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!