Selling an Inherited Home (And all the repairs that come with it)
The house has been in the family for a couple generations, built in 1920, and home to several members of the family. Now, the parents have moved on and the property falls into the kid's hands. What to do with it? It has old knob and tube wiring and pretty much should be torn down for new developments but no one's biting. What can they do?
I actually see this a lot. Adult children that have to take care of their parent's estate and although they want a profit from it, the work needed for a traditional sale seems overwhelming.
This is real property, just off the highway in amongst homes built 50 years after it was constructed. These homes surrounding the 1920s property were built in the 1970s and 1980s so even the cute, historical design doesn't really fit into the neighborhood. Should the owners sell as-is? The problem with this is that most lenders, well, probably all, won't loan on a house that is not up to code. We're talking about $20,000 in new electrical work here. The plumbing needs help although not completely redone. Each room needs some love and there's an outside door that's been replaced with an interior door. Needless to say, it's seen its fair share of weather and anyone could put a foot through it at this point it's so rotten. The owners have the house listed for $460,000. In that market, it may be a fine price but not for its state. It needs about $100,000 of work just to make it habitable. So should they sell for $360,000? I mean, the appraisal may not even come in over $400K.
The owners are definitely in a pickle. They need to sell the property, they probably need the profits to care for their parents or other expenses but are they willing to put in the time, money and effort to bring it up to livable standards just so they can sell it?
I think this is why it was listed as a development property. The agent saw this lot as a buildable, maybe even a subdivided option, not as a single family home for a nice, little family.
However, they just accepted an offer. A family offered $430,000 contingent on their home selling and of course, inspection and financing. However, after the revelation of the wiring, the family cannot obtain financing until it's fixed. And the owner may not want to deal with all the repairs that are needed.
The owner can then decide to reject the inspection report and sell to a developer or cash buyer, or accept the terms and complete all the repairs. There really is no other option. Even if they reject it and stay on the market, the next buyer will probably want the same repairs. The owner has to weigh the costs of the repairs versus simply selling as it and letting it go.
This is where I come in. This is exactly what I do and a really good argument for cash home buyers. Yes, I usually won't pay the full asking price because I understand the work that will need to go into the property once I take ownership. But, there is something to simply handing over the keys, no questions asked, and receiving a chunk of cash. Sometimes, letting it go for a little less money is really the best option.
We'll see where this goes, but for so many agents that think that cash buyers are a scam, this is where these services are really needed. This property is almost impossible to sell otherwise and in this case, a cash buyer investor really makes a lot of sense.
Related Information:
What happens when the inspection shows unpermitted work?
How to get insurance on an older home?
Compare Selling Options for Your Home
When should you hold out for a higher price and when to reduce
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