Selling a home as-is certainly has its appeal. Organize the property, maybe clean it up a bit and throw it out there for the buyers to flood the gates! After all, today’s market is currently a sellers’ market, right? Well… it depends on what your goals are. We’ve put together a list of 10 risks to keep in mind and 10 ways to avoid them.

Risk #1 – Spending Valuable Time on the As-Is Market

One of the largest pain points to your listing on the market is how long it stays available – especially in a market like today where the average days on market is anywhere from 3 days to 18 days; which include homes that are showcased and move-in ready. Homes generally sit on the market because of 3 reasons: not priced correctly, condition doesn’t match the value, and because of location. These 3 things are also how buyers will “grade” the property and determine if they want to put in an offer to purchase.

Now the reason days on the market can become risky is because most buyers and agents will view the climbing number as there must be something wrong with the house. Then it begins to have a compounding effect against you. Investors and buyers will typically offer far less than the asking price as the days on market accumulate.

Way to Avoid #1) Spend some time preparing the listing and on improving the condition. Remove the clutter, clean everything, freshen it up as much as possible to improve the value buyers feel when the property is viewed online and in-person. For steps to prep your listing, see our Listing Playbook.

Risk #2 – Home Inspections for As-Is Home

Typically a home inspection can take place as part of the buyer’s offer to purchase. Most buyers will not make such a large commitment without someone level of confidence the house is worth at least what they’re spending. If buyers find a list of issues or one large problem in the midst of the contract there is a possibility their purchasing confidence may go away; despite any attempts to negotiate repair. When you don’t have a confident buyer, you may not have one at all as they could void and withdraw their contract.

Way to Avoid #2) Hire a home inspector to conduct a home inspection before you make it available for purchase. This way some or all of the potential “red-flags” can be addressed. It doesn’t take much to discourage some buyers in any market. It’s the biggest purchase they are going to make and any amount of risk can reduce their likelihood to commitment and your unlikelihood to successfully sell.

Risk #3 – Appraisals & Market Value for As-Is Home

Appraisals are conducted to assess the market value of a property. What a buyer spends to purchase the house can be higher, equal to, or less than what an appraiser thinks it’s worth. Chances are any unrepaired, broken, or unsatisfied parts of the property can influence the appraisers value downward from what the property could be worth.

Furthermore, appraisals are the lifeline of ALL finance loans. When a buyer purchases a house with a loan, eventually they send an appraiser to the property to check it out. This is to ensure the bank or lending institution isn’t taking a risk by giving their money to a buyer. The way their risk is eliminated is by ensuring the purchasing price doesn’t exceed the value of the appraisal. This is key when selling as-is because if you want $300k for the house and the appraiser only thinks it’s worth $250k – your options are limited if the buyer doesn’t have the cash to make up the difference.

Way to Avoid #3) Hire a real estate agent who has experience with pricing homes accurately and someone who will value the property similarly to how the appraiser will. This way when a price analysis is complete, there will be a clear understanding where the opportunity for improvement lies. Whether you want to do more the listing to improve its value or simply sell as-is for the right price so it sells quickly – either way the right Realtors will pave the way so you have the tools to succeed.

Risk #4 – Negotiating the Best Deal in As-Is Sale

When you sell a house as-is, buyers know you’re not wanting to make repairs or improvements. This can put them in a position of “power” during negotiations. Potential buyers may offer a lower price with the knowledge that you’re unlikely to counter repair demands. Even if you get a price analysis prior to selling, as-is property conditions can lead to having maybe one buyer at a time.

Way to Avoid #4) Do your best to improve what you can. When done correctly, any improvements you do make should earn you 100 % or more in return in addition to more potential buyers. If you don’t have the funds to do the repairs upfront – hire a real estate team that may be able to hold your repair costs until closing day. The Frey Team has a Renovate Now – Pay Later program to earn you more at closing!

Risk #5 – Overestimation of Renovation in As-Is House

Buyers interested in as-is properties may also overestimate the cost of renovations. This can lead to lower price offers or ultimately deals falling through after you had a contract. Some buyers may assume the costs of repairs are higher than they actually are – buyers prefer to play it safe. With this safety net, buyers may also be add in a “convenience fee” for not having a move-in ready home – which may also follow with a contingency “buffer” for any unknowns in their budget as well. Once again, the negotiation power is typically being held by the buyer in these situations unless…

Way to Avoid #5) As spoken already – do what you can with improvements first. Then support your pricing strategy provided by a local expert AND a breakdown of renovation costs provided by a reputable contractor. For bonus points, include the contact info for that contractor as well as their timeframe for completion. Both the thorough pricing strategy and cost of renovation breakdown will together help battle any buyer overestimation.

Risk #6 – Multiple Sales Attempts Selling As-Is

With as-is property sales the buyer audience is naturally lessened due to the condition of the property. For a list of the top 10 things buyers are looking for see our Listing Playbook. More than anything else the average buyer today is looking for move-in ready homes – and they are willing to pay for it! So already off the bat, we are looking at a smaller audience – usually buyers who are handymen (and women) themselves, buyers who aren’t afraid of a project, and/or they are investors looking for a deal.

Typically this means they may offer less for the house unless it’s priced correctly according to your pricing strategy. Otherwise, if it happens to remain on the market – the listing could be relisted later as another attempt. This is sometimes done to reappear as a “new listing” to buyers. Depending on when you take it off the market, it has to remain off market for a duration before listing it as a new listing. In Virginia, it must remain off for 60 days.

Even if the listing is “renewed” the history will still reveal its on and off market status.

Way to Avoid #6) This has everything to do with your goal. If you don’t mind the listing sitting a while and you don’t want to do any work to improve your price, then the best suggestion will be to price it just a bit lower from the beginning. The reason this can work in your favor is because you could introduce a multiple buyer offer scenario where the best one wins.

Risk #7 – Repair Costs for Buying As-Is House

This is very similar to #5 where we discussed overestimation of renovation costs. This section covers repair costs – essentially fixing anything that isn’t operational. Appliances, plumbing, electrical and anything else that has an on button or a power switch.

The risk here is not addressing big ticket items, which can be discovered by conducting your own pre-listing inspection. Remember the average buyer who is willing to pay for market value are those who are delivered “less risk.”

Way to Avoid #7) By improving any items in advance, you’re likely to receive the expenses in return on closing day. We recommend consulting with a real estate professional before using your funds toward any improvement. This way we can be sure your expenses have a higher probability of earning 100% or more in return on closing day. Not all improvements are created equal.

Risk #8 – Buyers Backing Out of Sales Contract

If a buyer discovers that repair costs are higher than anticipated or that they’re unable to secure financing, they may back out of the deal. This can be frustrating, time-consuming, and can ultimately lead to your home sitting on the market for an extended period of time. When this happens, you will have to start the selling process all over again, which can be time-consuming and expensive.

Way to Avoid #8) When you hire the right person to sell your house, they will “vet” any and all buyers when the initial offers are sent over. This means they will ensure they have proof of funds, deposit for title company, financing is pre approved with some underwriting (not just a prequalification which is completely different), and ultimate ensure the right expectations are set forth in the listing.

Risk #9 – Legal Issues for Selling House As-Is

When selling a house as-is, it’s important to properly disclose any and ALL significant issues to potential buyers. Failure to do so could result in legal issues down the line. Buyers have the right to know about any defects or problems with the property. Failure to disclose this information can result in lawsuits and significant financial penalties.

Way to Avoid #9) To avoid such legal complications, it is important to work with a reputable real estate team who can provide you with the necessary guidance in listing your house correctly. Experienced agents will also guide you on which legal documents to use and steps to take before listing your house.

Risk #10 – Financial Risks of Selling House As-Is

Finally, selling a house as-is can come with significant financial risks. Without preparing the property, even just minimally, your home may not sell for as much as you were hoping.  This will leave you with less money to put toward your next move or financial goal. This can be especially problematic if you’re relying on the sale of your home to purchase a new one.

Way to Avoid #10) Consider making the necessary renovations and your home will attract the type of buyers who are willing to pay top dollar for a move-in-ready property. The right real estate team offers resources for renovating your home before listing and then waiting to pay for the renovations at the closing table!

Conclusion: For an accurate market value of your property visit our home page and we will send you a complete sales & equity report!

How to Cover your Mortgage: 6 House Hacking Strategies

Free mortgage payments? Yes please! But how does it work?

Try these house hacks so can earn money to cover your mortgage.

1. Multifamily House Hacking: Long-Term Rental

Multifamily properties are probably the most common form of house hacking out there. This is because they are incredibly effective. First, what is a multi-unit or multifamily house? Any residence with 2-4 units is considered a residential multi-unit. Any buildings with 5+ is considered commercial multi-units – for example: an apartment building.

The “hack” here is specifically with the residential units because you can take out a regular residential loan to buy the property. FHA may require 3.5% down or conventional may require 5% down payment. When our clients hire us to help them accomplish this goal, with the help of a seasoned mortgage lender, we help you paint the picture of the financial costs.

The concept is simple. Buy the house with 2-4 units (separate rentals) and live in one of the units – renting out the rest of the space. The goal here would be to live without having to pay for your own portion of space because the profits from the other unit(s) should cover some OR ALL of the entire mortgage!!

Some of you might say, “Well I don’t want to live there, I can just rent my unit out.” Yes, that would be a perfect concept yet to qualify for the low down payment financing, one of the stipulations is that you MUST live there as a primary residence – sometimes for at least 18-24 months.

2. Multifamily House Hacking: Short-Term Rental

If you are lucky enough to live in an area with a strong tourism presence – or have your eyes on a property with a potentially high tourism presence – then you may find more joy in renting out your house on Airbnb or VRBO.

The immediate difference from a long-term rental may be more beneficial. You don’t have to be concerned for personality conflicts, rent defaults, evictions, pets, poor maintenance, lawn care, or any other potential headache that can sometimes become part of the long-term equation.

Short-term rentals come with their own set of “risks” of course. Guests can still cause damage, vacancy rates can vary based on the season, extra planning around cleaning, laundry, and customer service the list goes on here too. Don’t forget you’ll need to furnish and decorate the place – nothing fancy needed here as long as it meets the needs of the guests and looks taken care of.

In order to acquire a property and make it a short-term rental, it must be purchased with an “investment” loan which is different from the normal FHA, conventional etc. These typically require a 15-25% down payment – unless of course you plan to convert your current property.

The house can turn into a rental when you’re not home, you can rent out a space of the house like the basement or a spare bedroom, the property can have a tiny house added to rent out, a portion of the driveway can be rented for RVs – essentially converting a portion or all of the property to earn income.

3. Live-in Flip House

Multifamily homes are not for everyone. Now, for those who love home improvement projects may enjoy this next strategy!

Another way to earn extra money would be to buy a fixer-upper, renovate it over the course of a year or two, then sell it for a profit. Instead of a short-time and faster flip, this would take place over the course of your time living there. The goal with this strategy is to earn profit to cover your mortgage that you paid while living there. The key being to focus on the high-dollar return remodeling to maximize your experience.

Then you can rinse and repeat, doing it over again with another fixer-upper. Keep in mind, you will want to plan with how the market is fluctuating. We can of course help you understanding how/when the housing market may benefit you.

In order to acquire a property for this, you can buy with as low as 0% for first-time home buyers (about 3.5% for FHA and 5% conventional) yet remember, you must reside in the property for at least 18-24 months per the terms of the financing you choose. Don’t forget about educating yourself on how interest rates can affect your goals.

Another finance option would be to buy the house with a 203k loan or a Fannie Mae Homestyle renovation loan. The way this works is simple – get a quote on the renovation costs and this is added to your purchase price; making one single loan.

BONUS: if you live in a property for at least a year, you pay the lower capital gains tax rate on your profits. If you stay for at least two years, you can AVOID real estate capital gains tax by taking advantage of the primary residence exclusion. Specifically covering profits up to $250k for single owners and $500k for married owners.

4. Housemates or Roommates

Imagine living in a house and your roommate pays for more than half the mortgage. This essentially applies the long-term rental element to the portion of the home you make available.

It’s a good idea to run your tenants through a screening process especially since you’ll be sharing the same house. Yet this may be more than the typical background check and credit score check. You can ask questions like:

• When do you normally go to sleep and wake up?
• Do you plan to have guests often? What times?
• Which chores do you dislike? Which chores do you enjoy?
• How often do you like to cook?
• How often do you think the house should be cleaned?
• Do you have a significant other?
• Will you have guests over night?
• Do you like social events? How often?
• Are you allergic to anything?

And the list can go on – which is necessary as creating a win-win experience will be worth the extra work ahead of time.

Another benefit to this process is that you can split the utility bills – saving thousands. You do have to sacrifice some privacy yet in return you can cash flow on some mortgage savings while still earning 100% of the equity. If you’d like to take advantage of this, check out PadSplit.

5. Add Rental Unit Space

Another way to introduce the previous strategy and create a cash flowing scenario with MORE PRIVACY would be to add a rental space by adding onto the house or converting an existing basement or garage.

If it cost you $6,000 to convert a basement, and you rent it for $600 per month. You’ll earn your money back in just 10 months!!! Afterward you can enjoy 100% profit and put it toward your mortgage.

This also applies to adding a shed unit that serves the purpose of a tiny home. Check with your local real estate expert to get the scoop on how much each square foot is renting for in your area. I think you’d be surprised that these tiny homes can go for around $1,000-2,000 rent per month depending on the finished product.

With these additional spaces, consider the amenities that you can provide to increase your profits. Items like designated parking, utilities included, fast internet, private dwelling, and anything you can do to improve their experience.

6. Move into the New Rental Unit Space, Rent out the House

Now this sounds wild – yet people have lots of success with it! Essentially you would build your tiny house, cabin in the woods, a tucked away in-law suite, or your DREAM house – then move into it.

This leaves you with three options- renting the main house out in a long-term or short-term setting -OR- you can sell the previous property after subdividing the lot to recover your building expenses. Depending on your area, one of these options may be a grand slam opportunity for you.

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If you’re not sure what your investment opportunity looks like with 100% confidence – with our guides to buying and selling in this market, we are glad to help you with your business plan After all, helping others build wealth is why we got into real estate.
To The Frey Team, real estate is…

#MoreThanATransaction

Home 🏠 Remodeling: Tips & Mistakes 🚫 One of the ways homeowners can earn money (i.e. build wealth) WITHOUT selling is to build their home equity. As we know equity increases as this rising market appreciates in value yet “forced appreciation” is also a creative way to heighten these gains!! By renovating a space, and doing so correctly, you may “force” the appreciation to increase even more. Helping sellers prep their homes for the market is one of the many rewarding experiences in our day-to-day. Not only does this “forced appreciation” strategy earn more money for our clients, it also attracts more buyers which ultimately maximizes the sale experience!  The Frey Team loves real estate because this industry offers the opportunity to help people like you build wealth with real estate.  Let’s dive into the details on how to approach home remodeling and the mistakes to avoid; making for a successful transformation with home equity gains! 1. Lack of Home Remodeling Research and Planning 🔧📊 “Failing to plan is planning to fail,” according to Benjamin Franklin. He must have had experience helping sellers earn top-dollar selling their homes! 😄 When it’s time to change a space in your home, you’ll want to be mindful that the finished result entirely controls how much value is added to your home equity. Researching materials, contractors, design styles, colors, etc in advance really does affect your timeline and added cost-avoidance. If needed, lean on us to connect you with interior designers, architects, engineers, and a real estate agent to help determine finished value in advance. 2. Ignoring Permits and Regulations 🚨👮 When enlisting the assistance of licensed professionals, this won’t really be a concern as this is required by their state to perform. Yet neglecting to obtain the right permits can lead to potential legal liability and consequence. Each county or city can be different so it’s best to at least give the county a call and confirm. Not only does this method sort of provide a fail-safe to poor quality workmanship, it also prevents more cost later. If a mistake is made here, it more than likely will not surface until you sell your home or turn it into a rental; thus reducing your profits in these later events. 3. No Home Remodeling Budget 💲💵 From the wise words of DJ Quik, “if it don’t make dollars, it don’t make sense.” This couldn’t be farther from the truth when it comes to building wealth! One of the more common mistakes is getting starting without including budget into your plan. To simplify best practices, it’s similar to creating a business plan. Map out all the potential cost, time, preferred budget, the who, what, when, where, why, how and thus a plan is solid. For example, remodeling a kitchen today could earn a potential 96% on average return on your investment! That’s amazing!! Yet on the same token, if you don’t stick to the budget, that margin shrinks! And nobody likes that. 4. No Contingency Budget ☝➕ This mistake is really an extension of the #3 item to avoid. So important that it needs it’s own parcel. Projects typically come with unexpected expenses such as structural issues, needed electrical updates, or problems with plumbing. Not preparing for any unexpected costs almost guarantees you will exceed your budget. Best practice is to add 5-15% to your initial planned cost budget depending on how minor or major your remodeling will be. 5. Taking the Lowest Home Remodeling Bid 😱🤑 We know you’ve heard the saying, “you get what you pay for.” The struggle is real. Proper budgeting also means that you must keep spending low, yes this is true. Remember not every material or professional should be the lowest available cost if you want the best results. When hiring a professional, consider their experience, reputation, and portfolio of work completed. Request detailed breakdowns of their cost layout and scope of work. If you need help aiming for balance between cost and quality, give us a call and we’ll connect you to a few options! 6. Unlicensed Home Remodeling Contractor 😵🤡 You know what happens when you hire a clown for a kid’s birthday party and they don’t have an official business; showing up smelling like late nights and bad decisions. Well “contractors” without a licensed business sort of provide the same experience when it comes to finishing on time and producing a memorable valuable finished project; minus the smell, but who knows! 7. Not Asking Enough Questions 🖤🗣 Be curious, get involved, make the most of the project because the only opinion of the end result that matters is you! It’s your haven so it should be perfect. Don’t be afraid to chime in on material selections or ask how they plan on getting something done. The right contractors welcome this more than you know because they understand their reputation and your happiness go hand in hand. 8. Underestimating Home Remodeling Stress 😣🙃 Projects = potential anxiety and stress. It’s completely natural especially when you want it to be perfect! Embrace the energy and turn toward staying productive. This is also where a project manager takes the weight off your shoulders; ensuring the projects are rolling along as they should. Create peace of mind by scheduling time away from the home or creating your own designated space away from the noise or the temporary mess. 9. Poor Time Management 🎭⏰ Project managers usually come with hiring a professional. Either the contractor themselves also play the project manager role or they have a partner to take care of this. Also ensure when hiring help or taking on a project yourself that project management is included in the plan. Sticking to the time plan keeps your costs low and happiness high! 10. Ignoring the Style of the Existing Home 👀👻 When completely remodeling a space, it’s natural to entirely design everything apart from the rest of the property. Doing so can unfortunately make other spaces in the home feel noticeably different or outdated; which is critical for selling or turning your home into a cash-flowing rental. Be mindful of your design elements and upgrades as the rest of house may start calling your name. 11. Choosing Lower Quality Materials 😰😡 Budget is key, yes we know you know this by now. “Buy once and cry once.” The point here is quality will render a better looking result, a longer lasting result, and usually a higher valued result. When the money is spent correctly, some lower cost items can still qualify two of the above, but you won’t get all three: appearance, durability, and increased home equity. 12. Over improving 😅🙄 Improving the space is obviously the point here, right? Well it is possible to over improve. Sounds silly I know. The point here is to stick to budget, planning, and avoid all the above to create the best result. We are hoping you’re also aligning this project as an equity building tool. So over improving by selecting luxury materials such as gold plated toilets, when the rest of your home by not be luxury, is a sure-fire way to throw away that high “forced appreciation” margin you’re aiming for. Conclusion 😎😎😎 Have fun and dream big! If you need any resources or professional advice on design elements and what the project value may render, shoot us a text! We laid these tips out for you to help increase your chances of crushing your goals. Remember to look for balance between budget, your dreams, and the right team. Steven, Jamallia & Ryan 540-685-1010