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, with 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, even in a 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 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)
