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6 Tips to Consider When Selling a Distressed Home

Owning a home is a hallmark of the American Dream, but not all homeowners are making the most of it. Some may even look at their homes more as a financial burden than a source of stability and security. These homes may also pose a major risk to the families living in them.  If this sounds familiar, then you could be the owner of a distressed property.  The best possible way you can deal with it is to put it on the market. 

However, selling a distressed property is easier said than done. Due to the numerous issues it faces, not many buyers will want to make an offer. Some may even purchase the house below the fair market price. On top of that, many homeowners aren’t fully aware of the cost to sell a house, including closing costs, agent fees, and repairs—which can eat into your final proceeds. Here are a few tips to help you sell your home no matter the condition and appearance.

1. Know what’s wrong with your property

Before getting it listed, you will need to know every detail of your home, from the most significant damages to the roofing system to a chipping paint job. Knowing the total physical condition of your home is still important in helping you determine how much it would sell for.

You may not expect much at closing, but estimating your home’s value based on its current state will allow you to sell at a more reasonable price. It won’t be much, but you can at least add the few dollars you have gained from the sale to your next home purchase.

2. Decide whether to undergo foreclosure or not

If you owe more on your mortgage than the actual value of your home, you may have to deal with an underwater mortgage. This often happens during a downturn in the housing market when property prices fall at significant rates.

In case you don’t have enough equity to qualify for a refinance, foreclosure should be your last resort. You can prevent this through a short sale or a debt relief program that reduces the interest you owe. That way, you won’t have to go through foreclosure and lower your credit score.

3. Know if there are any repairs for you to handle

If you don’t mind selling your home at a lower market price, you should still need to do a thorough inspection and see if you can make improvements to the property. This is ideal if you want to sell at a higher price, but the cost of rehabilitating the property could be too much of a financial burden.

Major repairs can take too much time and money, but if that isn’t a problem, you might as well take up the expense. There’s a good chance you could increase the property’s market value. However, there’s also the risk of discovering underlying problems such as a termite infestation or a faulty foundation which could bump up repair costs further. If your home is beyond saving due to the number of repairs it requires, you might want to sell the property as-is. There are numerous options to consider if this is the road you are taking.

4. Sell to investors or home-buying companies

No home is too unsightly for real estate investors looking to expand their portfolios. Many of these professionals can purchase a distressed property, spend for the repairs, and re-sell it for a profit. Some investors would prefer buying a home and holding until it reaches a certain market value. However, buy-and-hold investors would prefer homes that require minimal repairs, so consider selling to people or companies that have no problem buying homes in the worst shape possible.

If you want to sell a house for cash without going through the traditional process of selling with a real estate agent, consider reaching out to a company that buys homes as-is. This company uses special software to evaluate a home and come up with the best possible offer within days.

Apart from the speed at which your home could sell, you also enjoy avoiding making costly repairs and improvements. If you don’t have the time and luxury to get your home listed, consider a house-buying company that can help you unload your burden.

5. Sell your home by yourself

Putting your home under for-sale-by-owner or FSBO status could be your best option if you don’t have the means to put your home on a Multiple Listing Service. Under this arrangement, you have total control over the transaction, especially when it comes to negotiating the closing price with a motivated buyer.

In addition, you also get to save more money than you would with a real estate professional by your side. In this case, you could be paying at least 5% of the final price to the agent and over 3% in commission fees to the buyer’s agent.

Despite these advantages, there are several downsides to selling your home by yourself. For one, your home could spend too long on the market because it doesn’t get the exposure it needs to become visible to eager buyers. Agents can also tap into their network and use their resources to market their listings. Unless you have no problem letting off a distressed property quickly, selling your home through an agent might be the better option.

6. Verify every buyer that comes along

Whether you are selling to a home-buying company or an investor, you still need to do your due diligence before accepting every offer that comes your way. If you list your home on Craigslist or Facebook Marketplace, expect to receive proposals from people who claim to have the money.

To be certain,  consider running a background check on the buyer. In addition, make sure the buyer is prequalified to prove they are ready to finance the purchase.  You may also want to ask them to make an earnest money deposit and come up with a purchase contract that will protect your interests.

Endnote

It’s never a dead end to owning a distressed home. You can still make the most of selling it by using the right tools and approaches. Use this guide to help you sell your property and finally have peace of mind.

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