Selling a house needing repairs can be a scary proposition. Most of us don’t want to even think about hiring a contractor, or two, or three…to come and perform a variety of repairs before selling the property. And yet selling as-is properties is a bona fide, workable option for people in all kinds of situations.
The regular advice about selling real estate is that the owner should always perform repairs and improve the property. New paint, new carpet, maybe even a new kitchen, and don’t forget to replace the leaky roof!
Sometimes all of this makes sense.
Other times, however, it is neither a feasible or an economical proposition.
When Repairs Don’t Pencil
Most people over-value all of the repairs they’ve made to a property over the years. It’s one thing to invest $25,000 in a new kitchen and be able to claim all of that value back. It’s quite another to just want to make your home saleable. Even relatively inexpensive repairs (the bathroom that will be $8,000 to improve) usually don’t offer an add-back in value anywhere near the cost; more like $4,000 or $5,000.
Repairs have other hidden costs, too: the carrying cost. Every month the property sits empty is a month of mortgage payments, taxes, insurance, and utilities. No problem if someone is living in the property. But for people who have already moved or for people who have inherited a property, carrying costs can be significant burdens.
And then of course there is the process of actually making the repairs. Finding and selecting a contractor takes time. Getting three estimates from three different contractors takes quite a bit of time! Managing the whole project generally becomes a part-time job. Things come up after work begins that are never considered at the outset. What seems like a simple task list (updating an old bathroom) can easily morph into, “Oh no! We’ll need to fix the leak. We’ll need to update the electrical here”. And on and on.
The As-Is Option
Selling houses in as-is condition is becoming more common because there are actual buyers out there who purchase properties in as-is condition. Owners don’t have to worry about all the repairs if they sell in this way. For property owners pressed for time, companies like iBuyLehigh present an opportunity to avoid this step in the process altogether.
Direct buyers work differently than agents. With agents, the seller must wait for a prospective buyer to come along. With direct buyers, individuals assess the value of your home and they make you an offer. You don’t have to get your home “show ready.” You don’t need it to be spotless with “staged” furniture. Many homes are sold in their as-is condition, with old, outdated decorations, unfinished basements that need to be cleaned up—and yes, even furniture left by the previous owner.
There are various types of buyers looking for as-is solutions. People who are moving across the country for a new job aren’t able to supervise repairs from thousands of miles away. People who are inheriting properties are often faced with a home that has been left empty but that will take a great deal of time to address. Homeowners going through a divorce want to get out of the situation as quickly as possible; undertaking improvements in a home together is often very difficult and awkward.
The Trade-Offs
The trade-offs of selling as-is usually involve accepting a lower price than you would anticipate in a traditional sale process. The inclusion of repair costs in a traditional sale justifies that price; they are built right into the offer.
Homeowners will typically find similar price numbers in both paths at the end of the day. Closing costs and expenses are not included when people think about the money they will get at the end of a traditional sale. Those costs can be quite significant.
In terms of time, as-is sales actually save homeowners a huge amount relative to traditional processes. It can take months—and sometimes weeks or even months just to get sold homes prepped to go on the market. Buyers in a direct purchase process often close on properties in days or even hours if necessary.
For homeowners who need certainty that they can definitely sell a home now (or very soon!) This time factor can be invaluable.
What As-Is Means
As-Is Sales are conducted in buildings that need various levels of work done—things that need relatively little effort to address and that are still in reasonable shape, things that need moderate upgrades that would probably only take a couple of months work (and can often be done while the owner is still living in the property)—and then again there are properties that need multiyear projects of effort and improvement.
Buyers work with all kinds of properties and all ranges of value: fire-damage properties; houses with leaks in them; moderate plumbing problems; major plumbing problems; major electrical problems; roofs that need replacing; houses with wells that need digging; and properties that need all kinds of landscaping issues addressed; empty houses; and everything in between.
Direct property buyers are not deterred by properties that need work. This is the model of their entire business and they know what they are doing. Potential clients can always conduct their own inspections but be honest about what everyone knows.
Believe it or not, even properties that owners have not stepped foot in (or cleaned) for years can be sold as-is. Many times, people (and buyers) will take care of clean-out after the sale is final. Once again, this process is invaluable for assets left by deceased relatives.
Making a Choice
Two options are available to people thinking about selling their homes: Do improvements and sell through a traditional means. Or, sell through non-traditional means without making improvements.
Selling as-is is now something people consider for their first option instead of only contemplating it as a last resort. It is gaining momentum as an industry and it can still provide huge value to homeowners.
Homeowners can think about different relative price ranges between traditional and non-traditional sales (similar to above).
Repairing your home isn’t always necessary if you’re planning to get value in homes directly sold by their owners. These direct-sale processes do provide different types of value (though not necessarily more economic value through repairs)—less time wasted and better efficiency. However, sellers should think about whether value maximization is important to them—or efficiency? For most homeowners, efficiency typically reigns supreme over every dollar saved.
