Selling a house that needs repairs in Orlando
Any homeowner instinctively knows that if he tries to sell a house that needs repairs, the asking price will be lower than the market value. So it may seem intuitive to just hire a realtor and tell him to list the house at a discount. In some parts of the country this logic may work, however, in Orlando most buyers want a move in ready home. Although they understand why the property is discounted, they tend to pass on these kinds of deals.
This is indeed frustrating to any homeowner who needs to sell quickly but never gets any serious offers. Month after month the listing stagnates on the MLS, developing a negative stigma for potential buyers. The realtor may give the homeowner the standard encouragement that is due for a client, but words don’t cover over the fact that the house won’t sell.
If you are in this situation now you may be wondering why buyers are so put off by a house that just needs a little renovation. But what you don’t understand is that there is a risk that you are passing on to the buyer.
Let’s say the market value of your house is $160,000 and you lower the sale price to $145,000 because it needs $15,000 worth of work. If the repairs really cost $18,000, the buyer will end up paying an extra $3,000. More often than not, the only way a realtor can fix a problem like this is to knock off another $15,000 from the listing price. If you add the $30,000 discount to the 6% realtor commission plus the 2% title fee you can understand how difficult it would be for you to make a profit on the house sale.
Now you can see one reason why it’s better to work with a real estate investor (e.g. Fiesta Home Buyers) when you want to sell a house that needs repairs. You wouldn’t be paying any commissions, title fees or extra money associated with the closing. You would just sell the house at a discount (without the commissions and fees) and let the investor use his expertise to do the renovations himself.
Difficulty for buyers to get a loan
We must also consider the fact that banks aren’t amicable towards giving loans to people who want to buy “fixer uppers”. There are loan alternatives like the HUD 203(k) program and the Fanny Mae Homestyle Renovation Mortgage. But these rates won’t be competitive with the normal loans out there.
The hidden danger about a buyer taking out an expensive home improvement loan is not getting a correct appraisal of the cost. When asking for an appraisal from a contractor it’s necessary to get a detailed breakdown of materials and labor for each renovation. For the average homeowner this isn’t common knowledge and so he might borrow too much or not enough.
Major DIY renovations can backfire
Those of you who are DIY people love to take on home repair challenges, especially when you know your improvements will augment the value of your house. But if your house needs major renovations you shouldn’t do the work by yourself unless you are licensed.
I know of a man who replaced his roof by himself after Hurricane Irma devastated Florida. He later received a major fine by the city because he wasn’t licensed to do the work. There are other major projects like this that could look tempting to fix but be forewarned before you make the commitment. These projects could include:
1) Structural damage reparation
2) Termite damage restoration
3) Siding replacement
4) Driveway paving
5) Window replacement
6) Wall demolition
With so much at stake you really do have to ask yourself if selling your house to a real estate investor is the better option. Should you take on a project yourself you may be saving money but will be losing long periods of time. And you might even be fined by the city of Orlando.
Simple renovations
There are projects that aren’t so invasive which you could take on yourself. They aren’t time intensive and don’t open you up to fines from the local government of Orlando. Best of all they can strongly increase the value of your house before a sale through a real estate agent. Some of these projects include:
1) Fixing leaky faucets
2) Recauking bathtubs and vanities
3) Painting walls
4) Driveway paving
5) Painting or replacing front door
Let’s say that you are planning to sell your house for $230,000 but right before that you decide to do these repairs. You could be adding another $10,000 to the price of your house. As long as you know how to source the materials cheaply and effectively do each improvement, it might make sense to work with a realtor.
If you are seriously considering selling your house through a realtor these kinds of repairs are mandatory. Why? Because after you receive an offer and a home inspection is done the buyer will demand that you fix the cosmetic small stuff. If you don’t the offer will be rescinded.
Working with a real estate investor
If you’ve come to the conclusion that increasing the value of your home through DIY projects is not worth the effort then you will no doubt be working with a real estate investor. They have a bad public image because everyone hates the ‘We Buy Houses’ signs all over Orlando but real estate investors have a very essential part in real estate ecosystem.
For example, if you were trying to sell a house which needs repairs and was about to go into foreclosure you could call one of them to save your house from the bank. And in the process you could get equity from the house and start your life over. What’s not common knowledge is that your credit could remain in good standing because it would show that you paid off your debts.
Before you contact a real estate investor you have to settle the issue in your mind that you will be getting lower than market price. This is just logical because he will be paying for the material and labor to get the house up to market standards.
After agreeing to an offer the steps to selling your Orlando home are simple. First, the investor would come to your house and walk you through the paperwork. Next you would discuss the move out date which the investor will tailor to your convenience. They are always gracious in regards to deadlines because it is in their best interests to create a harmonious experience for the customer.
The final step of the first phase is to sign the agreement and start to think about how you are going to spend the money that you are going to get at the closing. To reach this agreement there was no need for people to come into your house and there was no need for making repairs of any kind. All of the damages were figured into the final price.
The truth about permits
Now let’s talk about how the real estate investor will be handling the repairs after the closing. In order to make money on the house that he just purchased he will probably apply for the required permits so that he can start the renovation as soon as possible. There are three permits that are available in Orlando which are for residential construction, shed construction and fence construction.
If you read the pages for each of these links you will find that there is a steep cost for each permit. Not only that, the requirements to successfully get a permit are complex and have to be followed closely. One reason for you to read these documents is to educate yourself on what it really costs to bring a house up to market standards.
This is an important step for you to take when deciding if you will do the house repairs before the sale. Surely you will appreciate how a real estate investor can quickly go through the permitting process and hire contractors at a minimal cost. By the way, this cost would be about half of what you would pay because of his experience and close relationships with his contractors.
The decision process secret
If you want to sell your home that needs repairs you have a fork in the road ahead of you. The road to the left is working with a realtor and the road to the right is doing business with a real estate investor. The way to make the correct decision is not intuitive because it involves placing yourself in the shoes of a potential buyer instead of thinking about yourself.
If you can envision a buyer walking into your house you will need to imagine what he would want to see in order to buy. All of your decision making would stem from that. Once you understand reality you have to ask yourself what the best way is to improve your house so that it is appealing to the buyer. Can you afford to do the repairs yourself? Do you have the time and skill set to do those repairs? Do you have a clear understanding of how much you need to spend to do those repairs?
I’d like to talk about this last question of having a clear understanding of the required work. If seasoned professionals have difficulty in knowing how much all of a houses renovations cost in total, don’t you think it will be more difficult for you? And if you are wrong (which you probably will be), you will be losing money on the day of the closing with the realtor.
How will you lose money? By not doing enough or doing too much. If you don’t do enough, your house will not meet the expectations of potential buyers and they will talk you down. This will happen after your bloated expenses that are associated with typical DIY projects. The result will be losing more money than if you had simply sold your house as-is to a real estate investor.
If you do too much work the buyer will be thankful, but that will not substantially bring the price of the house up. In fact, there are projects that you can be shrewd in undertaking but will render you a sure loss. For example, for every dollar that is spent on a bathroom remodel in Orlando you will get back about 64 cents at the closing.
Conclusion
If you have to sell a house in Orlando that needs repairs you have the choice of working with a realtor or a real estate investor. This article details what level of damage is acceptable in order to sell through a realtor. Those who have houses with too much damage to be listed through a realtor might try to do renovations themselves. But the drawbacks to this are many and can cause the homeowner to get a horrible deal at the closing table.
Part of the homeowner’s quandary is always wanting to get the market price for a home despite having a home that’s in bad shape. Their idea is that maybe they can get more money than the house is worth by using a realtor to sell on the open market. The problem is that buyers don’t fall for this strategy and the house remains on the open market. After not being sold for a month it’s unlikely that anyone will buy because of the stigma.
The other option is of course working with a real estate investor. This article covers what they do behind the scenes and why they would be a good fit for buying a home that needs repairs. By knowing more of how a real estate investor functions in the sales process, you will be more capable of understanding how to sell your home quickly with the most profit.