Your Judgment-Free Guide to Selling a House in Poor Condition
Contrary to what Instagram-worthy listing photos would have you believe, not every house that hits the market is brand new, freshly remodeled, or sparkling to perfection. Nearly 80% of America’s housing stock has weathered two decades of wind, rain, and sun, and 38% of U.S. homes were built before 1970, according to a report from Freddie Mac. Meanwhile over a third of homeowners say they’ve been putting off at least one home improvement project for a year or more. Homes need constant TLC and keeping up with property maintenance is a never-ending job.
When you decide to sell your time, it’s time to face the music: issues like a leaky roof, dingy floor, potholed driveway, or cracked foundation are going to raise red flags with potential buyers. “Most homeowners don’t recognize how much work their house needs until they start to pack up,” says Brandi Abram, a top-selling real estate agent in Lawrence, Kansas.
But how you choose to sell a house in poor condition really depends on your personal goals, timeline, and financial situation. Do you need to sell fast and accept a discount, or would you rather invest some time and money to command a higher price? In this guide we’ll help you evaluate what kind of shape your house is actually in, determine which repairs and updates you should make (if any), and strike a deal with the right buyer.
Source: (Julian Schultz / Unsplash)Defining ‘poor condition:’ Figure out where your house is on the spectrum
“Poor condition” is a relative term in real estate that translates differently from market to market. Your house could fall into any of the following camps:
1. Absolutely uninhabitable
“In my area, poor condition houses are ones that are considered uninhabitable,” explains Abram. “We refer to houses that are rundown, but habitable, as fair condition properties. Fair condition houses have dated finishes and fixtures, or maybe they have foundation issues.”
This wide discrepancy between definitions is in part because “poor condition” is a term sometimes used by home inspectors when a house receives a bad inspection report. Houses that receive a poor condition rating have multiple issues that make them uninhabitable, that may include:
Serious electrical issues (outdated knob-and-tube wiring; frayed wiring; etc.)
Serious plumbing problems (leaky, corroded pipes; non-functioning water heater; etc.)
Severe and/or extensive roof damage
Lead and/or asbestos
Termite infestation (or unrepaired damage)
Severe and/or extensive foundation issues
Severe and/or extensive chimney damage
2. Visible repairs needed
A habitable house with several flaws and repair issues may gain a “fair condition” rating from a home inspector. However, many buyers and their agents will still consider a property as in “poor condition” if it has several of these serious problems:
Some electrical issues
Some plumbing problems
Significant roof damage
Significant wood rot
Significant foundation issues
Failing, yet still functioning HVAC
Damaged and outdated kitchen
Damaged and outdated bathroom(s)
Damaged and/or non-functioning faucets/light fixtures
3. A bit dingy — could use some updating
A home that has good bones, but has some general repair or deferred maintenance issues may gain a “fair” or “good” condition home inspection rating. However, if the house shows poorly, some buyers will still say it’s in poor condition — especially when writing up their offer.
Items that can give a house a bad rep as a “poor condition” property include:
Dirty, cluttered interior
Dirty, stained flooring
Dingy, peeling paint
Outdated finishes on faucets & light fixtures
Dead, overgrown, untended landscaping
Weathered exterior (including peeling paint, minor wood rot, etc.)
Source: (Serhii Krot / Shutterstock)I’m selling a poor condition house: What are my options?
No matter what level of “poor condition” your house is in, you have three basic options open to you to get it sold:
1. Do nothing and sell it as-is
Maybe it’s a lack of time, or cash, or motivation, or a combination of all three. But whatever the reason, you have no interest in investing any money or effort into your home before you list it for sale.
If that’s the case, you’ll be selling your property in what’s called as-is condition. Your buyer enters the home sale knowing that they are responsible for fixing any repair issues they find. This puts you in a “take it or leave it” situation should your buyer want to renegotiate an accepted offer after the home inspection.
However selling as-is doesn’t absolve you from all responsibility. You are still legally required to disclose any known problems in most states. HomeLight has a list of all 50 states mandated disclosure forms that you can consult. Even where you aren’t required to disclose problems with your home, intentionally hiding known issues about your house in a transaction is never advisable. (If you are selling an inherited home that you’ve never lived in, however, you may be exempt from filling out your locale’s real estate disclosure form since you aren’t expected to be familiar with the property).
In addition, don’t be deceived by the “do nothing” mindset. While you don’t need to spend time and money on repairing major problems, it is wise to invest a little bit into your home before listing it for sale. A rundown house that’s also coated in a layer of grime, covered in dirty carpet, and hidden behind wildly overgrown landscaping guarantees you’ll get the least amount of money for your home.
You can net more by using nothing but your own elbow grease or a little cash to hire a pro to deep clean, declutter, and depersonalize your home:
Deep clean – $25-50 per hour (around $100 to $400 for a 2,000 square-foot house)
Declutter & depersonalize – $255 to $761 for a pro organizer; or 2-10 hours of your own time, plus the cost of storage containers
Landscaping maintenance – average of $61 for pro lawn mowing, plus an additional $12 to $40 per hour for weeding and basic pruning
Pro carpet cleaning – $50-75 per 10×14 room (including furniture removal/replacement)
2. Make low-cost, cosmetic fixes only
A clean, decluttered house makes necessary repairs seem less daunting to fix, but even buyers in the market for fixer-uppers get intimidated by a long list of must-do repairs.
If your poor condition requires a high number of major and minor repairs, it may make sense to knock out a few of the low-cost, cosmetic fixes to make your home more appealing to potential buyers.
For example, let’s say your house hasn’t been updated in 20 years—so it’s due for a new roof, the HVAC is nearing the end of its lifespan, and all of the fixtures (lighting, faucets, appliances, etc.) are worn out and out of style.
Taken altogether, your potential buyer is looking at spending an additional $50,000 to $100,000 or more on remodeling your home. Are you willing to take that much less for your home? Probably not.
On the other hand, if you tackle the smaller jobs before listing, the big price tag items (like the roof or HVAC) that still have a few years of use left will feel manageable rather than overwhelming to potential buyers.
Repaint interior – $1,192 to $3,919 average for full home interior (an average of $1-3 per square foot)
Replacing outdated light fixtures – $88 to $250 for installation by a licensed electrician, plus an additional $30 to $100+ for each light fixture
Replacing old faucets – $246 to remove/install one sink faucet, plus an additional $25 to $200 for each faucet
Refinish existing cabinets – $1,800 to $2,200 for pro cabinet refinishing
3. Invest in some major repairs or upgrades
If your home is in truly poor condition, it definitely has severe problems that are too much for the average buyer to take on once you add them all together.
True, it makes no sense for you to invest tens of thousands of dollars putting your rundown house back into brand new condition, but it may make sense to make one or two major repairs simply to get your list price closer to what your home is actually worth.
Picking which needed repair or two you should do requires an honest assessment of what work your home needs, and a little research on how much each job will cost:
Replacing flooring – $2,200 to $7,400 for materials and installation, depending on flooring type
Replacing appliances – $2,200 for new appliances (fridge, oven/stove, dishwasher), plus an additional $100 to $300+ each for installation
Updating bathroom – $35,000 for a complete renovation
Updating kitchen – $38,300 to $68,000 for an upgrade or a complete renovation
Roof repair/replacement – $7,000 including installation and roofing materials
HVAC replacement – $8,200 including the unit and installation
If your home needs all of the above (and you don’t have the finances or ability to DIY a few of them to increase your list price), consider selling to a real estate investor.
With access to wholesale materials and a network of contractors, an investor can fix your house up for considerably less than you can — so they may be more willing to pay a reasonable (though still discounted) price for your home than a traditional buyer.
Source: (Ameer Basheer / Unsplash)Should you put money toward improving your home’s condition? 4 factors to help you decide
Once you start running the numbers, those dollar signs start adding up—until you’re wondering if it’s worth spending any money at all to improve your poor condition house before selling.
The answer isn’t a simple yes or no:
“It depends on how expensive it is to fix the issues. Are we willing to let the deal fall through over a small, inexpensive repair request? Absolutely not. We’re going to fix it,” explains Abrams. “However, if it needs a whole new roof, that fix may be more expensive than the seller can afford. So then it’s a ‘take it or leave it’ situation.”
When you’re teetering between the “to fix or not to fix” question, it’s important to consider these four factors:
1. Current market conditions
What are buyers buying and how fast are they buying it? That’s the burning question you need your real estate agent to answer first when considering whether or not to spend capital on your house to improve its condition.
If your property is located in a hot seller’s market where home values are rising and buyers are snapping up every house that comes available, you may be able to get away with doing less.
However, if you’re a slower market or a full-fledged buyer’s market, then you’re better off spending a little money and effort on improving your property. If you don’t, you’ll either have to list at a rock-bottom price, or expect to sit on the market for months (which will slowly lower your list price over time).
2. Your competition
Check out comparable sales (in photos or in person) to evaluate how your home stacks up against your competition.
Let’s say every home for sale in your neighborhood has great curb appeal, updated finishes, new appliances, and brand new flooring. Chances are that your home will sell for a whole lot less than it’s worth (even in its current condition), or even worse, it’ll sit unsold indefinitely.
If however, your neighborhood has a mix of homes that cover the spectrum between completely remodeled, partially renovated, and as-is condition, then your house stands a reasonable chance of fetching a reasonable price — as long as it’s clean and decluttered.
3. Value vs. spend
Would you be willing to spend $1,000 in order to get up to $10,000 to $15,000 more for your home? Of course!
How about spending $10,000 in order to get only an additional $5,000 to $7,000 more for your home? No way!
Paying to improve your house doesn’t make sense unless you stand to make significantly more money than you spend — in other words, you need to weigh the cost-vs-benefit ratio, or return on investment (ROI).
“I make a list of every repair or update the house needs done in order to get a top dollar, then price out how much each item will cost to get done. Once my sellers get the list, they can decide which repairs are affordable and will provide a decent ROI,” explains Abram.
Consider the cost of major repairs, such as the roof at $7,500 and the HVAC replacement at $8,200. If your house needs both, it makes more sense to replace the roof with an ROI of 107% versus the HVAC which only has an ROI of only 85%.
The disclosure laws in most states require that you list all known issues about your home, but an inspection is almost guaranteed to uncover more problems. The inevitable findings in the home inspection report gives your buyer a powerful negotiation tool. After it’s over, you’ll either have to negotiate an even lower price, or let your buyer walk away.
That’s why it’s sometimes best to fix some of the bigger issues that will definitely loom large on the inspection report, so that your buyer has less leverage to renegotiate the sold price.
Leverage during negotiations isn’t an issue if you’re selling as-is:
“Sellers don’t need to be afraid of the home inspection as long as we say up front that we’re selling as-is and not willing to make any repairs,” says Abram.
“Of course, the buyer is welcome to have a home inspection, but it’s for their own knowledge. The findings won’t impact the sale because it’s a take it or leave it situation.”
Know your home’s value, no matter its condition
Every home has value—even ones in poor condition. In most cases, the location, the lot, and even the house itself are all worth a whole lot more than it’ll cost your buyer to fix it up. And it’ll be worth a whole lot more once it’s back in tip top shape—so don’t let its current condition fool you into accepting less than its worth.
“When you sell a poor condition house as-is, buyers are going to come in with low offers. They’re going to try and beat you up with the price,” advises Abram. “However we just need to know our value so that we can stick with it.”
Header Image Source: (Stijn Daenens – stijn.ca / Shutterstock)