6 Tips for Selling a Fixer-Upper
According to business reports, residential homes are in a bull market, which means there are many more buyers looking for homes than homes on the market. At the end of 2020, the monthly supply of houses in the U.S., or ratio of houses for sale to houses sold, was 4.3 months, well below the six-month level considered as a “balanced market.”
Buyers, tired of being confined in their present living spaces, are eagerly snapping up homes that come on the market, which resulted in an average price increase of almost 4.2% in 2020. Buyers are always looking for a bargain, especially in sellers’ markets. If you own a house that needs some TLC, putting it on the market today at a discounted price will still attract buyers.
The Market for Fixer-Uppers
The demand for housing has generated new interest in the practice of buying homes in need of repairs for bargain prices, rehabilitating them, and selling at a quick profit. Signs advertising “Buy your home for cash” and “Looking for a quick sale of your house?” have bloomed across low and middle-income neighborhoods from Los Angeles to Bangor and all points in between.
While investment buyers – those looking to buy at a low price and “flip” it to another buyer at a higher price – will likely make offers, their business plans require them to buy at 50% or more below the retail price once rehabilitated.
Buyers who purchase homes for residences, especially if they have the skills necessary to do repairs and remodeling, are more likely to pay a higher price for your house than professional investors.
Because it's such a seller's market, people are more willing than ever before to buy a fixer-upper for their personal home.
Six Tips to Sell a Fixer-Upper
Selling a fixer-upper home in any market is never easy. Selling a home quickly is even harder. Implementing the following tips will improve your chances of a quick sale of a house needing renovation at a fair price.
1. Engage a knowledgeable real estate agent
Few non-professionals have the expertise, experience, time, and contacts to properly market a house, especially one that needs repair. Knowledgeable agents understand markets and potential buyers. They can assess the current market demand, help you determine which repairs are necessary to get the highest market value under the circumstances, develop a complete marketing plan, and aggressively market your property as is and after remodeling through their professional network.
You can also use services such as We Buy Ugly Houses, a platform that specializes in buying fixer-upper houses, but nothing can replace an agent. A competent real estate agent can advise you on additional options to consider when selling a fixer-upper, such offering a discount on closing costs or other costs associated with buying a property.
2. Market the intangibles, not the tangibles
The odds are high that the house will most appeal to young individuals or families on a budget buying their first home or a larger space — in fact, 71% of millennial home buyers would consider a fixer-upper.
Emphasize the history of your house and the joys of a happy family living in a comfortable, safe refuge from the turmoil of everyday life. Promote your home emotionally with physical and mental images of playing children, family get-togethers, and neighborhood activities.
3. Limit your repair/renovation costs
Those interested in buying a fixer-upper to repair and live in afterwards appreciate the ability to create the specific features they want; buying a fixer-upper gives them that opportunity.
Before placing your house on the market, get a home inspection to identify the mandatory repairs likely required by a mortgage lender. Budgeting for the key renovations necessary to achieve a predetermined market value is essential.
Generally, the cost of any improvements should return an increase in value equal to or exceeding its cost. For example, a massive kitchen upgrade or room additions typically return less than 60% of their cost. Though the need for major repairs should always be disclosed to a potential buyer, who will be responsible for the cost of the repairs is negotiable.
4. Complete the less expensive repairs first
A sale can occur at any time, even before or during the process of renovation. The money saved from transferring the costs of remaining repairs can be passed to the buyer, allowing a lower price. Therefore, begin making the most affordable repairs first.
5. Remember curb appeal
Improving the appearance of a home through yard work and landscaping is inexpensive and dramatically improves curb appeal. Other simple tasks – washing windows, replacing missing boards in fences, repairing garage door openers – have a significant impact on a buyer’s attitude.
The tiniest bit of repair and cosmetic work can help fetch a higher price than what you seek. Simply making sure the garden is tidy and giving the house a paint job makes a positive impression on potential buyers.
6. Educate the buyer about renovation financing
Buyers with good credit scores might be able to get approved for a higher loan amount with funds to pay for significant renovations:
- HUD’s Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.
- Fannie Mae’s Homestyle Renovation loans offers first-time homebuyers funds for a wide range of renovation projects, from repairs and energy updates to landscaping and luxury upgrades.
Final Thoughts
Your task as a house seller is to make the property as appealing as possible. A clean, open space allows potential buyers to imagine what could be, not what is. For many buyers, acquiring property that needs refurbishing is a great opportunity.
Success in selling hard-used properties is about selling the features the property has – great location, design, and size. Many older homes have desirable architectural features that are no longer available.
Navigating the real estate market can be challenging for non-real estate professionals, especially the traps and snares in older home purchasing and renovation. Your best asset will be that professional real estate agent by your side.
