Is Selling a House ‘As Is’ Something You’ll Regret Later? (Yes!)
We’re living in the age of authenticity. We all have social media accounts and blogs where we share our most personal moments with the world. We believe it is our fundamental right to be taken as we are.
This philosophy has lead to a very interesting 2016. Donald Trump has been lauded by many for his “tell-it-like-it-is” mentality. However, he’s also been criticized just as strongly for being “dangerous,” “unfit” and for his refusal to compromise with others.
Then there’s his opponent, who has been criticized by some for being too rehearsed. She has been accused of such atrocities as “preparing,” being strategic, and listening to people in order to give them what they want, even if it’s not necessarily her first choice.
Selling a house is not that much different than the plight of these two people. For many sellers, the idea of selling their home in it’s current condition is very attractive. However, for many buyers, they see homes with old roofs and septic systems as being dangerous, unfit to live in, and appreciate the seller who’s open to compromising with them.
The Power of First Impressions
According to a BMO study on the psychology of house hunting, 80% of buyers just know if the property is right for them the moment they step inside. It’s a feeling. It’s an emotional decision that’s later justified with facts and figures and a declaration of their love for the school district.
The BMO study also found another interesting statistic. When it comes to things that could hold a buyer back from making an offer on a property is a fear of the unknown. Seventy-one percent of buyers say their biggest fear is something going wrong with the house once the ink is dry.
Let’s do the math:
80% of buyers making the decision based on emotion + 71% of buyers afraid to buy a fixer-upper = Oodles of lost time, money and profits if you insist on selling your house as is.
“When I see the words ‘as is” I tell the buyers don’t even bother with it,” says Debra Blanchet, the number one seller’s agent in Providence County, Rhode Island. On average, Blanchet sells homes for 271% of their listing price. When potential buyers see those two little words in listings, it usually denotes that there is something wrong with the property.
Therefore, unless you want to sell your home to an investor or home-flipper for a fraction of the property’s value, you’re going to have to put your best foot forward with potential buyers.
Let’s look at the reasons you might be tempted to write “as is” and your listing, and analyze whether you’ll regret that decision or not.
Still Thinking of Selling a House As Is?
Below we provide three of the most common scenarios that people sell as is, and talk you through the decision process.
In an episode of HGTV’s Flip or Flop, Tarek and Christina’s family friend, Carlos, had a family property that he wanted to sell. It was a nice house in decent condition, but outdated and needed some work.
After looking at some comps in the area, Tarek and Christina estimated the property would sell in the mid $500k range. However, after reviewing the property they realized it had a lot of potential, just not ‘as is.’
They loved the layout, but didn’t like the old kitchen or the outdated flooring. They also found a couple bathrooms that needed to be completely re-done. Carlos said he was prepared to invest $30k in the renovations, but Tarek and Christina said $60k was necessary to get a full return on investment. They were so sure that they could sell the property above $650k with the right work, they put in their own $30k to get the project done.
Spoiler alert: After Tarek and Christina’s remodel, Carlos ended up making a profit of $114,350.
Blanchet says that she understands the difficulties of selling an inherited property. A lot of times the family lives out of state and doesn’t have the time, energy, desire or money to invest in a remodel in addition to cleaning out all their relative’s belongings.
“I tell them you can’t put “as is” in the listing because that means there’s something wrong with your house,” Blanchet explains. “The buyer can walk away for any reason for 10 days after the home inspection, and in Rhode Island they don’t even need to give a reason.”
If you’re willing to take a cut in order to offload the house as quickly and inexpensively as possible, then there are people who are willing take it off your hands. These people tend to be investors, home flippers, and in some cases people will buy the home with all the belongings still inside. (They think they’ll find hidden treasures buried away in your relative’s attic.)
You’ll Probably Regret Selling Inherited Property As Is
The potential buyer still has the right to ask for a home inspection even if you state you’d like to sell as is. They also have the right to ask you to fix problems that the inspection turns up. If you refuse to engage in a little give and take with the buyer, it could lead to you having to sell the property way below what it’s worth, or the buyer will simply walk away and you’ll have to go through the process all over again.
In the case of a short sale, the seller is trying to offload their home before the bank forecloses on them, or in some cases due to poor health or a job change. Under these circumstances, there’s a good chance the seller isn’t able to afford home improvement projects.
These sales tend to move very slowly. Many buyers offer extremely low ball figures that the seller rejects. Plus with all the government programs now aimed at keeping people in their homes, many sellers are more likely to do everything in their power to stay put.
While you may not be able to invest much in the property, it’s advisable to keep the lines of communication open. Will Gaskins, a who is in the top 2% of Washington DC and Northern Virginia’s seller’s agents, tells his clients to engage in the home inspection process and see what the buyer asks. He reminds them that they still have the right to say no, but at least they’ll get to have a conversation about things.
“We want a win/win,” Gaskins says. “We want the buyers to feel good about the transaction, and we want the sellers to feel good.”
Chances Are You’ll Regret Making an As Is Short Sale
Listing your home ‘as is’ decreases the number of buyers who will even come look at the property. “It tells people this is a disaster,” Gaskins notes. If your goal is to sell your home quickly, attract buyers with your openness to negotiating. You can still say no to their requests (which may lead to a decrease in what they’ll pay) but at least you’ll have people willing to make an offer.
Have No Desire to Invest in the Home?
Some sellers can’t afford to make major improvements to their home, but others don’t want to for emotional reasons. They eschew home staging and modern upgrades and instead want all the personality and charm of the home they raised their family in to be on full display.
This affliction, called “Uniformity’s-Nauseating-and-Recognizing-Eccentricities-in-A-Listing-is-Important-’cuz-Staging-Inhibits-Charm,” or “UNREALISTIC” for short, is the quickest way to ensure your home sits on the market before selling for less than you otherwise could have gotten.
So far we’ve learned that struggling to find potential buyers and settling for a discounted sale price are just a few of the reasons you might rue the day you decided to add those two little words “as is” to your listing. However, there are more setbacks that await the seller who isn’t willing to entertain his potential buyer’s requests.
“Half the battle is getting the property in escrow, and then keeping it in escrow.” Explains Anthony Marguleas, who’s in the top 1% of seller’s agents for both townhouses and single-family homes in Pacific Palisades. “In Pacific Palisades 20-25% [of homes] fall out of escrow. It’s in [the home-seller’s] best interest to fix something so they don’t have to re-list it.”
Marguleas tells his sellers to put aside 5-10k as soon as they open escrow in case the buyer asks for credits for reductions in purchase price. Half the time the seller doesn’t even ask. In California, sellers have benefitted from a strong sellers market for the last 5 years, although that’s starting to slow. If there’s a backup offer, it’s easier to say no to things that one buyer may ask for. Working with an agent who knows your local real estate economy is paramount to making the right decisions when it comes to negotiating with your buyers.
Even If You Don’t Want to Invest, Don’t List As Is
If you simply don’t want to invest time or money into your property, you may find yourself losing more time and money than you otherwise would have if you list the home for sale as is. You stand to make more money on your property in less time if you’re willing to negotiate and work with the buyer.
Here’s What You Can Expect for Your ROI
Have we convinced you not to list as is yet? Fantastic. For real estate nerds like us, it feels like we saved you from getting tied to the train tracks.
But how can you be smarter with your money? Where should you invest it to get the biggest bang for your buck? If selling “as is” doesn’t work, what’s the better way?
According to Remodeling Magazine’s Cost vs Value 2016 report, the five best remodeling projects for the highest return on investment are:
Attic insulationAverage investment: $1,268
Average return on investment: 116%
Manufactured stone veneerAverage investment: $7,519
Average return on investment: 92.9%
Garage door replacementAverage investment: $1,652
Average return on investment: 91.5%
Entry door replacement (Steel)Average investment: $1,335
Average return on investment: 91.1%
Minor kitchen remodelAverage investment: $20,122
Average return on investment: 83.1%
Whether you’re thinking of doing a little nip and tuck on your home to make an impact on that ever important home buyer first-impression, or you want to wait and see what buyers ask you to do specifically, the important thing is that you’re willing to communicate openly and find a mutually-beneficial solution.
Avoid those two little words “as is” in your listing at all costs.
“The discount that’s usually associated with selling as is, is not usually the discount the seller wants,” Gaskins explains. “A red flag goes up and people wonder what’s really wrong with the property.”