Selling a Home with Expensive Repairs
Does Your Home Have Expensive Repairs?
Do you also want to sell that home? It can be a challenging situation to be facing. Oftentimes, when people are selling a home, they want to be able to get money out of it, not put money in! But it is possible to recoup the investment you make in your repairs, and sell your home more quickly. In fact, it is a tool that investors like Olive Tree use all the time to add value to properties. Here we will discuss how you can sell a home that needs some major fix-ups before it hits the market.
Most of the time you will need to follow this process:
Assess Needed Repairs
Identify Value-add Projects
DIY or Hire it Out?
Find a Trusted Contractor
Align Funding
Manage the Renovation
List House for Sale
When Olive Tree Properties is assessing a house to buy, we go through a very similar list of steps. The one difference may be that we have developed relationships with many different contractors and partners and already have an idea of the value add projects that we like to see or believe a home could use. We often can do this in less time and for less money than the average home-owner. This is why many home owners with expensive and extensive repairs choose to sell their home to Olive Tree Properties As-Is for cash rather than go through the project management. If you are already feeling overwhelmed, give us a call or shoot us an email and we would be happy to discuss options with you!
If you are still feeling comfortable and confident, let’s move on!
1. Assess Needed Repairs
When it comes time to sell your house, you may start remembering all of those things you had been putting off…
Wobbly Toilets and Stained Tubs
Dripping Faucets and Clogged Pipes
Missing Siding and Cracked Windows
Peeling Paint and Damaged Walls
Leaky Roofs and Falling Gutters
And the list could go on and on! Maybe you have even more extensive damage caused by flooding, or a major structural fault such as a shifting foundation. Take note of all of these things and begin making a list of what you need to repair. In today’s market most people expect their house to be “move-in ready.” This means on top of keeping cosmetics up-to-date, many of these issues will need to be addressed.
Once you have your list together, move on to the next step, identifying value-add projects.
2. Identify Value-Add Projects
One of the biggest tool in Olive Tree’s investment arsenal is finding value-add projects. Here is where it can be fun to dream! Imagine adding a patio, or 3rd bedroom. How about moving a bathroom onto the first floor or expanding the kitchen? All of these things can greatly increase the value of your home. You might find it helpful to spend some time Pintrest or HGTV to get some great ideas. We believe this is a great time to think about these projects, because if you have to fix a handful of issues in your kitchen already, why not think about an upgrade? Some of these projects can help boost your ARV or “After Repair Value.”
At this point it could be very helpful to have the help of a professional realtor who knows the finishes and home values of houses in your area, and neighborhood. They are going to be able to give you insight into what projects are going to give you the best bang for your buck. They also can save you money on projects that would be a waste because that feature isn’t highly sought after by buyers. Plus, when it does come time to sell you will already have developed a relationship with someone you trust.
Once you have your list of projects together it becomes time for you to honestly assess your capabilities, time and know how. Read on for more on this.
3. DIY or hire it out?
Now is time to be honest… Are you more Bob Villa or Tim the Tool Man? If you are a bit more like the Tool Man, with big dreams followed by big disasters, now is the time to get the big jobs done professionally. There is nothing worse than spending your sweat and pennies on a project that ultimately detracts from the homes value because of mistakes or poor craftsmanship. No that isn’t to say all the projects have to be done professionally. That can get very expensive in a hurry! Our advice here is simple: Don’t bite off more than you can chew. Your home sale can turn into a heart ache very quickly.
4. Find a Trusted Contractor
This is undoubtedly the MOST IMPORTANT step in this entire process. Hiring a bad contractor can cause you some very serious grief. When you are looking for a contractor you want to make sure that you are working with someone that respects your thoughts and opinions. If they aren’t going to listen to you now, when they are supposed to be winning the bid, what makes you think they will listen to you once they have your money and the project in house? Also, you will need to be sure that they are licensed and insured. Many time projects on your home will require you or an individual with a contractors license to pull a permit to perform the work. If you have someone who isn’t licensed begin working and Neighborhood Code discovers the work, you are going to be seeing the words “Stop Work Order” very quickly. That is no fun. A trusted contractor should be able to show you evidence of their license and insurance, have a portfolio of successful past projects, and provide you with a stack of referrals that you are welcome to call. If you live in or around Fort Wayne, IN and don’t already have a contractor, we suggest giving Christian Brothers Remodeling Company a call.
Once you have a contractor vetted, discuss the list that you and your realtor finalized. Show them what projects you would like them to do, and ask if there are any DIY projects that they can take care of inexpensively while they are there. Sure you can hang a ceiling fan, but if they are already repairing the roof and patching the ceiling, why not have them do it and save you a headache?
The last thing to do with your contractor is to agree on a price (negotiate away!) and payment schedule. It is reasonable to expect to pay a portion of the total project as a deposit. This helps the contractor secure material and be confident of payment on the job. Don’t have $25,000 laying around to pay the contractor for materials and labor? Then this next section is for you!
5. Align Funding
As mentioned above, many time when sellers have costly repairs to make on their house, it is because little things have piled up over time, and unfortunately these little piles can turn into big heaps after the years pass. That is why some people are often shocked to hear of the cost to renovate a bathroom ($8,000-$11,000) or to replace a roof ($4,000-$8,000) or replace a furnace ($2,000-$5,000). And what if your house needs a few of these together? OUCH. But there are ways to get the funding that don’t require you to take money out of your pocket. Many banks offer loans on rehabs, or you can consider getting a Home Equity Line of Credit (HELOC). A HELOC allows you to take equity out of your house and use it to fund repairs. For instance, let’s say your house is worth $100,000 and you owe $55,000 on your mortgage. This means you have $45,000 of equity (Home Value minus Mortgage amount). Banks are willing to loan you a portion of your equity in exchange for a mortgage on your house. The bank will often allow you to take 75% of your equity (sometimes more) so in this case you can borrow $33,750 (75% of your $45,000 in equity). There are also options to get “unsecured loans” or “personal loans” from banks, but these are usually more expensive and oftentimes won’t allow you to borrow as much money.
A HELOC is a nice option because of the flexibility of the loan. Similar to a credit card, a HELOC is a line of credit that allows you to pull money out as you need it and only pay on the amount you have borrowed. Further, many HELOCs are “interest-only” during the early part of the loan. See why this makes them great for someone who is selling? You can borrow equity from your house, pay the contractor as work is completed, and only pay interest on the money that you have borrowed. We don’t advise this for everyone, but if you are looking to sell the house soon, this can be a great way to use the equity you already have if you can’t afford the repairs.
One of the only issues with approaching the job this way is you need to be credit-worthy. If your house needs a lot of work and you aren’t able to secure funding to repair it, a Professional Home Buyer like Olive Tree Properties might be the best way for you to pay off your loan and move. We aren’t worried about houses that need some work, because immediately moving in or having someone else move in. Our passion is to restore homes, and provide great houses for Fort Wayne, Indiana.
Want to see what we would offer on your house? Fill out this form to receive a cash offer on your home.
6. Manage the renovation
We are going to be honest…. This can go one of two ways.
You hired a great contractor you can trust, the weather cooperates, and the contractor’s crews are all on time. These jobs are a breeze and there isn’t much for you to do.
You hired a contractor that saved you money, but is disorganized, the weather fights you every step of the way, and the contractor doesn’t know what job his crews are on that day.
We hope that you never encounter scenario #2, but unfortunately it can be the norm for people working to repair their house. In this situation it becomes time for you to manage the renovation. You have options such as controlling payments to the contractor, setting clear expectations, and discussing discounts for delayed work. After all, the longer the job takes the more it is costing you if you borrowed money. Managing a disorganized contractor is probably the most frustrating part of getting your home ready for sale. It drags out the amount of time you spending waiting to sell your house and can potentially cost you homes you want to buy if you aren’t able to put your house up for sale.
We suggest taking Step 4 seriously in order to avoid this.
7. List house for sale
Congratulations! You made it! After all the work, time, effort, and money invested, you are finally ready to list your house. Now is the time to call the realtor you trust and agree on the listing. Your realtor will help you plan staging, professional photos of the home, and will schedule all the showings. Your family will need to take care to keep the home clean for potential buyers. Once you have offers rolling in, your realtor will help you find a qualified buyer who has a good shot at securing financing to support their offer. Generally after an offer is accepted the house is now “under contract” and the buyer has the opportunity to inspect the house and back out if there is anything amiss (if you did a good job assessing your house needs with your contractor there shouldn’t be much!) The buyer often has two contingencies to back out of the sale at this point, if they can’t get financing, or if there is a “major defect” on the house and you and the buyer can’t resolve the issue through pricing adjustments, or repairs.
If you make it through the contingencies by having a good inspection and the buyer gets financing after the appraisal then you are good to go! Your realtor will help arrange the closing of your house and you get to collect all of your hard-earned equity (less fees and commissions).
Now you can take a deep breath, and begin your plans to move into your new home, if you haven’t done so already!
Sound like too much?
If this all sounds like too much work, or if you aren’t able to arrange the funds to pay for repairs, you might consider selling to a reputable Professional Home Buyer like Olive Tree Properties. Our business is buying houses in any condition and any situation. We have a team that can evaluate your house and make you a cash offer, as-is. Because we pay with cash we don’t need to worry about inspections or bank appraisals, slowing down the process. You get to work directly with the buyer and there are no closing fees or commissions for you. Instead of going through months of hassle getting your home ready for sale, Olive Tree Properties can have you an offer in as little as 2 days in many cases. The best part is, since we don’t occupy the homes, we can close whenever you like, leaving your family time to find your next house without the pressure of selling yours.
Sound like a dream? Get in touch with us to see what we can do for you, or fill out the form below to begin the process of getting your cash offer now!
