Not all homes on the market are ready to move in to once the deal is signed. While almost all buyers could probably find something they’d change or improve on, even if the property they’ve bought ticks every single box, there is another category of homebuyer who is not discouraged when a property does not adhere to traditional requirements. These people are mostly property investors who are on the hunt for fixer-uppers.
The online Merriam-Webster Dictionary defines a fixer-upper as something (such as a car or house) that needs fixing up, but the vernacular real estate term really says it all. As far as it pertains to real estate, fixer-uppers are typically properties that require a fair deal of work. The extent of the work a property needs may vary from structural problems that the home seller finds too expensive to repair before selling, like foundation or roof problems, to homes that have simply fell into minor states of disrepair due to a lack of ongoing maintenance.
There is a lively market for fixer-upper properties, especially among property investors who have the capital to undertake the necessary repairs before selling the home again, with a handsome profit in tow. “Flipping” properties has become even more popular due to reality television shows like Fixer Upper. In the hit show, husband-and-wife team, Chip and Joanna Gaines, show a couple three potential homes for purchase – all in need of some tender loving care – in central Texas. When the couple chooses a property, the Gaineses are tasked with remodelling and renovating the property on a tight budget, with Joanna in charge of design, and Chip as the lead contractor.
Even if most property investors don’t have access to celebrity renovators, they do have the commitment to see a project that they deem worthwhile through to the end, driven by the potential of selling at a price that is much higher than they bought it for.
Many home sellers are faced with the dilemma of undertaking costly repairs before putting their home on the market, fearing the wrath of meticulous buyers, bargaining on a high selling price, and forgetting of the option of selling it as a home that needs work – albeit at a price that is lower than comparable properties that are in a better overall state.
With that being said, property investors are always on the lookout for cheaper-than-usual property to renovate and resell. Fixer uppers typically don’t fetch the prices that newly renovated homes do, for obvious reasons, but that does not mean you won’t be able to get a decent price for that property that needs a bit of work.
If you are thinking of selling your home as a fixer-upper, here are tips to guide you through the process.
Determine whether it will be best to sell as is, or to fork out some money for repairs
Before making a final decision about whether you want to sell your house as is or not, it is important to take all the repairs and renovations that need to be done into account.
As most homebuyers will probably employ the services of a property inspector before deciding to purchase a property, it will serve the home seller well to do the same, even (and especially) if they are planning to sell the home as is. Property inspectors do a thorough assessment of the entire property to determine what state it is in. This will include inspecting the property for any structural faults, problems with utilities, mould and pests.
These people are experts in their field, but before deciding to use the services of a property inspector, home sellers (and buyers) should ensure that the property inspector is highly qualified to do the job. Because property inspection is not regulated by law in Australia, you’ll want a person that really knows what they’re talking about and has the necessary experience and qualifications to lend gravitas to their opinion.
Good questions to ask here would be:
- What is the extent of the property inspector’s experience in the field?
- Where did they do their training?
- Are they members of a certified home inspection company?
Once you have established that the home inspector who you are using to advise you on the state of the property you are looking to sell, and once the inspection has been completed, you will have a good idea of the scope of repairs, improvements and renovations that will be necessary to get the best selling price for your property. In turn, this will provide an impression of what amount of money you will need to undertake said repairs, improvements and renovations.
While it certainly isn’t a requirement to do a full home inspection when selling a fixer-upper, potential buyers will appreciate receiving a detailed breakdown of faults, done by a competent property inspector. Even if they are knowingly buying a property that needs work, having a report to refer to regarding the state of the property will put you in a good position with buyers, giving you some leverage on the sale.
Should you, upon completion of the home inspection, find that the required repairs and renovations are within your budget, it might prove useful to consider having the repairs done to get the highest possible price for a home that is a newly renovated property. If the repairs are extensive and it is not possible for you to complete them before the property goes onto the market, it might suit you better to opt for selling it as a fixer-upper. If you do decide to take this road, there are a few things that you’ll need to keep in mind.
Property investors acquire fixer-uppers because of the potential value it can have after the necessary repairs and renovations have been done. Even so, you should not bargain on selling your fixer-upper for the potential value it has – this simply won’t happen. Buyers who look at buying a property that they want to renovate know the realities of renovation and repair costs, and will take this into account when they make you an offer.
In this regard, the best route of action would be to speak to a qualified and experienced real estate agent or a property valuer.
Property valuers are considered to be expert interpreters of the property market, and will analyse a range of information about your property to ultimately determine the best selling price for it, keeping in mind that it is being sold as is, but still using comparable properties as collation.
A qualified real estate agent can also be invaluable during this part of the process. Especially if the property you are selling holds some sentimental value – if it’s an heirloom or the house that you grew up in, for instance – emotions may influence the value you place on the property, leading to a listing that is not realistically priced, considering the fact that it needs work.
Real estate agents will most likely determine what the highest, but most realistic selling price for your property is by using a rather standard formula: they will first establish the potential value of your property (that is, the value of the property, had it been completely renovated) by means of a comparative market analysis, and then deduct the cost of the necessary repairs from that amount. It goes without saying that the price your agent suggests will probably be lower than comparable properties in the suburb, city or town that the property is located in, due to it not being in tip top shape at the time of sale.
Your real estate agent will be able to advise you on additional options you may want to consider when selling a fixer-upper, like offering a discount on closing costs or on any of the other costs associated with buying a property. Should this be an option for you, your real estate agent will be able to give the best advice.
Ultimately, your expectations for the price of the fixer-upper you are looking to sell should not be ridiculously high and unfeasible, nor should they amount to selling yourself short in terms of the potential value that a property may have for a property investor after the repairs and improvements have been done.
Full disclosure is paramount
Even if the property you’re selling is not in the best possible condition, you shouldn’t think that you can get away with withholding information about some of its faults from potential buyers. This isn’t just negligent but also irresponsible, and can land you in hot water later on, should the buyers of your property decide to take legal action on account of you not disclosing all faults.
Real estate agents are obliged to disclose any faults or property defects to potential buyers, together with a number of other things, including building consent and sensitive historical issues like crimes, deaths or drug manufacturing. Australia’s different states all have different laws pertaining to the disclosure requirements that are placed on home sellers, and your real estate agent will be able to advise you on what the law considers to be issues that are non-negotiable when it comes to disclosure.
Even if you have already had a home inspection done to ascertain the extent of repairs to your property (this can prove a real selling point in your negotiations with potential buyers), a home inspection might again be required before banks approve loans for homebuyers, and your omissions might be discovered before the sale has even gone through, should the buyer decide to have an inspection of their own done.
Caveat emptor, or “let the buyer beware”, is a legal maxim that is also applicable in Australia. Insofar as it relates to general consumer affairs, Cornell University Law School describes this term as a “doctrine that often places on buyers the burden to reasonably examine property before purchase and take responsibility for its condition. Especially applicable to items that are not covered under a strict warranty”.
Even if the onus falls on buyers to make sure that they are not purchasing a property of which all defects have not been declared, the International Bar Association has noted that caveat emptor does not apply in all situations. In Australia, the key factor in such a case would be whether the seller or the agent that is acting on their behalf acted in a misleading or a false manner. In an article about the subject, Jennifer Duke explains that this might include “express or implied statements that created a false impression about a property’s characteristics, a vendor knowingly disguising or concealing a physical defect in order to mislead and where a known latent defect, flaw, fault or imperfection is not readily observable or discoverable through the exercise of ordinary care”.
The bottom line is that investors who buy fixer-uppers are prepared for spending money on repairs, but all buyers have a disdain for dishonesty.
Take care of the cosmetics and focus on the highlights
Fixer-uppers are particularly attractive to property investors when they can already see the result of repairs, renovations and improvements when viewing the property in its pre-repaired state. Not unlike Michelangelo, these people have the ability to see the angel in the marble, and the willingness to carve until it has been set free. However, that ability doesn’t mean that you can’t help to give a potential buyer a clearer glimpse of the angel if they’re not seeing it just yet.
All home sellers should try to highlight those aspects of their property that are most likely to attract the attention of potential buyers, but nowhere is this more true than in the realm of selling fixer-uppers.
Letting the focus fall on those features of the property that make it a worthy investment can make your fixer-upper one that is sought after among property investors, potentially driving up the selling price. This may include, but is not limited to things like hardwood floors under worn carpets (rip them out immediately!) or a basement, attic or study that can easily function as an extra bedroom. If you are selling a heritage-listed property, make sure to make mention of the fact, as this is always an appealing option to potential buyers.
You can do this right off the bat by optimising your property’s description to attract the attention of buyers online. Take care to include features that can be restored, like original floors and cornicing, as well as those areas of the property that lend themselves to be good extension opportunities, like a large backyard. The importance of including good photos of these features cannot be overstated. If the property is located in a prime location, close to schools, amenities or the CBD, don’t forget to mention that, too. Your real estate agent will be able to assist you in creating an online listing that stands out from the rest.
Simple cosmetic improvements can also greatly improve your chances of making a good first impression on potential buyers. A fresh coat of paint, new light fixtures, and a yard clean up can make a world of difference in terms of the way your property appears – even if the more significant repairs and improvements are left to the buyer. If the improvements that your home requires are not particularly big and potentially more expensive, make sure to also mention this in your online listing description, as a home that isn’t in need of more significant repairs will attract a much larger potential buyers’ pool.
The tiniest bit of repair and cosmetic work can help to fetch a higher price than what you are bargaining for. Simply making sure the garden is tidy and giving the house a paint job already make a better impression on potential buyers, despite the bigger repairs that might need to be done.
Find the right real estate agent
A real estate agent that is adept at selling fixer-uppers is an indispensable partner when you decide to sell your property as is. Make no mistake: real estate agents are always an asset when you’re selling your home, but when it comes to fixer-uppers, they become indispensable. Real estate agents that have experience of selling fixer uppers are vitally important on this journey.
They will be able to answer your most pressing questions, like how long a home that needs work typically stays on the market, and how successfully that specific agent has been in fetching the asking price sellers want on this type of property. A proven track record will give you an indication of who the right agent for you is.
Qualified and experienced (and experience is a key requirement if you’re selling a home as is) real estate agents are trained to help sell a home at the best possible price, and this is just as true for selling fixer-uppers. Especially if your agent has experience in selling this type of property – and you will need to confirm this when you interview potential candidates – they will be able to give you a good idea of what your house will probably sell for in its current state, but will also be able to make suggestions that won’t break the bank, but can significantly push up the ultimate selling price.
Real estate agents are specialists, and bring a fair amount of knowledge of the property market, as well as the area you are selling in, with them. They will also have access to a large database of potential buyers, including property investors and contractors who are searching for a property to flip.
Real estate agents also know how to market a fixer-upper in such a way that it attracts the greatest possible attention from the largest possible group of target buyers. They will be able to compile an online listing and organise viewings on your behalf, taking a lot of the effort out of selling your property.
Perhaps most importantly, they are an objective, impartial party, who won’t get caught up in sentiment and emotions about your property. The value of this is immeasurable, as they will be able to determine and suggest a selling price that is reasonable and realistic, but that still gives you the chance to make a profit.
If the only qualm you have about using a real estate agent to help you sell is the commission that they charge for their services, keep in mind that real estate agents work hard for said commission, which automatically leads to them putting in extra effort to sell your property at the highest possible price. The commission you pay to gain access to their expertise truly is a small price to pay for the ultimate benefits – and it is always negotiable.
Selling a home with its flaws and faults does have the potential to see you walking out with some cash in hand, but fixer-uppers should always be marketed as such. If the property you want to sell requires only minor improvements to push up the sale price, it might be better to spend a little to make a lot. However, if you specifically want to sell the property as a home that needs some TLC, you should be perfectly clear about the fact.
Should the property be located in a suburb that is sought after or up-and-coming, this will certainly play into your hand and attract a lot of potential buyers, but even so, chances are that a fixer-upper will sell for less than comparable properties which don’t need the same attention and repairs. Setting a bargain price (that is not unreasonable to you as the seller) is a key factor in the marketing process for a fixer-upper. Once you know what the costs of the necessary repairs will be and once your real estate agent has advised you on a good selling price, the process of marketing the property to target buyers starts.
Sellers should definitely disclose all faults to potential buyers when they view the property, and real estate agents are required to do so according to their professional code of conduct, but being dishonest about a property that needs work from the get-go is a sure-fire way to frighten off buyers and gain a reputation as a seller that should be avoided.
Still, fixer-uppers often have heaps of potential, and this is precisely what will draw investors, contractors and home improvement aficionados closer. In your online marketing write-up, the highlights of your property should always get the emphasis. Anything that is of historical value, original fixtures and areas for potential expansion… these are the things that buyers will look for, so make sure they are aware of them when they browse the web for properties to buy.
Through the entire process, a qualified, experienced and professional real estate agent is the sidekick you’ll need by your side. Real estate agents are property gurus of note, and you’ll know you’ve struck gold when you find an agent that has broad experience of selling homes that need a bit of extra attention.
To find an agent that can help you sell fast, contact Perfect Agent. We will provide you with a number of potential candidates, based on your specific preferences and needs, also as they pertain to selling fixer-uppers. The entire process is fast and completely free. Contact us today.