How does selling a house work?
April 29, 2020 9:15 PM Subscribe
I have been renting out a house to longterm tenants who have informed me they are vacating at the end of May. I want to be rid of this house as soon as possible but it needs work and I don't have a lot of cash on hand. I've never sold a house before. Where do I start?
I currently live about half an hour's drive from the house and I am terrified of trying to sell it and having it stuck on the market for months. I can't afford the mortgage without renters for very long but I think that increasing the rent to where I'd have a little cushion would mean I'd have a very hard time finding renters since the house is quite small and not in a very desirous area (small Illinois suburb of STL, not one of the sexy ones). I really don't want to move into it myself since my family has grown and it would be a very difficult fit. The current renters are paying their own utilities and paying me about 5 bucks over the mortgage payment. They are moving in with elderly parents and aren't interested in buying it.
I don't expect a profit from selling; I still owe about 80% of what I borrowed and it hasn't increased much in value if at all. I'm just hoping not to have to spend thousands I don't have to sell it at a loss. Plus I know there can be tax implications of some kind and I don't intend to buy another house for a long time.
The work it needs includes roof repairs and probably some inside cosmetic work, I know there's some carpet damage. How do you know what is worth the time fixing?
Is my best bet just to get a real estate agent? Call the "I buy ugly houses" people? Of course this is assuming that real estate resumes soon as well but no one can predict that.
I currently live about half an hour's drive from the house and I am terrified of trying to sell it and having it stuck on the market for months. I can't afford the mortgage without renters for very long but I think that increasing the rent to where I'd have a little cushion would mean I'd have a very hard time finding renters since the house is quite small and not in a very desirous area (small Illinois suburb of STL, not one of the sexy ones). I really don't want to move into it myself since my family has grown and it would be a very difficult fit. The current renters are paying their own utilities and paying me about 5 bucks over the mortgage payment. They are moving in with elderly parents and aren't interested in buying it.
I don't expect a profit from selling; I still owe about 80% of what I borrowed and it hasn't increased much in value if at all. I'm just hoping not to have to spend thousands I don't have to sell it at a loss. Plus I know there can be tax implications of some kind and I don't intend to buy another house for a long time.
The work it needs includes roof repairs and probably some inside cosmetic work, I know there's some carpet damage. How do you know what is worth the time fixing?
Is my best bet just to get a real estate agent? Call the "I buy ugly houses" people? Of course this is assuming that real estate resumes soon as well but no one can predict that.
The "ugly houses" people rely on you being desperate to sell. I don't know what kind of discount they demand to the true market price, but it's considerable. I hate real estate agents as much as the next person, but it takes time to find buyers and you can't short circuit that process and still maximize your return.
posted by wnissen at 10:03 PM on April 29, 2020 [3 favorites]
posted by wnissen at 10:03 PM on April 29, 2020 [3 favorites]
Absolutely get yourself an agent, and one affiliated with a major firm. Not the "we buy ugly houses" people.
Interview a few and find one you trust. Selling a house is a process with a lot of moving parts and it is well worth having a professional involved.
I hate real estate agents as much as the next person
I'm not sure what that's about. I've used four different agents across the last thirty years and I've enjoyed working with all of them.
posted by Tell Me No Lies at 10:40 PM on April 29, 2020 [2 favorites]
Interview a few and find one you trust. Selling a house is a process with a lot of moving parts and it is well worth having a professional involved.
I hate real estate agents as much as the next person
I'm not sure what that's about. I've used four different agents across the last thirty years and I've enjoyed working with all of them.
posted by Tell Me No Lies at 10:40 PM on April 29, 2020 [2 favorites]
I just bought a house. I will say - now is a strange time to be entering into a real estate transaction.
Have you considered refinancing your loan? Current interest rates are stupidly cheap, and with 20% equity in the house by now you should be able to get rid of mortgage insurance. You could potentially knock hundreds of dollars off your mortgage with a refinance.
That might change the balance of whether you continue to rent it out or not.
posted by chuntered inelegantly from a sedentary position at 10:53 PM on April 29, 2020 [12 favorites]
Have you considered refinancing your loan? Current interest rates are stupidly cheap, and with 20% equity in the house by now you should be able to get rid of mortgage insurance. You could potentially knock hundreds of dollars off your mortgage with a refinance.
That might change the balance of whether you continue to rent it out or not.
posted by chuntered inelegantly from a sedentary position at 10:53 PM on April 29, 2020 [12 favorites]
I *almost* rented a house that was trying to be sold to be demolished.
Between the (unknowable) lag in selling the property and the (known) closing lag and (known) permitting lag, I knew I would have at least 4 or 5 months notice to find a new place.
Almost pulled the trigger on it, but it was still an overpriced rental (for the circumstance) and I found a condo closer to work.
Rent it out at -25% of market with known stipulations (it's on the market). Check with your local rental ordinances to make sure this is an ok arrangement in your jurisdiction. Mine is someplace with pretty decent tenant protections and a prohibition on short-term rentals (but was a near-zero vacancy rate and rapidly escalating rents across the board area).
posted by porpoise at 11:27 PM on April 29, 2020 [2 favorites]
Between the (unknowable) lag in selling the property and the (known) closing lag and (known) permitting lag, I knew I would have at least 4 or 5 months notice to find a new place.
Almost pulled the trigger on it, but it was still an overpriced rental (for the circumstance) and I found a condo closer to work.
Rent it out at -25% of market with known stipulations (it's on the market). Check with your local rental ordinances to make sure this is an ok arrangement in your jurisdiction. Mine is someplace with pretty decent tenant protections and a prohibition on short-term rentals (but was a near-zero vacancy rate and rapidly escalating rents across the board area).
posted by porpoise at 11:27 PM on April 29, 2020 [2 favorites]
If you can show it clean and empty you're more likely to have a sale In These Times. At least here in the NE the market is surprisingly still active, but showings and open houses are curtailed. Realtors are able to show empty unoccupied houses, though. An empty house could also be worked on if need be. A realtor will know better what's happening in your market.
posted by Otter_Handler at 2:04 AM on April 30, 2020 [1 favorite]
posted by Otter_Handler at 2:04 AM on April 30, 2020 [1 favorite]
Absolutely find an agent. Ask your friends who they've used and liked. Or ask the neighbors. Ask the agent how many transactions they've handled in the last year; you don't want someone who's doing 100s of deals and will lose your house in the shuffle but you do want someone who is steadily selling. I've been told that 10 percent of agents sell 90% of houses. And how many in that specific area. Ask them how the market is changing now; that will give you some sense of how knowledgeable they are. A good agent will help you prioritize repairs and be realistic about the likely selling price.
posted by postel's law at 4:46 AM on April 30, 2020
posted by postel's law at 4:46 AM on April 30, 2020
Figure out what you want to get out of the sale. Do you just want to walk away and pay off the mortgage, or do you want to recover what you have put into it. Then find a realtor and find out what it could sell for.
As far as the repairs, they should be able to guide you on what would pay off. If the roof is leaking, it will probably need to be repaired before the buyer could get insurance. Cosmetic repairs and carpet might better be handled as an allowance that you would pay to the buyer at closing. Instead of spending money on carpet nobody wants, the purchase price assumes the house will get new flooring but the buyer will pick what they want and you do not pay for it until you get the funds for the sale. There may be a cap on the amount you can do this for and it would sometimes have to be within a total sale price realistic to the current appraisal value.
posted by Short End Of A Wishbone at 5:06 AM on April 30, 2020 [1 favorite]
As far as the repairs, they should be able to guide you on what would pay off. If the roof is leaking, it will probably need to be repaired before the buyer could get insurance. Cosmetic repairs and carpet might better be handled as an allowance that you would pay to the buyer at closing. Instead of spending money on carpet nobody wants, the purchase price assumes the house will get new flooring but the buyer will pick what they want and you do not pay for it until you get the funds for the sale. There may be a cap on the amount you can do this for and it would sometimes have to be within a total sale price realistic to the current appraisal value.
posted by Short End Of A Wishbone at 5:06 AM on April 30, 2020 [1 favorite]
When we were house shopping, we saw a lot of houses where people had priced them as if all the work to fix them up had happened, but in reality the work hadn't been done and those houses weren't worth anything close to what was being asked. So watch out for that; I don't know if those people were poorly advised by their realtor or if that was from their own assessment of values and incorrectly comparing their house to houses in better condition.
I very much agree with the advice above to find a realtor who a) you find ok interpersonally (since you have to work with them) and b) is doing it as a real job and sells lots of houses. There is almost no barrier to entry as a realtor so there are many, many realtors who basically have a hobby job and sell an occasional house here and there.
Around here (in a totally different part of the country), houses appear to still be selling, and supposedly fewer houses are being put on the market because people are delaying moves so supply is limited. So, it may not actually be the worst time to sell, though certainly there are a lot of uncertainties given the overall situation.
posted by Dip Flash at 6:45 AM on April 30, 2020 [1 favorite]
I very much agree with the advice above to find a realtor who a) you find ok interpersonally (since you have to work with them) and b) is doing it as a real job and sells lots of houses. There is almost no barrier to entry as a realtor so there are many, many realtors who basically have a hobby job and sell an occasional house here and there.
Around here (in a totally different part of the country), houses appear to still be selling, and supposedly fewer houses are being put on the market because people are delaying moves so supply is limited. So, it may not actually be the worst time to sell, though certainly there are a lot of uncertainties given the overall situation.
posted by Dip Flash at 6:45 AM on April 30, 2020 [1 favorite]
There is a middle ground between full agent process and the sign on the side of the road ugly house people.
Some of the Real Estate websites are moving in the house flipping business in particular markets. Like Zillow Offers. Probably worth a shot to see if they will make an offer. You won't make quite as much as selling private party but if they do make an offer it will be a fast process.
posted by magnetsphere at 7:09 AM on April 30, 2020 [2 favorites]
Some of the Real Estate websites are moving in the house flipping business in particular markets. Like Zillow Offers. Probably worth a shot to see if they will make an offer. You won't make quite as much as selling private party but if they do make an offer it will be a fast process.
posted by magnetsphere at 7:09 AM on April 30, 2020 [2 favorites]
Like Zillow Offers. Probably worth a shot to see if they will make an offer. You won't make quite as much as selling private party but if they do make an offer it will be a fast process.
Came to suggest this. We looked a ton of houses last year and many were Zillow or company-name-I-forget-but-similar flips. They bought the house, painted, did floors and maybe new appliances and put them up for sale within a month or two. Their asking prices were typically about 20% above the price they bought them for as I recall.
posted by the christopher hundreds at 8:31 AM on April 30, 2020
Came to suggest this. We looked a ton of houses last year and many were Zillow or company-name-I-forget-but-similar flips. They bought the house, painted, did floors and maybe new appliances and put them up for sale within a month or two. Their asking prices were typically about 20% above the price they bought them for as I recall.
posted by the christopher hundreds at 8:31 AM on April 30, 2020
I've sold a house at a less than great time, although it was not as bad as right now.
I want to echo the advice to really set in your mind the lowest price you can accept, and don't share that. Most houses can be sold,* it's a question of what can you get for them. Take into account any real estate fees and other costs.
Which repairs are worth making will depend on your market. If the roof is actively leaking or about to leak, that's really important as moisture will make a sale a million times worse. You can also create an action plan that might go like this:
Right now - start gathering information about costs. Get quotes on the roof and see if there are any carpet places in your area that are open enough for a discussion. When we were selling our quirky weird home (which ended up going to a developer), we did replace some flooring and our discussion was like this "These are the rooms, we will take any ends of rolls that you have in the following three colours, installed any time you have time in this timeframe" -- we ended up with office-grade grey carpet that I actually kind of wish we had in our current home in the areas we have carpet. You can decide if you want to spend the money OR you can have the quotes in hand for buyers.
If you can at all, clean the place up, make it smell nicer, take pictures, assess the roof and the carpet damage, make a decision about what you're going to do. If you're handy and have time and energy, painting a few areas of an empty house can be cheap and pay off well. One trick is to replace shower curtains, a grotty curtain turns people off. Cleaning the windows can help quite a bit. If you don't have time and energy for this I apologize for the suggestions, but this amount of elbow grease can make a big difference to real people who are shopping and is pretty much dirt cheap. (real estate flippers won't care.)
Week two, put the house on the market in both the selling and rental markets - put a rental price you can live with long-term and a selling price with room to negotiate. Since it's empty and show-ready, and you don't live too far away, there's only a loss of your time + gas money in showing the place to renters and you never know. Then whatever arrives first, you can assess.
Then you need a chart showing where you can take a loss and where you have to start compromising. For example, if you have no showings at all on your house, it's not going to sell, so then you might need to start dropping the rent to get a bit of income coming in. If all your offers are below your basement price, same thing. For me, having it kind of mapped out helped me to make decent decisions when we were really, really wanting to get rid of a house that was odd enough that it was going to be a rocky road.
As it turned out, our agent found a buyer that wanted the land and we got a good price. That really was worth the commission because this was a developer he worked with a fair amount, not a guy off the street.
* Now might be an exception which is why I suggest also pursuing the rental market to help with your carrying costs.
posted by warriorqueen at 9:09 AM on April 30, 2020 [1 favorite]
I want to echo the advice to really set in your mind the lowest price you can accept, and don't share that. Most houses can be sold,* it's a question of what can you get for them. Take into account any real estate fees and other costs.
Which repairs are worth making will depend on your market. If the roof is actively leaking or about to leak, that's really important as moisture will make a sale a million times worse. You can also create an action plan that might go like this:
Right now - start gathering information about costs. Get quotes on the roof and see if there are any carpet places in your area that are open enough for a discussion. When we were selling our quirky weird home (which ended up going to a developer), we did replace some flooring and our discussion was like this "These are the rooms, we will take any ends of rolls that you have in the following three colours, installed any time you have time in this timeframe" -- we ended up with office-grade grey carpet that I actually kind of wish we had in our current home in the areas we have carpet. You can decide if you want to spend the money OR you can have the quotes in hand for buyers.
If you can at all, clean the place up, make it smell nicer, take pictures, assess the roof and the carpet damage, make a decision about what you're going to do. If you're handy and have time and energy, painting a few areas of an empty house can be cheap and pay off well. One trick is to replace shower curtains, a grotty curtain turns people off. Cleaning the windows can help quite a bit. If you don't have time and energy for this I apologize for the suggestions, but this amount of elbow grease can make a big difference to real people who are shopping and is pretty much dirt cheap. (real estate flippers won't care.)
Week two, put the house on the market in both the selling and rental markets - put a rental price you can live with long-term and a selling price with room to negotiate. Since it's empty and show-ready, and you don't live too far away, there's only a loss of your time + gas money in showing the place to renters and you never know. Then whatever arrives first, you can assess.
Then you need a chart showing where you can take a loss and where you have to start compromising. For example, if you have no showings at all on your house, it's not going to sell, so then you might need to start dropping the rent to get a bit of income coming in. If all your offers are below your basement price, same thing. For me, having it kind of mapped out helped me to make decent decisions when we were really, really wanting to get rid of a house that was odd enough that it was going to be a rocky road.
As it turned out, our agent found a buyer that wanted the land and we got a good price. That really was worth the commission because this was a developer he worked with a fair amount, not a guy off the street.
* Now might be an exception which is why I suggest also pursuing the rental market to help with your carrying costs.
posted by warriorqueen at 9:09 AM on April 30, 2020 [1 favorite]
I recently needed to sell a house that needed work. I didn't live in the area and had no personal leads for a good real estate agent. What worked for me was to go on Zillow and look at who had actually sold a decent number of houses in that area. I wanted someone who both knew how to sell houses and also knew the local market really well. I took the top set and googled them and narrowed it down to 5-6. I then called and asked some questions and picked two to come to the house and do their presentation. (Might want to do the presentation step virtually these days) I ended up with someone who really knew the local market and local tradespeople. We had a very clear discussion about what she thought was worth doing and what I could afford.
posted by metahawk at 5:22 PM on April 30, 2020 [1 favorite]
posted by metahawk at 5:22 PM on April 30, 2020 [1 favorite]
This thread is closed to new comments.
The biggest decision you need to make is what is the lowest price you will accept. I would not tell my agent that, just keep it in mind for a negotiation. The timing of a sale is a function of price somewhat. The better value you offer, the faster the sale.
As for putting money into it or selling it as is, your agent should have good advice on each item. I put a new roof on mine. The house sold quickly. I have no idea if the new roof helped or if I got the investment back because I did not try to sell it without a new roof.
Good luck!
posted by AugustWest at 9:57 PM on April 29, 2020 [3 favorites]