How Much Do You Lose Selling a House As Is?
Truthfully, it’s difficult to give you an exact figure or percentage because there are many variables that will play a role in how much you will (or won’t) get by selling your home as-is. However, when you’re crunched for time, inherited house you don’t want, or cannot pay for the repairs necessary to make the home move-in ready, selling your home as-is can be a good option with several benefits.
As you read through this article, you’ll learn what it means to “sell a house as is,” the pros and cons of going this route, the factors that impact how much an as-is house can sell for, and much more.
Drexel University’s Nowak Metro Finance Lab released a report on that very subject. In that report, they found that homeowners in Philadelphia who sold their properties to those “We Buy Houses” companies between January 2018 and June 2022 collectively lost out on $500 million.
“…even when comparing for characteristics like home size, condition, and amenities, homes sold from an owner-occupant to an investor off the MLS sold for 51% less than comparable homes sold on the MLS to an individual.”
Note: MLS means “multiple listing service” and is a tool used by real estate professionals to list properties for sale and find properties that may interest their buyers.
When looking at Bright’s 2022 On MLS Study, 83.4% of homes that sold on the MLS between 2019 and 2022 earned 13% (or $45,741) more than homes that were sold off the MLS.
But, not only can you lose money by way of a lower purchase price, you’re limiting your pool of potential buyers. Buying a house is expensive as it is and most buyers prefer move-in ready homes, or they don’t have the money in their budget to spend on fixing the place up to be livable.
Plus, when buyers see that the house is being sold as is, they assume that the property is going to need a lot of work, which is also a turn off.
In a study conducted by Buildworld, 57% of people who bought a fixer upper went over their renovation budget. Depending on what your home needs, you could spend $30,000 or more making your home move-in ready.
Even Realtor.com published an article that shows that even if someone buys a new construction property, they can spend thousands to turn that blank canvas into a comfortable home.
On top of all that, there’s the potential of legal repercussions if you know of any problems but don’t disclose them to the buyer. For example, if you’ve had problems with your septic system but you don’t tell a potential buyer about it, you could find yourself slapped with an expensive lawsuit.
On the Flip Side:
We know that it sounds like you’re only losing money when you’re selling your home as is. That’s not entirely true. Homeowners who sell as is are actually saving money. Sure, you may not get that 13% when your home sells, but you’re saving money in other ways.
For one thing, you’re saving money by avoiding renovation and repair costs. You don’t have to worry about the price of lumber or finding the cheapest contractor. Selling as is means you’re selling it in it’s current state, regardless of what work may need to be done.
Secondly, you’re saving on holding costs. The longer your house sits on the market, that’s money coming out of your pocket. So, if the average property takes 55 to 70 days to sell, you’re looking at two month’s worth of mortgage payments, insurance payments, taxes, and utilities. That’s quite a bit of money!
Lastly, when you sell as is, you’re cutting out all the costs associated with selling your home the traditional way. You don’t have to pay for a professional cleaning company to come in and scrub every nook and cranny. You don’t have to pay for staging or a professional photographer to come and make your home look like it came from a magazine. You don’t even have to pay for landscapers to come by and spruce up your curb appeal.
And, by selling as is, you might be able to negotiate with your real estate agent for a lower commission, which means you’ll pay less in closing costs, which can be 6% to 10% of the sales price. Or, better yet, you don’t have to pay any commissions or closing costs if you decide to sell with HomeGo.
What Does It Mean to Sell a House As Is?
Selling your house as is means exactly that; you’re selling the house in it’s current condition. You have no intention on making any repairs, doing any upgrades, or even negotiate with a potential buyer for credits so they can make the repairs themselves.
Who Typically Sells Their Homes As Is?
People who typically sell their homes as is aren’t rolling in the dough and simply don’t feel like doing the work. There are a multitude of reasons why a homeowner would consider selling their home as is. Often times, the people who sell their homes as is usually aren’t in a financial position to make costly repairs before selling.
But, they aren’t the only ones.
Sometimes people will sell a home as is because they inherited it from a deceased loved one and cannot (or is unwilling) manage the property.
Sometimes lenders or banks will sell foreclosed homes (which are always sold as is) cheaper than market value so they can recoup money from outstanding mortgage balances, unpaid property taxes, closing costs, and any liens placed on the house.
Who Typically Buys an As Is Home?
Who, exactly, buys properties in as is condition?
Average Joe: The average joe buyer is someone who’s fallen in love with your home, can see the potential, and are willing to put in the work to make the home something they’ll love living in. It’s rare to find these types of buyers because they’re understandably leery about what kind of problems they may face when they’re going to make the repairs.
Individual Investors: Investors see buying an as is house as a great opportunity for because they can score a deal. They’ll either buy and flip the property, or keep the property and rent it.
Franchise Cash Buyers: Franchise cash buyers are companies like We Buy Ugly Houses, We Buy Houses We Buy Houses, and I Buy Houses. These companies often buy houses on the cheap, work with local contractors to fix it up, and then will either sell it for a profit or keep it as a rental property.
iBuyers: iBuyers are companies like Opendoor, Zillow Offers, and Simple Sale. These companies typically offer cash to homeowners with the promise of a fast closing. They usually pay more than cash buyers, but the typically buy houses that need very little work.
Trade-In Companies: Did you know you could trade in your house for a new one? Trade-In companies can give you the cash you need to buy a new home based on your current home’s market value. They’ll then sell the property for you, but will keep a percentage of the sale.
Pros and Cons of Selling a House As Is
In a perfect world, homeowners who wanted to sell their properties would receive top dollar for their home and have a fast closing. Unfortunately, that’s rarely the case. It’s usually a trade off and depending on the circumstances, some sellers simply cannot wait for a good offer and they consider selling as is.
Here are the pros and cons of selling a house as is.
Pros of Selling As Is:
- No need to make repairs: No need to make any repairs at all.
- Faster sale: You can promote your property faster and get a buyer faster — sometimes in as little as 5 days.
- Easier process of selling: There’s little room for negotiations, no mortgage approval waiting period, and there aren’t any buyer repair requests to contend with.
- Little to no contingencies: Your deal won’t hinge on buyer contingencies. The deal is basically fail-proof.
- Lower closing costs: Depending on who you sell to, you may not have to pay any closing costs. Keep in mind that some investors may charge fees, so be sure to ask about that prior to signing on the dotted line.
Cons of Selling As Is:
- Buyers can walk away: If there’s an inspection contingency in the contract, the potential buyer can walkaway if there are too many issues that they don’t want to deal with.
- Opinionated buyers: Unfortunately, buyers are going to be more critical if they’re buying the property as is. As a result, it leads us to the next drawback.
- Lower and fewer offers: Potential buyers are likely to expect the worst and as a result the offers will be few and lower than anticipated.
- Harder to prove the value of your home: It’s going to be harder to prove that your home is worthy of a fair price because all they’ll think about will be what and how serious the repairs must be if you’re selling as is — regardless of the true reason you’re selling.
- Potential legal repercussions: Although your house is sold as is, you still have to disclose any problems or defects that you may know of. If you don’t, the buyer could sue you.
What Factors Impact the Loss When Selling As Is
As with selling your home traditionally, there are going to be a few factors that will play a role in how much you’ll receive when you sell your home. The most important, most impactful fact is property condition!
The condition of your home is going to be the determining factor in how much money you’re actually leaving on the table. If there isn’t a lot of work that needs to be done, the more money investors will be willing to pay. However, if your home is in bad condition or needs major repairs (replacing the roof, cracked foundations, significant water damage, etc.), you’re not going to get as much money.
Other factors that will determine how much you lose when selling a house as is include:
The local real estate market plays a big role in how much you stand to lose by selling as is because it’s all about supply and demand. If there are more buyers than properties for sale, it’s a seller’s market. What this means for you is that buyers may be more willing to put an offer on your home, despite it being sold as is.
But, on the flip side, if it’s a buyer’s market, which means there are more properties available than buyer demand, then they have the upper hand. What this means for you is that it’s going to be quite a bit harder to sell your home as is because buyers have more properties to choose from — some of which may be move-in ready or need very little work.
Local Real Estate Trends
Beyond market conditions, local market trends will play a role in how much you could lose as well. Let’s say your home is located in an area that has seen better days and people are leaving the area, then getting your home sold is going to be extremely difficult, especially if it needs work.
However, if your home is located in an area that is being revitalized, then potential buyers won’t mind paying for a home that needs work. They won’t mind paying for an as is property because they anticipate that property values will increase over time.
That said, that all may change if the Neighborhood Homes Investment Act (NHIA) becomes law. This bipartisan legislation was introduced by U.S. Senators Ben Cardin (D-Maryland) and Todd Young (R-Indiana) on March 7th, 2023 that would revitalize distressed neighborhoods across the nation.
The NHIA would create a federal tax credit that can be used to cover the costs of building or renovating homes in those distressed areas. The act would also limit the price at which the completed homes could be sold for.
In an article posted on Revitalization.org, Senator Cardin says:
“Everyone deserves a safe and affordable place to call home. Our bipartisan tax credit will drive housing investments and revitalize neighborhoods across Maryland while keeping them affordable for low- and moderate-income families.
“This credit will allow individuals in these communities to build equity and wealth for their families. We must continue to make it more attractive to invest in the communities that need it most.”
You can see a visual representation of how the NHIA would work by clicking here.
When you’re trying to price your home, you need to be realistic. If you price your home too high (especially as is), people won’t want to buy it. And, if you price it too low, you’re leaving money on the table.
How to Minimize Losses When Selling a House As Is
Naturally, you’re going to want to whatever you can to make sure that you’re getting top dollar for your home, even if you’re selling as is. To do this, you can do the following:
1. Pre-Listing Inspection
A pre-listing inspection can give you an idea of any issues that could impact the value and sale of your home. If the report shows minor flaws or repairs, you might consider addressing them before selling. Not only will that be one less thing to worry about come closing time, but it could help to get top dollar.
Minor fixes worth considering include:
- Applying fresh paint in a neutral color
- Replacing broken fixtures or glass
- Deep clean and declutter every room
- Boost curb appeal with fresh mulch, weeding flower beds, and tree trimming
If the inspection report reveals that serious repairs are needed and you cannot (or do not want to) deal with them, then you’ll have to take that into consideration when setting a price.
2. Price Your Home Realistically
There are a few ways you can figure out the market value of your home. You can use home valuation calculators to get a rough idea of what your home should be priced at. Tools like this uses data from recent sales in your area to determine the value. It doesn’t take into consideration the condition of your home and some sites use different metrics when calculating the estimate.
Some notable home valuation calculators include:
You can also hire an appraiser to get an accurate value of your home. An appraiser will look at a number of things to determine your home’s value. These things include:
- Condition and age of the home
- Market conditions
- Proximity to goods and services
- Comparable home sales
And, of course, you can work with a real estate agent who knows the local market like the back of their hand. They can offer advice about pricing, the best time to sell, and so much more.
3. Marketing Strategy
The name of the game when coming up with a marketing strategy is to highlight the best features of your. This includes things like your location, lot size, architectural features, and so on.
4. Choose a Reputable Real Estate Agent
You don’t have to work with a real estate agent to sell your home, but it’s advisable. Homeowners who go the FSBO (for sale by owner) aren’t likely to get as much money for their homes as they would if they worked with an agent. Plus, working with an agent means they’re going to do the hard stuff. Some of the tasks they’ll do that you won’t have to include:
- Determine a realistic price to sell your home
- Create a solid marketing plan for your home
- Stay on top market conditions and adjust pricing accordingly
- Review offers and negotiate with potential buyers
- Draft contracts, arrange inspections, etc.
How Much Money Do You Lose Selling a House As-Is Final Thoughts
Selling a home in as is condition can be a good option for those who don’t have the funds to make large repairs, who inherited a house they cannot (or don’t want to) manage, or who needs to sell quickly. Unfortunately, selling your home as is means that it’s not likely that you’ll get market value — especially if your home is in need of TLC.
It’s important to know that while you may not want to put a lot of money into repairs, doing some repairs and improvements can reduce the amount of money you lose by selling as is. What it boils down to is three things; how quickly are you trying to sell, how much work are you willing to do, and how much money you’re comfortable missing out on.
Life is full of twists and turns. No matter how hard we try to plan for the future, there are some things that are unavoidable. If you’re curious to learn more about selling your house, check out our blog. It’s full of helpful information for homeowners who want to know more than just how much money do you lose selling a house as is.