Most people selling a property as-is often do so due to emotional or financial distress. When a homeowner finds they can no longer live in the property following the death of a loved one, cannot afford the repairs needed, are in a rush to beat a looming foreclosure or urgently need the cash to meet a large unexpected expense, selling quickly is the most convenient way out.
But selling a home as-is will not automatically lead to a quick transaction conclusion. Selling fast as-is entails taking deliberate steps to get rid of any potential impediments to the process. Here’s a look at some practical tips that can help you do just that.
Full Disclosure
Selling your house as-is means the buyer will take up the property, flaws and all. As the seller, you will not carry out any pre-sale improvements, repairs and renovations. Whether the buyer is an individual or a company like househeroes.com, they will get the house with its problems intact.
An as-is sale has a legal definition in nearly all states. It’s not as simple as a seller handing over the house keys and walking away with a big check. The purchase agreement must explicitly describe the condition of the house in question. The law protects the buyer from waiting to discover the issues after the transaction is concluded.
Ergo, the seller must make all disclosures upfront whereas the buyer is permitted to back out if an inspection finds the state of the property is actually worse than originally stated. To make sure you have all bases covered, obtain a pre-listing inspection. The better armed with the information you are, the less likely of a nasty surprise later on.
Set a Low Listing Price
When people shopping for a property see as-is on a listing, they’ll immediately assume there’s a major problem with the house, the seller is desperate, that they can close the deal with a ridiculously low offer or all of the above. Often, they are correct.
Thanks to these negative preconceptions, you should set your list price lower than the property’s market value if you want to attract interest quickly. To give you an idea, foreclosed houses in St Louis sell for about 37 percent less than similar owner-sold properties. Since someone selling as-is is keen on closing the transaction quickly, it’s not unreasonable to think as-is buyers will expect a similar discount.
You have to be ok with losing out on the thousands of dollars you would otherwise have received if you made some major repairs before selling. A low price doesn’t guarantee the home will go quickly but it certainly increases the chances of that happening.
Make Small Renovations
You are determined to sell the property without performing any major renovation or repair. That doesn’t however mean you shouldn’t do any improvements at all. While you certainly want to dispose of the property quickly, you should target the best possible price you can get for it. A dilapidated house that’s falling apart will attract ridiculously low offers.
If you are not going to do anything else, make sure you carry out some basic work that will increase the property’s curb appeal. It could cost as little as a hundred dollars but can have a substantial impact. Thoroughly clean the house, mow the grass, water the lawn, plant flowers or apply a new coat of paint to the exterior walls. This will draw more interest to the house and pay off via a better sale price.
A home is the average American’s single largest investment. Naturally, you’d want to obtain the maximum possible return when you put it up for sale. Unfortunately, the condition of the house, the state of your finances and safeguarding your emotional wellbeing won’t always make this possible. Selling as-is is sometimes the most viable path to cutting your losses, making a recovery and starting afresh. Follow this tips to conclude your as-is sale fast.
The Federal Housing Administration is making it easier for once-struggling homeowners to qualify for a mortgage backed by the agency.
For borrowers who meet certain requirements, the FHA is trimming to one year the amount of time that homebuyers must wait after a bankruptcy, foreclosure or short sale before they may qualify for a FHA-backed mortgage.
The waiting period had been two years after the completion of a bankruptcy and three years after a foreclosure or a short sale.
But only certain consumers who’ve been in those circumstances will be able to meet the criteria attached to the eased restrictions. Borrowers must be able to show their household income fell by 20 percent or more for at least six months and was tied to unemployment or another event beyond their control. They also must prove they have had at least one hour of approved housing counseling and, among other things, have had 12 months of on-time housing payments.
“FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage,” said FHA Commissioner Carol Galante, in a letter to mortgagees announcing the changes.
FHA-backed mortgages are a popular option for first-time buyers and for consumers with lower credit scores who might not otherwise qualify for a loan backed by Fannie Mae or Freddie Mac. However, the agency has recently increased the fees tied to FHA-backed loans.
Fannie Mae is beginning to implement some changes to its policies regarding distressed homeowners. The institution is now moving towards helping currently distressed homeowners maintain their ability to own a home, by giving them second chances. Intended to support the housing market and incentivize homeowner cooperation with lenders, Fannie Mae will now offer homeowners who grant a “deed-in-lieu of foreclosure” a shorter waiting period before they will be able to qualify for a new Fannie Mae mortgage.
Historically, this waiting period has been at least four years, which is to say that if you, as a Fannie Mae borrower lost your home to foreclosure, you would not be eligibly for another Fannie Mae mortgage for at least four years from the date of foreclosure. Now, however, this waiting period is being reduced by half.
With the new two-year waiting period, homeowners will be required to put at least twenty percent of the purchase price as a down payment, however. This new policy will begin to take effect on July 1 of this year. Fannie Mae is hoping that offering such incentives to these homeowners will be helpful to the country’s recovery as well as setting forth a policy that homeowners who work with lenders are less risky to deal with and better than homeowners who simply abandon their mortgage obligations or fight the lenders for short sales.
Fannie Mae’s policy may be, in part, a reaction to Obama’s HAFA program which is aimed at homeowners who do not qualify for modifications and other foreclosure alternatives. Industry expert are predicting a dramatic increase in “pre-foreclosure” activities this year and next year, which Fannie Mae is hoping to alleviate through its new policy.
Mitra Karimi
Crestico, Inc.
Earlier I wrote about how the federal government was going to institute the Home Affordable Foreclosure Alternatives ("HAFA") program that is aimed at streamlining the short sale process specifically for properties with mortgages owned or guaranteed by Fannie Mae or Freddie Mac.
As it currently stands for most buyers considering short sales, they have had to wait weeks and even months before hearing back from lenders regarding whether or not short sales will be getting approved. HAFA intends to change that. Even though, for the most part, HAFA impacts lenders and homeowners of the subject properties, buyers will also be affected by these new rules.
For example, as a buyer, you will now need some sort of proof of funds in the form of a verification or pre-approval letter, that will need to be provided to the lender within three days of the lender’s receipt of your offer. Additionally, lenders will now be required to approve or deny an offer made on a short sale within 10 business days of receipt. The impact of this is huge! This means no more months of waiting.
Furthermore, buyers will be affected by HAFA in that the new program will require settlement to take place within a reasonable period of time after the offer is made. More specifically, a lender may not require less than 45 days from the date of the sales contract for a closing, without the home seller’s consent. This again will be reducing the total time spent on a "short sale deal."
As a buyer of a short sale, you will also be required to maintain ownership of the property for at least 90 days. This "seasoning" period is intended to avoid "flipping" and inflated prices for these properties. Finally, as a buyer of a short sale property, you will not be able to be related to, have a close personal or business relationship with the seller. Violation of these rules and guidelines may result in the loss of the property as well as other legal ramifications.
All in all, HAFA is hoping to achieve the end result of preventing foreclosures from inundating the market and facilitating the process involved in buying, selling and approving short sales. In doing so, it is hoped that we will be once again on a steady road to recovery. Once the process is streamlined and simplified so sellers, buyers and professionals can work together with greater ease, the real estate market will necessarily begin to grow and experience the health that it once did.
