How to Handle Damage to Your Home If You Are Trying to Sell
Published April 5, 2017
If your home has suffered damage, you may still be considering selling. Depending on the amount of damage and your decisions regarding the repairs, there may still be a possibility of a successful sale.
You may think that it is hopeless trying to sell your home after it has suffered damage. However, the truth is that your home may not actually be as worthless as you think. Depending on the type of damage and repairs that are required, you could find that you can still profit from the sale of a damaged home.
Whenever accidents or natural disasters occur, homeowners face the question of whether to rebuild themselves or move on from the property. In some instances, the homeowner may decide to sell the property. However, if your home has suffered damage and you are considering selling, you must be aware of the fact that damaged homes come with different sets of rules.
While what you decide to do will mostly depend on the level of damage to your home and your financial situation, you do have leverage when it comes to dealing with buyers. Here are a few tips to help you handle damage to your home if you are trying to sell.
Call the Insurance Company
If there is a policy on the home, the first step should be to call the insurance company. The insurance company may cover the cost of repairs on the home. In addition, you may get enough money to get the house in better shape in order to get it ready for sale and to make a profit on the sale.
Buyers Will Ask for Credits
The first thing that you should be aware of as a homeowner that is trying to sell, is that buyers will ask for credits for repairs that need to be performed. This is especially true if there is structural damage to the home. While the buyer may appreciate your attempts to repair the property, he or she will still likely incur some maintenance or inspection costs that are the result of the property previously being damaged.
This is why it is important to work closely with your real estate agent as you list your property to come up with a pricing strategy that will accommodate this likely scenario. Also pricing, even with estimates on the repairs, is not as straightforward as you might think.
“For example, a home that requires $50,000 of work among homes selling for $300,000, will not command a price of $250,000. That's not how it works.” says Elizabeth Weintraub, Broker-Associate at Lyon Real Estate in Sacramento, California. “A contractor, say, who plans to resell the home in fixed-up condition, will expect a reasonable profit and will factor in the costs of resale upon purchasing as well. This means the home will likely sell for less than $200,000.”
In cases of serious damage, if the damage is extensive, the home may not be worth anything more than the value of the plot of land that it sits on. This is because the existing home will have to be demolished and rebuilt. As a result, homebuyers are not likely to pay for anything more than the cost to demolish the property and the price for the lot.
If the property can still be a rehabilitated you should hire a local Realtor that has experience in selling properties that need rehabilitation. The real estate agent will reach out to buyers that are interested in purchasing damaged homes.
Repair the Home
“Because of so many distress sales and foreclosures, there are many “damaged” properties on the market and they are heavily discounted in order to get them sold.” says Lesslie Giacobbi, a Realtor with Seven Gables Real Estate in Anaheim Hills, CA. Giacobbi recommends that homeowners consider working with Realtors that can help to assess and repair the damage. “Maybe a builder would fix it and split the profit occurring from the repair. If this is not an option, and the property is sold in “as-is” condition, you will not get as good a return.”
Therefore, if debt is not a concern, homeowners should seriously consider the benefits of repairing a damaged home prior to a sale. The difference may mean a profit, and not simply breaking even or going into a debt by going for a lowball offer.
The last option for dealing with a damaged home is to sell “as-is.” This is the method that is least likely to be profitable for you. However, it puts the risk on the buyer with regard to the sale and takes the burden from you. Investors may look at the costs and may opt to purchase your home if they feel that it can potentially turn a profit. In this instance, you should not expect to get anything close to market value for the home.
If you don't plan to sell the home “as-is” the most important factor is that you make a complete disclosure about the property's current condition. Sellers can run into liability issues if the issues with the property have not been disclosed fully. If repairs have been made to the home prior to it being damaged, you must also disclose these repairs. Each state has different laws regarding disclosures.
Therefore, it is important that you work with an agent closely anytime you are trying to sell a property that has been damaged. By considering all of the potential options for your damaged property, you can make the best decision possible for your unique situation.