Your “handyman special” needs so much work, you’re not sure it’s worth the time, effort and money it will take. Here’s a step-by-step approach to evaluating your fixer upper.
Before selling, ask yourself if you can afford to fix the house. List the most important things that need repair and get estimates from reputable contractors. You don’t have to fix everything, just the issues that would give a buyer real pause.
You may be able to fix a series of smaller problems that help the overall situation look less dire. But if the house needs major roof work, foundation repair or a new HVAC system, you may want to fix as much as you can.
If money is tight, talk to a lender to see if you qualify for a home equity line of credit, or HELOC. If you have enough equity in your home to qualify, consider using this resource to pay for some of the repairs.
Another option is to ask a potential buyer to look into FHA’s 203K program loans, which helps with the purchase of homes that need rehabilitation.
When it’s time to sell. If the house needs kitchen and bathrooms updates, new floors and other appearance issues, you can still market to traditional buyers who might want to renovate to their tastes anyway. But if the house needs major repair work, the traditional buyer pool will shrink.
Be honest with buyers. In most states you will be required to provide the buyer with a property condition disclosure report, plus the buyer will undoubtedly order an inspection.
Buyers will want a deal, knowing they must invest in repairs. Try a combination of negotiating on repairs and price concessions. It’s to your benefit to reach a deal because many mortgage programs will not lend on a house with major problems.
This leads us to the investor market. You’ve seen the signs or heard the ads for “all cash buyers” who’ll buy your property in “as is” condition.
These investors, who plan to renovate and resell, are looking to make a large profit. Typically, that means they will buy your house for 80 percent of its current value. For example, if your house would be worth $175,000 in good shape, but is only worth $125,000 in its current condition, the investor will offer you $100,000. Consult a real estate attorney to scrutinize any investment offers.