Whether you want to buy or sell your home, know that it can be the biggest investment you’ll ever make. So it makes sense that at every point along the homeownership lifecycle, you’ll want to make sure you’re making the right financial decisions along the way.
If you’re planning to sell your home in today’s real estate market, you might understandably be wrestling with one major decision: Should you sell your home as-is or fix it up for a more traditional sale?
The implications and consequences of this decision can be significant and far-reaching. Make the best choice for you, your family, and your needs by first understanding what an as-is sale is, and how to choose whether it’s right for you.
What Does It Mean to Sell Your Home As-Is?
An as-is sale means that your home is being conveyed in its existing condition, exactly as it currently is. That means any flaws, problems, or repairs that might be needed will fall to the buyer to fix. You may sell to another individual or to a real estate investor or company.
Consequently, as-is sales typically come with lower sales prices. That lower price reflects the reality of the deal, whereby your buyer will take on the cost of repairs, while simultaneously relieving you of that burden. You can combine an as-is sale with an all-cash purchaser to close fast and get out from under the burden of owning and maintaining the property.
Legally, you’ll still be required to disclose certain conditions to potential purchasers. These requirements vary from state to state, but usually include items such as lead paint, defects in your plumbing or HVAC systems, and any flooding history, among other items. It’s important to confirm these requirements with a real estate professional before you try to sell your home.
Pros and Cons of Selling a Home As-Is
👍 Selling your home as-is saves a lot of time and you can typically get to a successful closing much more quickly. This can be a persuasive benefit if you’re battling a deadline to get to your new home—for example, if you have accepted an out of state offer of employment or you’re beginning your retirement and will be downsizing. You’ll also save money on those repairs and improvements you don’t have to complete. This improves your upfront cash flow when you may likely need it for relocation costs.
👎 On the downside, your sales price will be lower. You may also find yourself working with a smaller pool of potential purchasers because the ultimate buyer will need to take on additional work to update the property.
Spruce Up vs. Sell As-Is: 7 Factors to Consider
The decision of whether to sell your home as-is or to spend the energy and money involved in making significant upgrades for a traditional sale can seem overwhelming. That’s especially true if you’re facing pressure to wrap the sale up quickly to move on to the next phase of your life. Consider the following seven factors before you make a final decision.
1. The Current State of the Market
If you’re selling in a buyer’s market, that means that available home inventory in your area exceeds the number of potential buyers in the same area. When potential purchasers have this kind of available inventory from which to choose, they’ve got the edge against those sellers. Conversely, in a seller’s market the shrinking inventory isn’t sufficient to meet the demands of local buyers. Those buyers then become more willing to extend consideration to homes that aren’t in the best possible condition.
If you decide to undertake extensive improvements in a seller’s market, you’re risking a reversal or cooling off of the local market, which will decrease the potential sale price your home can command. Currently, the U.S. market generally is still a seller’s market, although rising interest rates may cool off demand further.
2. Condition of Homes for Sale Near Yours
Your home will be competing for buyers with all the other similar homes for sale in your area. These are called comparable properties, or comps for short. If your home’s comps are in much better shape than yours, that tends to suggest you’d have to work on your home if you want a similar closing price. Evaluating the local comps will help you get a better feel for the market and where your home fits in.
3. Potential ROI on Your Planned Improvements
Many home improvements come with a high ROI, or return on investment. Projects such as updating siding with vinyl or fiber-cement, replacing windows, improving security with new features such as steel-reinforced front doors, and necessary upgrades to your bathroom and kitchen typically offer a high ROI and attract more interested buyers.
Other projects, such as putting in a jet bathtub or installing a skylight in a bedroom, can actually turn some purchasers off your property entirely. The key to making the right decisions is to check with your local real estate agent who can advise you on local market expectations.
4. How Significant Your Home’s Improvement Needs Are
Major issues that need significant repairs to fundamental systems, such as plumbing or electrical repairs, can repel otherwise interested buyers. When you have the time and money to get these repairs done, you’re likely to entertain more offers of a higher value. By the same token, if there are structural problems that might impact safety, even the most interested and willing buyer is going to struggle to find a mortgage.
On the other hand, if your home is in fairly good repair—even if it’s looking a bit outdated and in need of aesthetic upgrades—you might want to entertain the idea of an as-is sale. In these sales, homeowners can safely let these kinds of minor improvements go without losing significant buyer interest.
5. Your Current Resources to Manage Improvements
Figuring out how much to spend on preparing your home for sale can be a complex decision, too. Do you have the resources on hand to manage a big list of improvements to your property right now? Think beyond cash flow alone to the physical and mental energy and the sheer time it takes to manage substantial home improvement projects.
6. Whether You Need to Close a Sale Quickly
Consider any external deadlines at play in your housing situation. If you or your partner accepted a job offer in a different location and need to move by a certain date that’s not too far off, or if you’ve already moved and simply need to consolidate households for your own peace of mind, a quick sale can be important to you. In that case, go for a cash offer on an as-is sale.
7. How Open You Are to a Lower Sales Price
There’s no question that an as-is sale, particularly one backed by a cash offer, is likely to yield a lower sales price than you’d otherwise get. That’s a fact that is simply dictated by the financial realities of the situation. If you’re prepared to accept that lower price, knowing that you’ve saved considerably on the expenses of upgrades and repairs, then an as-is sale might be right for you.
Best Improvements to Maximize Sales Price
When you’re creating a list of improvement priorities for your home before listing it for sale, it’s important to consider two separate but equally important interests:
- Your potential ROI for each proposed improvement: Some improvements cost more than they’ll add to your home’s value and might not be worth undertaking this close to a sale. Remember that home improvement projects often go over budget.
- Whether you’re selling as-is or not: If you’re going the more traditional route, you might want to take advantage of more extensive projects (many of which also offer a higher ROI).
Given these two major factors, you may want to prioritize low-cost and simple aesthetic updates such as painting and improving landscaping for an as-is sale. You’ll also want to look at major repairs that, if not addressed, might render the home uninhabitable.
For other sales, your options for upgrading your home are more extensive. Stick to projects with solid ROI that help you create the best possible blank-slate showcase home, remembering your purchasers want to be able to project their own tastes and preferences onto that canvas. Remember that some home improvements won’t increase the value of your home. Choose neutral decor elements and emphasize decluttering and removal of personal items.
How Much to Spend on Preparing Your Home for Sale
With a tight budget and time constraints creating additional pressure, you’ll want to choose which repairs and upgrades make the most sense. That list will vary depending on your circumstances and the local market. However, you can safely ignore certain improvements that don’t typically yield a strong enough ROI to make the cost and effort worthwhile. Those projects include the following.
Some Cosmetic Issues
Painting and cleaning up your landscaping don’t cost a lot, but they usually boost your home’s appeal to potential buyers. However, other purely aesthetic projects are more complex, requiring a significant investment of time and money. There’s no need to replace bathroom tiles that aren’t damaged but just look old or dated, or polish out lots of minor scratches in your hardwood flooring.
Sidewalk and Driveway Cracks
Small hairline cracks are very common, especially in places with earthquake activity and loose soil. If it’s significant enough to trip someone and cause a fall with injuries, that should be addressed. Otherwise, you can safely leave them as they are.
Replacing Outdated Decor
If your window treatments are looking ratty or distressed, you could replace them for a few hundred dollars. Or you could simply take them down and clean the area up. It helps open up the space and saves you money in the process.
Replacing Old Appliances
Old appliances in contrasting finishes that look worn, broken, or poorly functioning can really date your kitchen. However, replacing them with top-of-the-line up-to-date models is an unnecessary overspend. Instead, look for second-hand appliances that are in solid shape, or lower-cost new models.
Trying to Bring Your Home Up to Code
Sometimes building code violations can implicate safety issues, and those should always be addressed. However, in many cases, the code violations listed in your home’s inspection report won’t need to be upgraded. They may be grandfathered in if they were included in the home before those code requirements were added. And in any case, the buyer can always address those issues later, if they like.
Improving Your Home Over the Local Average
It might seem counterintuitive, but making your house stand out too much from the neighborhood often won’t net you a sales price high enough to justify the work. Strive to create the impression of a well-made, clean-slate home that meshes well with its neighborhood and nearby homes.
Adding a Sunroom
If you have the budget to add a sunroom, consider a deck or patio instead. Sunrooms don’t typically recoup the necessary investment, while decks and patios add considerable value. Stage it as an outdoor living or cooking/eating area for the biggest positive impact on potential buyers.