What is the best way to sell a house in poor condition?
March 17, 2016 5:30 AM   Subscribe

My wife and her siblings inherited a house that is in bad condition and full of dirt and clutter. They don't have the time or money to fix it up to the point where it would sell as a regular real estate sale on the market. The real estate market where the house is located is not great.

They had contact with one auctioneer who wanted to sell the valuable contents at his own auction house and then sell the rest of the contents and the house at an absolute auction. All of it would be sold together, so we wouldn't have to clean things out. It would take a pretty good amount of time to remove the contents (estimate maybe 2 people 2 weeks) and a good amount of it would have to be thrown away. The contract says that the seller and buyer pay the auction house 2% and we would pay the auction house $1,500 for advertising. The advantage is that we don't have to clean the house out or fix it up. I'm not sure if this is going to get the best result, though. Are there things to look out for to help keep the auctioneer honest?

The target market would probably be a flipper of some sort. Similar houses in good condition in that area sell for somewhere around $120,000. I have suggested that they get a fee based realtor to give them advice on selling the property, but I'm afraid that the realtor is going to say it's worth it to clean things up. What are some things that I might be missing that would be factors to consider when making a decision about what to do?
posted by jefeweiss to Work & Money (23 answers total) 6 users marked this as a favorite
I would absolutely contact a realtor - lots of houses are sold "as-is" which means they're in terrible shape (for various definitions of terrible) and plenty of foreclosed houses are full of the trash and belongings of previous owners. This will not get you the best sale price, but if you don't have the time/money to do any cleaning/repairs at all, by definition you can't get the "best" price. The realtor may say it's worth it to clean up but if you truly have a budget of $0 you can still move forward, accept a less-than-theoretically-ideal solution, and take the money you get.
posted by Tomorrowful at 5:34 AM on March 17, 2016 [4 favorites]

A friend of mine is a Realtor and her mantra is "A properly priced house always sells." It's just that sellers often don't want to hear what the proper price is. So yeah, consult a Realtor and be prepared to price it low to get the burden off your hands.
posted by BlahLaLa at 5:44 AM on March 17, 2016 [7 favorites]

Response by poster: I guess the nub of the issue is the pros and cons of using a realtor vs selling at auction and the various kinds of auctions available. A realtor is probably going to say it's best to use a realtor and an auctioneer is going to say it's best to use an auctioneer, but how to decide?
posted by jefeweiss at 5:59 AM on March 17, 2016

We bought an "as is" house at the bottom of the market. It was full of junk and smelly. We went with a realtor and paid about 3/5 of what the house would have been worth had it been clean. (It had some surprise problems - if we had known about them, we would have negotiated down at least $10,000.)

I would talk to a realtor. You don't have to clean or fix a house to sell it. (Although I hope you're planning to remove anything nice. We didn't find anything nice; we kept one vintage end-table that had been stored and one odd little nephrite carving. Also, there was a box of now-banned lawn darts in the basement.)
posted by Frowner at 6:11 AM on March 17, 2016 [5 favorites]

With an auctioneer, you get only the highest price willing to be paid by the people attending the auction. You can set a 'reserve', which is a minimum price you'll accept, but if the reserve is too high the auctioneer won't even try to sell it. But, the plus is that the house gets sold, and it's out of your hair.

With a realtor, the house sits, and waits, for someone willing to put the effort into it . Someone will still need to be paying the taxes, utilities to keep the heat on, etc., until someone buys it. The benefit is a realtor's job is to find a buyer on your behalf, and is incentivized to get the highest price possible. But, in the end, there's no guarantee you'll get a higher price than the auction. Note there's something called a FHA 203(k) program, which allows buyers to finance improvements through the FHA -- a realtor may be able to market the house based on this, if the house qualifies (but it may be too far gone for the 203K).

If the goal is to get rid of the house and everyone wipes their hands clean and walks away, I'd go with auction.

Qualifier: if there's any existing loans, easements, or other title/lien/encumbrance wierdness that needs some special consideration, the auction may not work; you may need a realtor's assistance to navigate the title issues.
posted by AzraelBrown at 6:13 AM on March 17, 2016 [3 favorites]

Best answer: If you go the auction route you might end up with 50% of the going rate of a house in decent condition.

I might approach it this way:

1. Go through the home and get out the actual valuables. Sell via eBay.

2. Go through the home and round up all the "stuff" Sell at a yard sale. Donate what doesn't sell. Another option is to let a local thrift store come in, they'll give you a price for the whole lot and then clean it out for you.

Now you have a few bucks to use to get the rest of the job done.

3. Go through the home and throw away all the trash. 1-800-Got-Junk is a good way to go with this, they come with the truck and the dudes just load and haul. It's about $600 for a truck-full. They recycle what can be recycled and take the rest to the dump.

4. Once the house is empty, get it as clean as you can. You can make it a family project, or hire someone.

5. This is totally up to you, but at that point, you can decide if it's worth it to paint it. I wouldn't tackle any actual projects.

6. Have it inspected. This costs a couple hundred bucks, but it gives you a good idea about what you're working with. If the home is sound, and there aren't any huge things wrong with it you can put it on the market. If there are big problems (foundation, roof or mold) you're aware and can price accordingly.

I'd say that you've got $30,000 up for grabs here. (Give or take). Me, I'd say it's worth it to segment out the projects and devote a few weekends to getting it done.
posted by Ruthless Bunny at 6:21 AM on March 17, 2016 [13 favorites]

A few other thoughts.

1. You can ask a few realtors to stop by and give you their opinions and suggestions. The great thing about realtors is that they have the hook up for folks who clean, paint and do handyman work. My guy was a wizard at this. I got the back of the house painted for $300. His handyman did my stuff lickety split for a nominal fee.

2. A realtor gets 6% of the total purchase price at closing.
posted by Ruthless Bunny at 6:27 AM on March 17, 2016 [1 favorite]

One of the guys I worked with went the auction route with his dad's house, and one of the things he mentioned was that the 3 kids all realized that they could have gotten more money if they were willing to go with a realtor instead... but they were in total agreement that they wanted to be shut of it all more than they wanted more money. It worked for them because everybody involved was completely on board with the plan.
posted by Mary Ellen Carter at 6:30 AM on March 17, 2016 [5 favorites]

If it's a place that needs renovation anyway, I wouldn't bother doing any decorating/painting at all. The buyer would plan to do it anyway, and painting may hide any issues with the building (cracks/damp) or at least it may appear as if that's what you're trying to do. Stick to clearing out the junk (or not).
posted by EndsOfInvention at 6:39 AM on March 17, 2016 [1 favorite]

Best answer: There's a middle road here, which is to hire an estate sale company to auction the contents and take/trash whatever doesn't sell. Then you'll have an empty house which you can sell through a Realtor with or without having made any interim improvements, like painting, although I wouldn't bother if your market is flippers. Similarly, I wouldn't get it inspected because then you have a duty to disclose whatever you learn. When you contract the Realtor, make the listing short, e.g., 3 months, which will work out anyway since flippers need the summer and fall months to do their thing. If the Realtor fails, then you can always go the auction route to sell the house.
posted by carmicha at 6:41 AM on March 17, 2016 [2 favorites]

By the way, if the house is filled with dirt and clutter because the previous owner got old and began to suffer some of the common delusions of age, remember that money and other valuables may be hidden in weird places. My relatives found a bunch of money and stock certificates hidden in my great grandmother's books, shoes, etc. and that was after they'd already dumped a lot of her stuff; who knows what they missed.
posted by carmicha at 6:43 AM on March 17, 2016 [1 favorite]

Response by poster: I think that the siblings had agreed to use an auctioneer to sell the more valuable items, he didn't want to haul away the trash though. I don't really know what he is going to consider valuable and whether anything left over is going to be worth selling on Ebay, but a yard sale might be a good idea. The Got-Junk thing might be good information to have for what is left over, as there is likely to be a lot of stuff left in the house.

It seems like there is some disagreement on the whole inspection thing here. There aren't any huge issues with the foundation, mechanical stuff, roof, etc, that I am aware of from when someone was living there. There is some really old and damaged tile and carpet, the kitchen cabinets are falling apart and some holes in the walls. Most of the stuff that I know about is cosmetic because nothing has been painted or updated since the early 80s. Would that change the equation on whether it would be a plus to have an inspection?
posted by jefeweiss at 6:54 AM on March 17, 2016

I think Bunnys advice is sound except I'd warn against an inspection if your going to seek the house "as is" or a contractor special. Anything that comes up in the inspection will end up directly on your disclosures and be used to knock down the selling price. Just say the house is as is and let the buyer do their own due diligence.
posted by bitdamaged at 7:28 AM on March 17, 2016 [13 favorites]

We're house-shopping, and a big line in the sand is something called a "FHA appraisal". If the buyer is using FHA /USDA backing to get a loan with little or no money down, there are very strict rules on the quality of the property they can buy.

In many ways, they're not THAT strict: a fresh coat of paint, carpet cleaning, and handyman-level repairs might be enough. Or, if the soffits are rotting and the front door doesn't close right, it could get expensive. Like, the broken tile will definitely need to be repaired and/or replaced.

If you don't do those sort of improvements, it limits the buyers to people who can put 20% down and can get a conventional loan; so you're cutting down the pool of potential buyers.

So you may want to have a realtor, inspector, or appraiser come through and tell you what needs to be done to get the home to qualify for FHA consideration. It might be a lot -- in which case you have to weigh the selling price vs the cost of improvements -- or it might be a couple hundred bucks and a weekend of hammers, nails, and paintbrushes.

On preview: bitdamaged does make a good point: let's say an inspector comes through and says, "these chipped tiles under the water heater in the basement are asbestos." NOW you've got to either fix it or disclose the presence asbestos to any buyers, because you know it now. There's a whole lot of "if nobody checks, we can say we don't know" going on in home disclosures.
posted by AzraelBrown at 7:33 AM on March 17, 2016 [4 favorites]

Anecdata, but my grandparents house was like this and the realtor didn't even have any pictures of the house in the listing. The saving grace was the amazing backyard. She literally would bring people in and say okay, now the owner bought this house in 1946 and did all the renovations himself, but come and let me show you the backyard. The house sold quickly and the new owners immediately demolished it and built a new one.
posted by JoannaC at 7:36 AM on March 17, 2016 [3 favorites]

Unless you are planning on doing repairs and fixing major items do not get an inspection. It doesn't help you. Buyers can decide if they are ok not knowing or they can pay for an inspection themselves.
posted by magnetsphere at 7:37 AM on March 17, 2016 [2 favorites]

I've attended a couple of estate auctions where they auctioned the house after selling the contents. None of these auctions actually made it up to the reserve price and actually sold the house, though; people were hoping to get a great bargain and came with less-realistic price expectations than if the house had just been listed with a realtor. I think going this route also eliminated a lot of people who might have considered the house but weren't willing to stand around all day waiting for the rest of the stuff to get sold or to commit to a purchase price without their own inspection first.
posted by belladonna at 7:43 AM on March 17, 2016

I had to do something similar last year when I sold-off my mother's home, after she went into a memory-care facility. The place was a gross mess. She had a dog that she often forgot to let out, so you can guess what the place was like. Ew.

Anyway, we contacted a realtor to just take a look at it. He, in fact, said he had sold worse homes. We all understood, though, that the house would have to be listed at below-market price because of the condition. Anyone buying it was going to have to dump a ton of money into it, just to bring it up to livable condition. Probably a contractor looking to rehab and flip the property.

So we listed it as-is at a very reasonable price, and we had offers immediately. In fact, there was a bidding war and we ended up selling it above what we listed it for.

So, my suggestion is to definitely get a realtor involved. Many of them have experience with distressed properties.
posted by Thorzdad at 7:53 AM on March 17, 2016 [3 favorites]

Given your update, I wouldn't inspect, let the buyers do that and then negotiate from there.

List it as a "fixer-upper" and let the new buyers decide what they want to fix. You could throw some Home Depot cabinets in there, be out $2,000 and then the buyers will upgrade to what they want anyway. So clean them, do as much repair as makes sense, or just leave them as-is.

True story, my friend loving renovated her condo in Ft. Lauderdale. Used top quality materials and then decided to sell. One thing she did was spend an outrageous amount of money on cabinetry in her small kitchen. Thousands of dollars A football player bought the place for cash and the first thing he did was rip them out and install something more to his taste.

When we bought our house, we hated the cabinets, and chose to paint the boxes and make our own cabinet doors. Very happy with the result. There's no accounting for people's taste. If they're looking for a property to fix up, crappy cabinets and trashed tile will be just fine.
posted by Ruthless Bunny at 7:55 AM on March 17, 2016 [3 favorites]

You can get it appraised by a bank appraiser; reasonably accurate.

You'll want to come to an agreement with siblings about whether anybody gets compensated for doing the annoying stuff.
posted by theora55 at 10:30 AM on March 17, 2016

remember that money and other valuables may be hidden in weird places

This! You asked about how to keep the auctioneer honest -- I wouldn't be so concerned about the auctioneer, but if someone who works for them is stacking books and finds several hundred dollars in cash it's a huge temptation. Also, if there is money in books and things like that, it's possible that the buyer at auction would simply find it as a nice surprise, nothing to do with the auctioneer being honest.

If none of the relatives are willing to sort through things, this is just a risk they will have to accept.

Home inspections: it makes sense to get an inspection in advance when you've got a house that isn't expected to have any issues and the sellers will fix any that are revealed in the inspection. That's not the situation here.

Any buyer who goes into a place seeing what you've described expects to find more problems. They can pay for an inspection if they want, but they are probably going to be budgeting for a lot of repairs anyhow and might just rely on their own examination of the house instead of hiring an inspector to tell them a bunch of things that are obvious to someone who's bought and fixed up a few houses.

The inspection is bound to turn up more problems, and the sellers will be legally required to disclose these things. If by some miracle it shows that there aren't any lurking issues, no buyer who has any experience with fixing up houses is going to believe that means there won't be lurking issues. Home inspectors don't check all that much, really.
posted by yohko at 11:22 AM on March 17, 2016 [1 favorite]

Call a licensed real estate appraiser. And i'm writing this as someone whose uncle is an appraiser.

This is the kind of thing he does all day, and he has no incentive do anything but tell you the fair market value. He's not trying to sell it, and he's not trying to weasel some cut or squirrel away valuable items in the house. He's just there to work for you.

Once you have that appraisal, you can decide where to set the auction reserve knowing what it should go for at best and have a good conversation starter with a realtor. 120k for a similar house is not a flaming hot market, but it's not a rust belt one either. That's enough that people will be interested, however, imo.

The appraiser will be able to show you comps for houses in good condition and houses in similar condition or with issues, and talk to you in an informed way about what would and wouldn't knock the price down.

In my mostly uneducated opinion, i would say it's worth the few hundred bucks to get all the trash out, and worth either having an auction house take all the items they want to sell or renting a storage unit that comes with a free move in truck to get the other stuff out. All of that should come out to less than a thousand, and i really feel like a house full of crap will sell for more than a thousand less than a house full of not-crap even if it obviously needs some work. It's just visually offputting(and i've seen how people absolutely bench press this while putting offers on places, etc). Don't paint, but do clear all the stuff out.
posted by emptythought at 12:00 PM on March 17, 2016

Response by poster: First, I would like to thank everyone for taking the time to answer. This was my spouse and her siblings decision, but I wanted to let people know what happened.

They ended up having an auctioneer come and take away all the valuables for sale at auction elsewhere. Then they sold the house "as is" at auction with all of the contents remaining and no cleaning or painting. They didn't get an appraisal, but they did set a reserve (it was fairly low.)

I think that the decision was made mostly to avoid having to deal with an unpleasant situation, rather than maximize the amount of money they got out of it. I advocated for many of the suggestions made in this thread, because I think that there were a lot of good suggestions.

My preferred way to go was to follow Ruthless Bunny's suggestion, minus the inspection and then sell as carmicha laid out. I think this would have maximized the amount made vs effort.
posted by jefeweiss at 12:46 PM on May 2, 2016 [1 favorite]

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