Selling Distressed Property
Most people assume that you have to get a property into perfect condition before you can sell my house fast, but that’s not actually true. The real estate market is booming right now, even for distressed properties. There are plenty of buyers looking to buy a fixer-upper. Here are some tips for selling a distressed property that will ensure you get the property’s full value.
Selling Distressed Properties – 10 Things You Need to Know
Be Honest About Disclosures
When a property is in bad shape, your first instinct might be to brush off the problems and focus on the positives. While understandable, this is actually a bad strategy. First of all, you can get into serious legal trouble if you fail to disclose potential hazards or issues in the home.
Another big problem is simply that it wastes time for you and potential buyers. If the online listing makes the property sound entirely different than it is, buyers may want to see it and then get disappointed when the foundation has problems. Being upfront about the property from the start means that you can negotiate with buyers who are fully prepared for all the quirks of the home.
Get Help From a Specialist
The traditional real estate sales process involves selecting a local realtor who will then arrange open houses and showings. However, this process does not work as well for distressed properties. The basic realtor is typically just used to showing picture perfect homes to buyers who need a mortgage and want something move-in ready. Meanwhile, a distressed property sale often involves as-is contracts and cash transactions.
Therefore, the target audience is entirely different. Working with a specialist ensures your property is marketed to a motivated audience. Instead of all the hassle of trying to sell the property to nervous homeowners, you can find a firm who actively wants to buy and fix up distressed properties. In addition to helping you market to the right audience, a specialist also has more experience handling the different legal and financial implications of distressed property sales.
Consider Your Timeframe Before Selling
Before you get into the process of selling your home, go ahead and think carefully about the timeframe. If you are in a rush to sell your home, you may want to go ahead and lower your price immediately. Your agent can also emphasize your need for a fast closing to buyers. This can encourage them to include a shorter closing period in any offer that they make to you.
If time is not a major factor in your decision to sell, you might want to set the opposite strategy. Pricing the property a little higher can be fine because you have plenty of time to wait for a buyer who makes the right offer. Fixer uppers often sell well in late summer or early spring, so you even have the potential of delaying listing until there is more market activity.
Set a Reasonable Asking Price
There are a few major pricing pitfalls you need to avoid when selling a distressed. Property owners need to avoid asking too much for the distressed property. Most buyers have a strict budget, so they may not even want to look at or negotiate for a home outside of that budget. Keep in mind that looking at the value of nearby homes will not give you an accurate listing price because turnkey homes sell for significantly more.
At the same time, you do not want to price the property too low just because it is distressed. This can lead to you missing out on a lot of profit. To know exactly how much the property is worth, go to the professionals. Getting an estimate for potential repairs and an official appraisal can help you find a fair asking price.
Don’t Be Afraid of a Little Cosmetic Work
Selling a distressed property does not have to mean you show buyers a complete dump. Enhancing your property a little will always result in better reactions. Even buyers who specialize in distressed sales are still affected by a bit of curb appeal. A few simple cosmetic changes will show the house in the best light and make it seem like it hasn’t been completely neglected.
When considering potential work on the house, avoid anything that takes a lot of time or money. Instead, relatively simple things like mowing the lawn help provide a better first impression. Inside the house, do a quick clean to remove any obvious dirt, dust, and clutter. Keep in mind that homes with intact roofs, plumbing, and electrical always sell for more, so if you are going to do any repairs, these are the best to invest in.
Pay Extra Attention to Paperwork
There’s always a lot of paperwork involved with any property sale, and it is especially important with a distressed property sale. You want to avoid any mistakes that may cause the sale to fall through, and you do not want the buyer to be able to claim they were misled. The other tricky thing is that many distressed property sales are done with companies instead of individual homeowners and their real estate agent.
To ensure that everything goes smoothly, it is a good idea to have a real estate agent or attorney on hand to go over any contracts. Having someone to look out for your best interests and handle tricky paperwork will make the process a lot easier. Being able to double and triple check every piece of paperwork will help you avoid unfortunate mistakes.
Avoid Unnecessary Delays
When selling a distressed property that you have no plans to repair, any time spent waiting on the sale may cause you to lose money. In many cases, damage is ongoing, so the property’s condition will deteriorate over time. Another potential problem is that abandoned properties are likely to attract squatters or trespassers who may further damage the property.
In addition to these concerns, you still have to keep paying mortgages and other bills on the property while you wait. Therefore, it is usually financially advisable to find a buyer quickly. Of course it can be fine to take a few weeks to consider your options. However, if no other buyers are on the horizon, delaying for several months can just cause you to lose money.
Consider Only Accepting Cash Offers
Most people do not have enough saved up to buy the home outright, so their offer is contingent on them being able to get a mortgage. However, this can cause some pitfalls when selling distressed properties. Most brokers and lenders will only offer a mortgage on a property in good shape. This means that a buyer cannot typically find a lender if a home has extensive water damage, roof problems, or structural issues.
To avoid wasting time with banks and mortgages, you might want to write a listing that says only cash offers will be considered. This makes it a lot easier to sell a house in rough condition. Furthermore, cash offers move a lot quicker than offers that involve a mortgage. If you need money fast, this may be the better choice.
Know When to Sell Without Repairs
One of the most important tips for selling a distressed home is simply taking time to consider all your options before deciding to sell. Think about whether or not it is really worth selling the property as a distressed home. In some cases, a few simple repairs could net you thousands of dollars in profits. For some neighborhoods, holding onto the property for a while or renting it out could result in higher profits.
To make the decision, consider your financial state and the state of the property. If you need funds quickly, selling it as a distressed property might be a good idea. You may also want to sell if you cannot get a loan and the cost of the repairs is extensive. Meanwhile, if repair costs are relatively low and you have time to do the repairs, you might want to fix it up and sell a move-in ready home instead.
Market the Property to the Right Buyers
In distressed property sales, your target demographic is key. For example, trying to sell a severely damaged property to newlyweds looking to start a family probably will not work. If your home cannot be appraised for a mortgage, there is no point in marketing it to those without a lot of funds.
Essentially, you need to think carefully about who the right cash home buyer will be. Then you can take steps to market the property in places your buyer might be.
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