Flipping, For Sale by Owner, Real Estate Investing, Sell Your House

Everything You Need To Know About Selling Your Home As-Is

WHAT DOES IT MEAN TO SELL AS-IS?

An as-is sale means the homeowner is selling a home in its current state. A buyer should not expect the owner to make repairs or improvements before the sale, but rather accept the home in its present condition.

Some potential buyers who see “as-is” house sales consider it a warning of potential issues down the road.

But others, like investors or wholesalers, see it as an opportunity. People are attracted to as-is homes because buyers and purchasers save money. Sellers can also sell the house quickly and avoid unnecessary stress in the home selling process.

WHY SELL YOUR HOME AS-IS?

There are several reasons why sellers list their homes as-is without making improvements or updates. Perhaps they inherited a home and want to unload and liquidate it fast. Maybe there are too many repairs than the seller can afford. Or maybe they just want to move on with their lives and start looking elsewhere for a fresh start. In any case, an as-is sale typically requires a cash buyer, as certain maintenance or repair issues the house would preclude it from qualifying for a mortgage.

REPAIRS YOU OFTEN MUST MAKE

Your buyer’s financing may depend on you fixing certain serious issues. The lender may ask you to pay for electrical or plumbing issues or a new roof before the buyer gets the loan. If the buyer can’t get a mortgage, they can’t buy your house.

 Other repairs that you may be asked to do include

  • Building code violations
  • Structure defects: foundation, walls, support structures
  • Termite damage
  • Bats or squirrels in an attic
  • Leaking roof
  • Outdated or unsafe electrical wiring
  • Water supply issues, such as a well
  • Electrical systems
  • Mold and mildew
  • Broken pipes or major plumbing

WHO BUYS HOMES AS-IS?

Buyers investing in as-is properties should expect to inherit any problems that may come with a home in need of repairs. A buyer must sign a document that makes it clear that they understand they type of home deal they are getting into. However, the buyer still has legal rights to know the same information that the seller knows when moving forward with the sale. As a result, if there are any known problems, the seller is obligated to disclose them.

WHAT TO KNOW BEFORE SELLING YOUR HOME AS-IS

Even when selling a home as-is, sellers are still required by law to disclose any defects about the house. If a seller purposely withholds known information about the issues regarding the house, they may incur legal liability if the problems surface down the road. Disclosable flaws include lead, sewer damage, sinkholes, and flooding. However, disclosure requirements vary state-to-state, so be sure to check local state laws for necessary disclosure information.

In addition to making sure to disclose all relevant information about the property, as-is home sellers should expect to have to negotiate on the price. Even in an as-is sale, the buyer still has the ability to negotiate the final sale price with a counteroffer. As-is does not mean a buyer will never ask for repairs or compensations after an inspection. In fact, this type of negotiation is typical in all home buying processes.

If you’re considering selling your home as-is, here are some tips to help you make sure everything goes smoothly:

  • Obtain a Pre-listing Inspection

An inspection will tell the seller what they need to know about the house before they sell the house as-is. Getting a pre-listing inspection allows sellers to know what to disclose about the house’s condition and learn everything about the house before selling it. An inspection can help sellers decide what improvements and upgrades to make before putting the home on the market.

Additionally, a pre-listing inspection allows the seller to seek estimates for repairs needed so the seller can properly inform a prospective buyer about what may need to be done to the home. Some buyers will find the most expensive estimate on improvements needed as a bargaining chip for the final sale price. If a seller completes their own estimates, they will be in a better position to counter a buyer’s numbers. This will give the seller better negotiating power over the purchase price.

  • Make a Few Home Improvements Anyway

Cash home buyers are spending a significant amount of money on buying a house as-is house payment. The money that remains for repairs may be limited, particularly if they are real estate investors seeking to make a profit on re-selling the home. Making improvements to a home being sold as-is will result in a higher purchase price for the home, and are likely to cover the costs of the improvements in the first place.

Cash home buyers expect an as is home to need cosmetic fixes. With that said, it may be cost effective to do some minor renovations to improve the curb appeal of the home. Also, buyers are usually turned off from purchasing a home with major structural issues, like plumbing or roof damage. If you do consider making home improvements to an as-is home, just do the important home improvements. Common home improvements for as-is homesales include:

  • Replacing the roof,
  • Updating the electric panel,
  • Installing a new water heater,
  • Addressing any pests, mold, or water damage,
  • Repairing pipes, sewer connection, or septic system, and
  • Updating the HVAC system.

If a seller is willing to do these types of repairs, they are likely to land a higher purchase price at closing. This can help you sell a house quickly. Of course, an as-is seller always has the option to skip renovations altogether if appropriate for their budget and timeline.

  • Try Your Hand at Marketing

Marketing will help sell a house quickly. Doing some research and outreach will help you target the right kind of cash home buyer or investor. Make your listing description attractive. Tell the buyer all the great and accurate things about the home and paint them a picture that they can imagine themselves appreciating.

Rather than focusing on the as-is condition of the home, share about the positive aspects of the property. As-is sales are expected to need improvements, so be sure to discuss things like location, lot size, floor plan, and any unique features that may catch a buyer’s eye. Any of these elements can be great selling points.

And of course, make sure the sale price is reasonable. Do some research on the comparable prices are for your market and price your home accordingly. Recent sales of similar homes in similar neighborhoods will give you a good idea of what to price your home at. In an as-is sale, both the buyer and the seller know that repairs will be necessary. So do not try to up the sale price unreasonably – this will only cause your home to sit on the market unsold.

If you’re considering an as-is homesale so that you’ll sell the house quickly, consider working with 8 Day Home Sale. We’ll make a cash offer to buy your house in as-is condition, no repairs or cleanup needed. We’ll even help you move! Contact us today for a free, fair cash offer – we look forward to the opportunity to work with you Maryland, Washington, DC, and Virginia!

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Taxes

How Property Taxes and Mortgage Interest Affect Yearly Tax Returns

When it comes to owning a house, there are some benefits homeowners may see when they do their annual taxes.  Along with other expenses related to your home that may be deducted, homeowners can deduct the cost of their property taxes and mortgage interest from their federal taxable income.  

Mortgage Interest

Mortgage interest is the amount of money homeowners pay in interest on their mortgage.  Since interest rates vary depending on the terms of each individual mortgage, this number is different for every homeowner, and many rates will change throughout the life of the loan.  When it’s time to prepare annual taxes, the amount of money that was paid in interest on a mortgage can be deducted from total income.

Property Taxes

Property taxes are determined by the county in which you live.  These taxes can include different taxes such as school, and city government taxes, combined into one payment.  The county sets the property tax percent and the amount a homeowner pays depends on the value of their home. For example, if the property tax is 3%, a house worth $100,000 will pay $3,000 per year, while a house valued at $300,000 will pay $9,000.  The taxes paid can vary if a home increases in value, or vice versa.

When you do your taxes, the money you paid for mortgage insurance and property taxes can be deducted from your total taxable income.  If your taxable income is $50,000, and you paid $5,000 in insurance and taxes, you new taxable income is $45,000. The more deductions you have, the lower the taxable income is, and the more money you may potentially receive in a tax refund.  Your accountant will know what can and cannot be deducted, so the best course of action is to keep track of all interest, taxes, and monies spent on your home.

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Investing, Rentals

How to Find Good Tenants

Finding the right tenants in the Maryland location, Virginia location, or Washington DC location is essential to having a good renting experience.  Your property is an asset and you need to be able to trust your tenants to take good care of it.  Approaching the search for tenants in a businesslike way is the key to finding the right people. Here are some tips to help you fill your rental with good tenants.

Know the Law

Every state, town, and county has its own rental laws.  Make sure you understand the laws for the location your property is in.  This will help you create a lease document that is lawful and fair for both you as the landlord, and your tenants.

Select Advertising

Advertising your open property is a must to finding the right tenants, but be selective where you post your listing.  There are sites such as rentals.com or zillow.com that may charge you a fee for your post, but will bring you better results than free sites such as Craigslist.  Put up a sign in the window or lawn of the property, and advertise locally in stores or newspapers. Provide details and the rent to get responses from people who are actually interested.

Application

Always have a rental application asking for names, social security numbers, income, and previous landlord references.  Run a background check on potential tenants. Many renters expect to pay for this, so you can charge a one time fee to do so.

Strong Lease Agreement

Spend the time before you look for tenants drawing up a strong lease agreement that clearly details the responsibilities of both the landlord and the tenants, late rent fees, occupants, and terms for evictions.  Even if something seems obvious, spell it out in the lease.

Set the Bar High

Just because ten people have applied doesn’t mean you have to choose one of them.  Don’t lower your standards for a tenant just to get your property rented. Keep looking until you find a tenant you feel good about.

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Buying a New House, Investing, Sell Your House

Buying/Selling Your House: 1031 Exchange

When you sell your house in the Maryland location, Virginia location, Washington DC location, or Baltimore location, any profits you make are subject to capital gains or recapture taxes.  To avoid paying those taxes, you can reinvest the profits in a new property under 1031 exchange.  To do this correctly, you’ll have to have a properly structured exchange.

There is a timeline for completing this exchange and you have just 45 days to find a property of similar or greater value than the one sold.  You only have 180 days total to complete the purchase of the new property.  This timeline is a bit tight if you want to take your time to shop around.

Like-kind Property

Another restriction on the 1031 exchange is the type of property purchased.  You can’t sell your business property and buy a house, or vice versa.  The property that is sold must be of like-kind to the property purchased.  They don’t have to be exact though.  You could sell a business and buy a business, or sell land and buy an apartment complex.

Debt and Equity

The 1031 exchange needs to be 100% in order to defer the taxes.  This means that the equity or profit from selling the property needs to be reinvested 100%.  If you make $50,000 on the sale of your house, you need to put that full amount back into the new property.  If you owed $200,000 on the property, you need to replace that same amount of debt as well.  You are exchanging the equity and the debt of one property for another.

Hire a Professional

Unless tax law and real estate are areas you considered yourself to be an expert in, you may want to consult a professional when looking at a 1031 exchange.  There are risks involved and if not done properly, you’ll still have to pay the taxes you’re trying to defer.  This is a great option for many people selling and buying a home, but to find out if it’s right for you, take the time to really learn the ins and outs of 1031 exchanges.

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Investing, Rentals

Airbnb vs. Traditional Rental. What Makes Sense for Your Property?

So you have a decision to make on your empty property: are you going to try and make money from renting it out to tenants on a contracted rental basis (traditional rental property), or can you put it on Airbnb and make more money that way? There are benefits to both, but which is better?

Your Time

Firstly with Airbnb, you or someone representing you will have to constantly be back and forth between the property. Whether it is letting new tenants in or clearing up once they have left. If you are not doing this you will need to oversee it so the condition of the property is always left in a good condition for the next visitors. There is also the fact that you will have to constantly check Airbnb and may need to answer questions, you could find yourself at the mercy of the app. With traditional renting you have the chance to speak to your potential tenants, sign a contract and once they are in you will only need to visit the property when a problem arises; you may even do it through an agency, although this can cost you it will also save you time. You will only have to visit the rental property or speak to tenants in the event of something that needs addressing.

Money

Airbnb is a good way of making more money from your property. You might get $1000 a month from renting your property to tenants as a traditional rental property. But if you were able to charge $100 a night for your home on Airbnb, your property would only need to be used for more than 10 nights to make more money, and if you managed to fill near on 3 weeks of the 4 in a month you would make around $2000. With traditional rental properties however, your $1000 is steady income every month, whereas you don’t know if anyone is guaranteed to book through Airbnb, unless you are in a desirable location. The money you make on Airbnb also has to be spent on the utility bills, whereas in traditional renting this is covered. You need to weigh which is the most profitable option depending on the cost of utilities in your area.

Flexibility

With Airbnb you are flexible not only on the rate that you charge but also on the amount your rent your place out. If it is in a location you like to visit, you can use your property at the times it is not rented. You can also change your terms and conditions at any point to suit you.

Occupancy

It will be appealing for most to know that their property is occupied, and they do not have to constantly find tenants. That is why a traditional rental property is the favorable option for many. The competition on Airbnb alone can make it challenging for many to make the money they desire. The problem with tenants in a traditional rental property is the fact that if you have difficult tenants, you might be stuck with them for a long time. The other side of this is Airbnb might leave you with some good, some bad every month.

These are all the elements you will need to weigh up when deciding what to do. It depends on the sort of person you are, if you want to leave the property alone and know your income is constant then traditional might be the way for you to rent your property. Maybe you’re more of a people person, or will be ok with the demands of renting your property out on Airbnb, the pros and cons are there for all to see.

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