How Much Do You Lose Selling a House As-Is?
Are You Leaving Money on the Table?
Understand the factors that can impact the selling price of a house sold "as is."
Learn how the condition of the property and market demand affect the potential financial loss.
Discover how to calculate the potential loss and consider additional factors when selling a house in its current condition.
Selling a house can be an intricate process, especially when it's in need of repairs or renovations. Many homeowners wonder about the financial implications of selling a house as-is. There is some confusion to the term and often that misinformation can prevent you from maximizing your home’s return.
In this article, we'll delve into the factors that can affect the selling price of a house in its current condition. Whether you're considering selling your home or just curious about the topic, we'll explore how much you might lose when selling a house "as is.”
The amount you can lose when selling your home "as-is" depends on several factors such as the property's condition, market demand, and comparable sales. While there is no exact figure, selling a house in its current condition typically results in a lower selling price compared to a fully renovated home. It's recommended to consult a professional real estate agent or Realtor for an accurate estimate based on your specific situation.
Understanding the Term "As-Is"
When a property is sold "as is," it means that the seller is not willing to make any repairs or renovations before closing the sale. An ‘As-Is’ contract does not contractually obligate the seller to make any repairs… but it can happen, and we’ll talk about it later.
The house is offered in its current condition, and potential buyers are aware of any existing issues. Selling a house "as-is" is often seen as a way to expedite the selling process, but it's essential to weigh the potential financial consequences.
Many homeowners believe they can simply say a home is being sold as-is and be required to do nothing to it to sell. This is incorrect. Depending upon what is discovered in the home inspection and the type of mortgage, you may still be required to do repairs.
Additionally, if there is a material fact about the home – something that isn’t apparent but would want to be known to a buyer – as a seller you must disclose it. So selling your home as-is doesn’t allow you not to disclose defects or other issues with the home.
Why Sell a Home As-Is?
There’s a number of reasons why you might want to sell your home As-Is. You might be selling the home for a relative or in an estate. If you aren’t in the area or don’t have the ability to handle any repairs to the house it can make sense to sell as-is.
If your home has a substantial defect – that is disclosed to all buyers – it might make sense to sell your home as-is. A home with a leaky roof, trashed interior, or one that needs substantial work might be listed as-is.
It let’s buyers know that the seller is aware of the condition and will not fix it as a condition to close. IE. “Don’t give us a low offer and ask us to fix the roof… we’ve already priced it to sell.”
Factors Affecting the Selling Price
Pricing a home to sell As-is should be done with professional input and based upon the home’s needs. There are three things you should know before pricing your home as-is.
Property Condition: The condition of your house plays a significant role in determining its selling price. Buyers generally expect a lower price for a house that requires substantial repairs or updates. The extent of the needed repairs, such as structural issues, outdated systems, or cosmetic flaws, will influence the amount you might lose.
For example: If you home needs a $10,000 roof, you might expect to price your home at$12,000 under the market value.
Market Demand: The local real estate market's condition and demand for properties similar to yours can impact the selling price. In a seller's market with high demand and limited inventory, buyers may be more willing to overlook certain flaws and still pay a competitive price. Conversely, in a buyer's market with ample inventory, the buyer's bargaining power may lead to a lower offer.
Market demand also can be affected by flippers and home renovators in your area. Sometimes they will buy ‘flips’ to renovate and sell. A large amount of them can increase the price on even substantially damaged homes.
Comparable Sales: Examining recent sales of similar houses in your neighborhood, known as comparable sales or "comps," provides insight into market trends and helps determine your property's value.
Your goal is finding comparable sales is to decide that if your house was in perfect condition, what would it be listed for and what would it sell for. Once you get that price you can get a better sense of the As-is price when you start discounting for the needed repairs.
Calculating Potential Loss by Selling As-Is
To estimate the potential loss when selling a house "as is," you need to consider the factors mentioned above. Start by obtaining a professional appraisal or consulting a real estate agent who specializes in your area. They can provide a realistic estimate of your property's value, taking into account its current condition and market conditions.
While there is no definitive formula to calculate the exact loss, you can roughly determine the difference between the estimated value of your house in optimal condition and its current as-is value. Keep in mind that buyers typically expect a discount to compensate for repairs they will need to undertake.
In our roof example, it might take $10,000 if you were having someone do the job. But an outsider is going to increase their estimate to something closer to $12,000 based on the unknowns. Your lose in listing as-is comes down to the difference on what it would cost to what everyone thinks it might cost to fix.
The bigger the fixes, and the more buyers are going to give themselves more wiggle room.
Additional Considerations for Selling a Home As-Is
Selling Costs: Apart from the potential loss in the selling price, it's essential to factor in other selling costs. These may include real estate agent commissions, closing costs, inspection fees, and marketing expenses. These costs can further impact the final amount you receive from the sale.
These costs shouldn’t be any different from standard sales to as-is, but it’s worth being reminded that you still have to pay them. As-is sales aren’t a get-out-of paying-card for everything.
Negotiation and Timing: During the negotiation process, buyers may propose an even lower price due to the property's condition. If time is not a pressing concern, you might choose to wait for a more favorable market or consider making selective repairs to attract potential buyers and enhance the property's value.
Laziness & Inflexibility: Don’t just list your home as-is because you don’t want to do anything to sell your house. It makes you look lazy, and inflexible to reality. I regularly steer my clients away from difficult sellers and transactions. So if you are telegraphing that you haven’t cared for your home and are too lazy to get your home ready to sell, then you probably don’t need good offers either.
Getting a home ready to sell is work, but it’s not impossible. A few simple steps and you can list your home for top dollar. The time and money investment will be worth it.
As-Is Offers Don’t always Mean As-Is
Agents can play games as well. I’ve been on both sides of a transaction where an as-is transaction required the homeowners to fix something – even though it wasn’t contractually obligated.
We represented a client who discovered termites in a structural beam in the basement. (Just one thank goodness.) We asked the seller to fix the beam – at a cost of around $2000 – because my clients weren’t able to do so. Termite damage would have been a valid reason for my clients to walk from the transaction as it needed to be fixed as a mortgage requirement.
The sellers decided to agree with us and fix the damage. The reason being that if they would have to put it back on the market they would have to disclose the termite damage, and probably end up fixing it anyways.
The other situation I ran into was an unethical agent who won a bidding war with a substantially higher as-is bid. They did a home inspection and came back to us afterwards with a laundry list of items to ‘fix or we walk’… It’s a strategy some agents use to ‘win’ in the negotiations to show they are ‘making’ money for their clients.
It’s also a strategy to have other agents avoid you and your clients offers because you don’t operate in good faith. We ended up acquiescing to some but not all of their fix it list – Mainly because their offer was still higher and had other benefits for my clients.
How Much Do You Lose Selling a House As-Is
Selling a house as-is can involve a financial trade-off. While it offers convenience and speed, it often comes with a potential reduction in the selling price. You need to be conscious of that trade-off and why you are doing it.
If you're considering selling your house "as is," consult with professionals who can help you make an informed decision. I can’t say this enough - hire professionals and experts in your local market.
Factors such as the property's condition, market demand, comparable sales, and additional selling costs influence the potential loss by selling as-is. Assessing your priorities, the current real estate market, and the condition of your property will guide you toward making the best choice for your specific situation.
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