Selling a House ‘As Is’: How Much Money You Stand to Lose — and Why
- Published on
- 11 min read
-
Gina Rodrigues Contributing AuthorClose
Gina Rodrigues Contributing AuthorGina is a freelance writer and editor who specializes in real estate and personal finance. She brings more than ten years of experience as a licensed agent and property investor. When she isn’t writing, she can be found tending to the sheep and chickens at her suburban homestead outside of Seattle. Gina holds a B.A. in English from California State University.
-
Richard Haddad Managing EditorClose
Richard Haddad Managing EditorRichard Haddad is the managing editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
Selling a home “as is” has its perks. First, you save on the cost of sprucing up your home. And ideally, you avoid painful repair negotiations with a buyer down the line. But there’s one major drawback to selling as is: less money in your pocket. So how much do you lose selling a house as is?
A simple equation for calculating how much less you’d net doesn’t exist. So we reached out to the experts — including a top Wisconsin listing agent and several professional homebuyers — to find out what goes through a buyer’s mind when making an offer on an as-is listing.
Also, to give you an idea of how your home might stack up, several of our experts revealed actual dollar figures from past transactions, along with insight into factors that affected their offers.
Sell Your House Just the Way it Is
House needs some work? No problem. Skip repairs, staging, and the hassle of open houses. Get an all-cash offer through HomeLight’s Simple Sale platform whenever you’re ready. Receive your offer within 24 hours and close in as little as 10 days. Available to sellers across the U.S.
To find out what affects offer prices when selling a house as is, we rounded up this select group of industry pros for insider answers:
- Wisconsin-based real estate agent Kim Batterman, who has more than 15 years of industry experience
- Ryan Dosenberry, owner of Lakeshore Home Buyer in West Michigan, one of the largest cash home buyers in the area
- Jordan Fulmer, co-founder of Momentum Property Solutions and buyer of as-is homes in Huntsville, Alabama
- Ryne Lambert, a longtime real estate investor based in Wisconsin
- Katherine Marino of Cash House Buyers Tampa
What happens when you sell your house as is
When selling your house as is, the buyer purchases the home with the understanding that the seller chooses not to make any repairs or improvements. The buyer accepts the property in its present condition (paint scuffs, leaky faucet, and all) without warranty from the seller.
“They’re letting the buyer know in advance that there’s no intention of making any changes to the property — not fix things or improve things,” says Batterman. “What you see is what you get,” she adds. This differs from a typical sale when sellers often make repairs and improvements to their house before listing and selling.
That isn’t to say that as-is sellers are off the hook from disclosing known issues about the home. If the homeowner is in a disclosure state and is aware of a material defect that would affect the value or desirability of the home, such as a cracked foundation, the seller would be obligated to disclose that fact.
Also, an as-is sale doesn’t preclude the buyer from inspecting the property. Whether you sell as is or not, the buyer has the right to inspect the home (within the terms of the purchase agreement) for potential defects. If the buyer unearths a material issue not previously disclosed, the buyer may want to renegotiate the price and terms.
That’s why Batterman recommends a seller pre-inspection. By having their home inspected before a buyer gets involved, the seller can disclose any defects in advance — and ease buyer hesitation. For buyers, an as-is sale can be scary, says Batterman. “But if they’ve got an inspection report, [buyers] have a really good idea of what they’re going to encounter. So there’s a lot more confidence there.”
The buyer has an idea that there’s something more to the story than maybe what they can see.
Kim Batterman Real Estate AgentClose
Kim Batterman Real Estate Agent at Keller Williams Fox Cities Currently accepting new clients
- Years of Experience 21
- Transactions 401
- Average Price Point $231k
- Single Family Homes 357
These factors impact how much you could lose on an as-is sale
Sellers typically don’t net the maximum value of their home when selling as is. These are the factors that buyers consider when placing an offer on this type of home sale.
Your buyer
You can expect a different offer price when selling as is to someone who wants to live in the home versus an investor profiting from the purchase.
Buyers who plan to occupy the house
Potential buyers who find out a home they’re considering is being sold as is tend to become suspicious, says Batterman. “The buyer has an idea that there’s something more to the story than maybe what they can see.”
Batterman goes on to explain that buyers worry about potential issues cropping up down the road, particularly with repairs that could exceed initial contractor estimates. Once upon a time, buyers sought fixers uppers for instant equity by putting in the work themselves. But nowadays, Batterman estimates that 90% (or “even a little more”) of buyers would rather buy a home that’s turnkey and ready to move in.
The end result? You limit your buying pool when selling as is. In Batterman’s experience, “oftentimes [buyers] offer you less money than you’re asking for the property, or you’ll have fewer offers in a seller’s market.”
Investors, including flippers and cash buying companies
Unlike buyers who plan to live in the home, an investor’s primary motivation when making an offer includes potential profit. As independent businesses, each investor calculates their own risk and profit margin, which impacts the final offer.
Long-term versus short-term investor strategies also factor into profit calculations and how much an investor may be willing to pay for an as-is home. “The biggest factor is the real estate investor’s exit strategy,” explains Lambert. “An investor can typically pay more for a property they intend to buy and hold as a rental property than one they intend to fix up and resell.”
According to Marino, homeowners can expect to net, depending on the condition of the home, 75% to 95% of the home’s value (after repairs) when selling as is to a cash buying company such as hers. And sellers typically don’t pay for any closing cost or commission fees when selling to a company that specializes in buying homes for cash, she adds.
Scenario for selling as is: Cash buyer and investor Finn places an offer on a home that needs $20,000 of work, estimating that the house will sell for $200,000 after making the repairs. Finn also offers to pay for all closing costs. Seller Jones accepts Finn’s offer of $150,000, or 75% of the after-repair value (ARV).
Scenario for selling after completing repairs: Homeowner Jones spends $20,000 on repairs before selling his home for $200,000. The buyer intends to live in the house after closing. Jones pays for seller closing costs in the amount of $16,000, or 8% of the sales price. Taking into account closing costs and repairs, Jones nets a sales price of $164,000.
Jones nets 8.5% less by selling as is to a cash buyer when comparing the two scenarios.
Your home’s condition
The better the condition of your home, the closer you’ll get to market value when selling as is. Conversely, homes in need of major overhaul tend to receive much lower offers because of the time, effort, and upfront cash required to bring the home to a condition that aligns with similar homes in the area.
Fulmer offers an investor’s perspective: “We generally try to make more profit on a house that is going to require significant repairs than on a house that just needs minor updates.”
Actual as-is scenario: According to Fulmer, the seller of a home he purchased as is and in cash ended up with just 4.4% less than if the seller had fixed up the home and sold it themselves. “The house was not in bad shape,” Fulmer says, noting that the home needed $15,000 for updates and repairs.
Fulmer estimated that the home would sell for around $140,000 after completing work on the house. He estimates the homeowner would have net $113,000 after subtracting repair costs and seller fees if the seller took on the project themselves. Instead, Fulmer’s company bought the home for $108,000. “That was a much better option to them than going through the hassle of fixing it themselves and putting it on the market,” he concludes.
Improvements can impact a buyer’s offer
Actual as-is scenario: Making even minor improvements can drastically increase a seller’s bottom line. Batterman once worked with a seller whose home had been on the market at $400,000 with a different agent for six months prior. The seller had received and rejected a buyer’s offer for $320,000 during the initial listing period.
When the listing expired and Batterman took over, she advised the seller to make minor improvements to the home instead of selling at its then-present state. The improvements cost $5,000 for staging, changing hardware and lighting, and painting. She also encouraged the seller to adjust the asking price to reflect market conditions. When Batterman put the home back on the market at $375,000, the same buyer who placed the $320,000 offer returned — with a higher offer of $375,000.
If the seller had accepted the buyer’s original offer of $320,000 on the as-is home, they would have net 13.3% less from the sale — even accounting for the $5,000 in improvements.
Connect with a Top Agent to Sell Your House As-Is
According to HomeLight data, top real estate agents sell homes faster and for more money than average agents. Connect with an experienced local agent to help with your as-is home sale.
Your property location
When it comes to offers and home values, we can’t forget real estate’s longtime mantra: location, location, location.
The more desirable your location — in a coveted school district, a view of the ocean, or on a quiet cul de sac instead of a busy road — the stronger the offer you’ll get, regardless of whether you’re selling as is or not.
Actual as-is scenario: Dosenberry’s company recently acquired a Grand Rapids, Michigan, home by making an offer close to its market price, primarily because of the home’s location. With an estimated after-repair value of $200,000 with approximately $6,000 to $7,000 in repairs, Dosenberry purchased the home for $175,000. He estimates that the seller could have secured between $180,000 and $185,000 (after closing costs and commission) if the seller did the work and sold the house on the open market. In this scenario, selling as is to a cash buyer net the seller between 2.7% to 5.4% less than if they had completed the work before selling.
“Because the house was in a desirable location, we felt more confident about achieving the ARV,” adds Dosenberry. “If this same house was in a worse area, our offer would be significantly less.”
Current market trends
Batterman notes that in a strong seller’s market, the offer price gap typically found between an as-is sale and a conventional sale shrinks — or disappears entirely. When there are more buyers in the market than available homes for sale, buyers can’t afford to be picky about homes, or price.
Recalling the hot pandemic-era seller’s market in her area, Batterman says, “We had so many people purchasing homes that even the as-is [homes] in terrible condition were selling … just because of the lack of inventory.” She adds that no matter if it’s a buyer’s or seller’s market, “people need to move for whatever reason. They have to take whatever they can get.”
In an extreme seller’s market, buyers seem to dismiss any apprehensions about buying a home as is. Batterman recounted an offer she placed for a client on an as-is home sale. Despite submitting a full price cash offer and waiving all contingencies, the seller accepted a different offer. Describing the home, Batterman rattled off a list of areas that required repair: significant water damage, garage doors that didn’t open or shut properly, and gutters needing replacement. Also, a tree had caused damage to part of the roof. There were “some serious repairs there,” she says. “But somebody offered more than full price cash and must have had no contingency as well because we didn’t get it.”
According to a recent HomeLight survey of more than 1,000 top agents across the county, in today’s more balanced market, buyers and sellers are struggling to adjust their strategies. The most common challenge for many sellers is overpricing their homes. The pitfall for many buyers is under offering.
The bottom line about as-is offers
- Sellers typically won’t receive as high of an offer price on an as-is home, but factors such as the type of buyer making the offer, the location of the home, the condition of the home, and market conditions all impact how much less a seller nets from the sale.
- A homebuyer looking to live in the home has different buying criteria than an investor, in that the former isn’t looking to turn a profit on the house. Instead, they’d rather choose a home they can move into without needing much work, while an investor primarily considers their bottom line when making an offer.
- An as-is home in good condition typically garners higher offer pricing, percentage-wise, than a property that requires extensive work. Buyers today prefer turnkey homes over fixer-upper deals.
- If substantial damage to the home exists, including severe deficiencies that “affect the safety, soundness, or structural integrity,” a mortgage lender may not approve a loan on the property. The lender would require repairs prior to issuing the loan. Otherwise, the seller would need a cash offer to sell the home as is.
- Location matters for any home sale, and you can expect to receive a stronger as-is offer if your home’s location has desirable qualities for buyers. Example elements of a great location include a picturesque view, a quiet street, or a high-ranking school district.
- If you’d like to skip the repairs, prep work, and open houses, or just need to sell your home fast, requesting a cash offer through HomeLight’s trusted Simple Sale platform can help you find a cash buyer in a matter of days, not months. Investors in the HomeLight network often prefer to buy homes as is, in almost any condition.
Another option is to consult with a top-rated real estate agent with experience in as-is home sales in your area. HomeLight’s agent matching service analyzes over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
Header Image Source: (Jacques Bopp / Unsplash)
