, sometimes as quickly as a few weeks. Because they are professionals who regularly do this in your area, they don’t have to rely on third-party inspections or appraisals. And, they don’t have to wait on a lender’s processing schedule. Choosing this route is generally the surest way to sell your house fast.
- When you’re dealing directly with the eventual buyer everything is much more simple. You don’t have to go through buyer showings or open house events that can be a burden on your family.
- Selling to an investor can save you a lot of money on closing costs. Realtor’s commissions alone can cost over $10,000.
As for the last point, you can read our three articles investigating how much you pay in closing costs in different situations:
- Cost of Selling a Home with a Realtor
- FSBO Closing Costs and Fees When Selling a Home by Owner
- Closing Costs for Home Sellers
Selling your house as-is means that the purchase price will be based on the unimproved value at that time. Your price will be lower than if you restore the house yourself.
However, you should carefully compare the net amount that you will receive from both options so that you can make a fair comparison. Your insurance will play a large part in this calculation.
If there are any funds left from your insurance claim after paying off your mortgage balance, that money will go to you. Include that amount with the investor’s offer minus your closing costs.
You may find that this number compares favorably with the net proceeds from the restoration and sale of your home. Especially when you consider the time and effort you save, and the possibility of unexpected repair costs that may have to come out of your pocket.
Additionally, we’ve discussed the pros and cons and the selling process in greater detail in our article about selling your home to an investor.
How to Get a Competitive Offer when Selling for Cash As Is
You need to find the right investor for the purchase of a fire-damaged home. Buyers who have experience with this type of property are best suited to make a prompt and accurate offer on your home. Ideally, you should try to find several so that you can compare offers.
Unfortunately, such a specific search will probably be difficult for someone who is not familiar with the real estate investment world. You can spend a lot of time learning as you go.
The Internet will lead you to real estate investors who say that they handle homes with all types of damage. However, they may simply be casting the widest possible net to sort out the deals that they actually want. You may be told later that they don’t buy fire-damaged homes.
The best way to put your home in front of the largest number of qualified real estate investors is to use the search function on HouseCashin.com.
The investors on HouseCashin have been thoroughly researched for experience and reliability. HouseCashin connects sellers like you with the top investors who buy fire-damaged properties in your area.
By using the simple cash offer request form on HouseCashin you can get multiple qualified offers at once. You simply have to compare terms and pricing and your search is done.
Option 2: Restore the House and then Sell
Before trying to find real estate investors that buy houses near you, you probably want to consider the other way — fixing your house and selling it traditionally.
There are a series of steps that you will need to take as you go about the process of restoring your home. These will involve:
- your insurance company
- local government inspectors
- the inspectors that you hire
- restoration contractors for quotes on the work to be done
- your mortgage lender
- one of your local real estate agents to list and sell your home.
It’s important to include everyone early on and to update them as you go along. This way you won’t leave out any necessary action that you need to take.
You also need to document everything that you do for your insurance carrier, your lender, and the local authorities.
Call the Insurance Company
Your first call will be to your insurance company. They will advise you on what you need to do immediately.
You may need to secure the property to prevent vandalism. Depending on the amount of damage that was done, you may need to cut off your utilities.
You might also need to prevent further damage from the water that was used to put out the fire. Water damage can cause mold which will add to the removal/repair costs (to learn more about these damage types, read our articles about selling a house with water damage and selling a house with mold problems).
The insurance company will send a claims adjuster to assess the damage. This will be used for their estimate of the cost of repairing your home.
Your policy may include payment for temporary housing (such as a hotel) and reimbursement for restaurant receipts. You’ll want to know how to submit these payments right away.
Your insurance carrier may have a list of preferred inspectors and contractors that they have worked with before. This might be helpful to you early on.
If you have a mortgage loan on your property, the checks disbursed by the insurance company for repairs will be made out to both you and your lender. You will both have to endorse them before you can use the funds.
It’s important to know whether your policy is Actual Cash Value (ACV) or Replacement Value. Replacement Value is the cost to rebuild or replace your home as it was. ACV is the Replacement Value minus depreciation.
Just as new construction homes are usually more expensive than a similar used home, ACV coverage is less than Replacement Value coverage. You could have to make up the difference in repair costs.
Have Your Home Inspected
You will need to have the fire department’s permission for someone to re-enter your home. Depending on the amount of damage done, it may not be safe for you to go into your house.
The adjuster used by your insurance company is not the same thing as a home inspector. You will need to hire a qualified inspector separately.
If your house has a lot of damage, you may need several different types of inspectors. This could include a structural inspection, mechanical (HVAC) inspections, electrical inspections, and plumbing inspections.
Contact a Restoration Contractor
Not all fire damage is obvious. There could be smoke residue in your ventilation or HVAC ductwork or even smoke damage behind your walls. This is why you should also call a restoration contractor.
Restoration contractors are specialists in restoring damaged homes. They are more familiar with fire-related damage and repairs than a typical general contractor.
Not all restoration contractors have a general contractor’s (GC) license. If they are not a GC, they will only recommend the tradesmen that are needed, such as carpenters or electricians. You should consider using a restoration contractor that is also a GC. That way they will actively manage all the work that is needed.
One of the areas where a restoration contractor can be a big help is in dealing with your insurance company. They should know how to handle communication with your insurer including draw requests.
If you use a restoration contractor that is a GC, their fee will be included in their quote for the work to be done. Make sure that the quotes you get are itemized. This makes it easier to make a comparison between contractors.
How Much Does Fire Damage Restoration Cost?
The cost to repair a fire damaged house will depend on the amount and type of damage done.
Some homes sustain more water damage from firefighting efforts than others. Some have more smoke damage than others.
Various organizations and trade associations have collected information on repairs and rebuilds done as the result of fire damage to homes. Although some jobs can cost much less or much more, costs typically range from $3,000 to $30,000.
Home Advisor shows a national average of $15,483 for repairs for fire damage. Minimal damage could be $1,000 or less. Substantial damage could cost $50,000 or more.
This does not include the cost of inspections. If you have to have different inspections done (mechanical, electrical, plumbing, etc.), it can cost from $400 to $600 per inspection.
If your insurance company makes you secure the property, that could involve additional costs. You may need to install a fence around the property or board up broken windows.
You should get an itemized quote for all work to be done. The written quote should clearly show the cost of demolition, debris removal, materials, and labor rates.
Whenever possible, you should get multiple quotes for comparison. Your insurance company may require this.
The restoration of a home that has been severely damaged by fire will involve the local authorities. They will inspect all work and possibly have to re-issue a Certificate of Occupancy. Their availability will impact your schedule.
A restoration project of any size will require approvals along the way from several entities. Your insurance company, your mortgage lender, the fire department, and local building authorities will all participate.
Even a small-sized project could take several months to complete. It’s not unusual for a fire damage restoration to take over 6 months.
So, Which Way to Go?
Your decision on how to sell your fire-damaged house will be dictated by your circumstances.
Everyone’s situation is unique. The needs of your family, the demands of your job, even your health can make it necessary for you to have more than one option in selling your home.
If you have the time and money to restore or rebuild your home, then that might be the best way for you to get the most money from the sale of your home.
Talk to the professionals that you employ to help you fully understand what that involves. Your insurance agent is a good place to start.
If you need to sell more quickly or don’t have the funds needed to complete repairs, then it’s good to have the option of selling for cash to a real estate investor.
Our platform — HouseCashin — contains the most reputable, ethical, and knowledgeable investors in the market. All of them have been vetted by the staff at HouseCashin. And they are willing to compete with each other for your property.
To receive up to 5 cash offers from the top-rated investors buying properties in your location, fill out our Request a Cash Offer online form.