How to Sell a House that Needs Work
In this guide, you’ll learn how to sell a house that needs repair work or renovations by weighing the pros and cons of listing the house with an agent vs. selling your fixer upper to a cash buyer.
Looking to sell a house that needs repair work but don’t have money to fix it up first? This guide is for you! You’ll need to start by choosing one of two primary selling options:
1) List it on the market with the help of a real estate agent to attract a buyer
2) Find an off-market cash buyer who’ll purchase your house as is
There are pros and cons to each one, which we’ll break down in this guide.
Option 1: Hire an agent and list a house that needs repairs on the market
The traditional way of selling a house is to sign a contract with a licensed agent who will handle the marketing and promotion of your house and advise you throughout the process. Agents will tell you how to get your house spruced up and ready for buyers. They’ll also make the house’s information and photos available to the public (in places like Zillow, Trulia, Redfin, etc.), and organize viewings for potential buyers. When you find a buyer, your agent manages all the communication with the buyer and their agent. The agent’s responsibility is to ensure everything pertaining to money and documentation is in order. In exchange for their work, real estate agents take about 6% of the sale price.
Pros of hiring a real estate agent:
- Reach more potential buyers
- Potentially end up with higher net proceeds vs. selling to an off-market cash buyer
Cons of hiring a real estate agent:
- Agents may not reach the right buyers for your property if it’s distressed and requires a lot of repair work
- You have to spend time cleaning up and dealing with the hassle of repairs
- You need to prepare for showings and vacate the property for open houses
- Signing a listing agreement gives the agent the exclusive right to sell your house for six months
- You will need to pay 6% of the sale price in commissions, even if the agent is not the one who finds the buyer or helps you sell the house
- As the seller, you must pay closing costs, which are typically 1-2% of the sale price
- You’ll pay holding costs (see below) while waiting to sell, typically for two months or more
- Dealing with a range of buyers and price haggling creates an unpredictable outcome
Option 2: Find a cash buyer and sell your house off market
Most cash buyers purchase houses with the intention of doing repairs, renovating, and reselling them. They purchase the house as is, without cleanings, showings, or renovations. The entire transaction can close quickly with no hassles. In a cash transaction, the owner can seek out multiple comparison offers and negotiate terms. In fact, as the owner, you work directly with the buyer on all aspects of the transaction such as escrow, title, and closing.
Pros of working with a cash buyer:
- Pay zero fees to sell your home
- Avoid cleanup, repairs, and showings
- Complete the closing in just 10 days if you need to move quickly
- Ask for a cash advance before closing (Sundae offers up to $10,000)
Cons of working with a cash buyer:
- You do the work to shop around for multiple offers, vet buyers, and compare offers
- Potentially lower net proceeds vs. listing and selling on the market
Best sell option for houses in need of work
So how do you choose between these options? The first question to ask yourself is how much time and money are you willing to invest to sell a house. If you don’t have much of either, and you need a reliable outcome, then selling to a property investor that can quickly do the repairs is probably the best way to go.
If time is on your side and you have some flexibility to sell at a later time so that you can focus on maximizing the cash in your pocket when you sell, you should explore both options. Here are two key questions to ask:
1. How much repair work does your house need?
If your house needs significant repair work or a complete renovation, it’s possible that it won’t sell on the market to another family. Instead, you’ll likely attract cash buyers or property investors. These companies want to buy your house for the purpose of investing in renovations and reselling it for a profit. Consider this option if you want to sell your house faster.
If you suspect your house is not likely to sell on the market due to its condition, your agent may have to find cash buyers or developers to help you sell your house. If this is the reality of your current situation, you’re probably better off going straight to a cash buyer to avoid paying agent commissions and other fees (see below). Most off-market buyers will also pay for closing costs. However, if you think you could attract some buyers who’d like to move in and handle renovations and repairs themselves, then keep reading.