Did you recently receive a final notice from your bank or lender saying they’re going to start the foreclosure process for your property? If you missed several payments out of negligence but have the capacity to pay your outstanding payables, you might still be able to work out something with your bank or lender.
On the other hand, if you’re low on cash and you recently received a foreclosure notice, you’ll have to start thinking of ways to sell your home as fast as you can at the highest price possible. You have to carefully map out your options and promptly look for any opportunities that come up. To help you out, here are some tips on how to sell your distressed home:
Find Out Your Property’s Value
Selling a distressed property is very much like selling a standard home. The main difference is that you need to sell a distressed property as quickly as you can. It’s a given that you’d be selling the home at a loss, but you wouldn’t want anyone to take advantage of your situation.
One of the important things that you have to do if you need to sell a distressed home is to figure out the market value of your home. You need to price your property low enough so you can attract as many qualified buyers as possible. However, you wouldn’t want to sell for too low because you’d still want to make the most of your property’s market value.
Here are some of the accepted methods of finding out the market value of your property:
- Do Comparative Analysis
The most common way of determining the market value of your property is by comparing it with the market value of properties within the vicinity of your neighborhood. You should check out properties which have a similar land area and features.
The properties that you compare should be located in the same street or same neighborhood as yours. This is the standard practice of appraisal companies and bank appraisers since properties in the same street or neighborhood as yours would most likely have a similar or comparable value. Keep in mind that the properties you compare shouldn’t only be in the same street and neighborhood as your home. They should also have similar or comparable features and attributes.
- Use Online Valuation Tools
You can also use the help of Automated Valuation Models (AVMs) to get an estimate of the market value of your distressed home. These tools would ask you to type in the specific address of your home and its basic features and attributes.
Most real estate listing websites have their own built-in valuation tools. In fact, the prices that you see on their listings are estimates generated by their automated valuation tools. The main advantage of using AVMs is the fact that the estimates are automatically updated when someone submits an offer for a property or if one is sold in your vicinity. However, some stand-alone valuation tools aren’t updated that often, those mostly rely on market estimates which may be less accurate.
- Hire Appraisal Services
If you don’t agree with the numbers that you get from AVMs, you can also hire the services of an appraisal firm. Appraisers are professionals who have technical and financial training to determine the value of real estate property.
An appraiser will have to see the property to make a proper examination. They would also carry out market research on comps sold, mortgaged, or foreclosed in your area most recently. An appraiser’s estimate is accepted by banks for mortgage loan applications, but do know that appraisers charge a fee for their services.
Sell As-is Or Do Some Repairs
The next set of tips are about whether you should sell your distressed home as-is or whether you should still undertake some repairs. If you’ve been constrained to sell your distressed home because of recent business reversals, it’s possible that your home is still in a good state. However, if you’re selling a distressed home that has been neglected for quite some time, then it’s highly likely that it’s no longer in a good state and won’t fetch a price anywhere near its estimated market value.
Here are some of the factors that you need to consider before you decide to do some more repairs or just sell it as-is.
- How Much Time Do You Have
You should sell as soon as possible regardless of the state of your distressed home if you’re facing a looming foreclosure or bankruptcy proceedings. If your lender has already made the move to foreclose your home, then you might not have more than a couple of weeks to a few months left.
On the other hand, if your lender hasn’t made its move yet even though they’ve already sent you their final letters, you may still have some time to work on repairs to improve the sale price of your distressed home.
- Conduct Full Property Inspection
Appraisers would most likely give out their estimate based on what they see when they visit your home, plus the market numbers. However, there might be issues in your distressed home that they might have missed such as structural damages in hard-to-see areas, like the foundation and roof beams.
You should carry out a full technical inspection of your property if you think you still have the time to do it and you have some cash to pay for the consulting engineer. A full property inspection will give you a complete picture of the state of your property beyond what can be seen by the appraiser.
- Compute the Estimated Repair Value
You should also find out the estimated price of the distressed home, should you undertake repairs before you eventually sell it. This value is called the property’s After Repair Value (ARV). If there’s going to be a substantial amount after you deduct the cost of repairs from the estimated ARV, then it’s still worth doing the repairs unless you don’t have much time left.
Finding Buyers And Selling Fast
There are many different kinds of direct buyers, brokers, agents, and auction platforms which can help you sell your distressed home as quickly as possible. However, you still have to understand how most of these real estate pros typically conduct their business.
7. Sell To Cash Buyers
If you’re selling your distressed home because you’re going through financial hardships or there’s a looming foreclosure, selling to mortgage buyers may not be your best bet. The standard home-buying process typically takes at least three months to complete. Some distressed home sellers might not have this much time before their property is foreclosed by the bank or lender.
If you’re selling your distressed home because it’s in a state of disrepair, selling to mortgage buyers may not be viable for you, either. The mortgage buyer will most likely apply for a loan mortgage with their own bank who will, in turn, send their appraiser to inspect the property. The bank will most likely require the buyer to fix the damages before they approve the loan. Your buyer, of course, won’t push through unless you do the repairs.
In this instance, your best bet would be to sell to a cash buyer. This can significantly shorten the buying process because they won’t have to go through the usual and tedious due diligence and credit checks that banks will have to do on mortgage applicants.
8. Ask Agents Who They Know Investors
As a homeowner, you’d still want to sell your home for as much as it can fetch in the market, even if you know you’re already selling a distressed property. The alternative for you would be to ask real estate agents if they know of any real estate investors. These are people who are willing and able to buy properties and pay in cash. Some of them don’t mind buying properties that still require considerable repair work before they are leased or rented to other people.
Real estate investors aren’t looking to buy your property to make it into their home. They’re buying it as an investment, with hopes of profiting from the property when its value goes up after a couple of years. Another plus is that investors who can pay in cash won’t need to take out a mortgage from the bank. This shortens the buying process by a few weeks.
There are different ways for you to sell distressed homes as soon as possible without veering too low from the fair market value. If you don’t want to sell your property lower than it should be, You can use comparative analysis, automated valuation tools, or you can hire an appraiser. You should decide whether to do some repairs or sell as-is. Look for buyers who can pay in cash to shorten the buying process. Mortgage buyers usually need more time before they can close. You have to come up with a plan and act fast before your lender forecloses on your distressed home.