In today’s seller’s market, buyers are opting to purchase homes as-is.
Brian Rudderow, a real estate investor who flips properties in New Jersey, Florida, Colorado and Pennsylvania, recently listed a Jersey home that needed around $30,000 worth of repairs. It had an all-cash offer in 24 hours.
“The market is extremely overinflated right now and sellers can get away with listing homes that need work while still selling them at full market value,” he wrote to Inman. “It’s pretty ridiculous what’s going on but that’s the state of what we’re dealing with. If sellers can simply clean up their house and make it look semi-livable it will sell fast with no issues.”
While there have been early signs of cooling, the housing market is still overly competitive. In June, Redfin reported that 65 percent of offers written by their agents faced bidding wars. That same month, the National Association of Realtors found that the median existing-home price in the U.S. hit $363,300, the highest on record and the 112th month straight of year-over-year home price gains.
Because homes are flying off the market for outlandish prices, sellers aren’t putting much TLC into their properties before listing them.
Erin Madden, a Realtor in Boise, Idaho, told Inman that most sellers are skipping repairs because they know they’ll get at or over the asking price without making them.
“The market here is such that the median home value has increased 40 percent year over year due to a critically low inventory and a mass migration of people from surrounding states,” Madden wrote to Inman. “The need to stage a home is minimal to none, the need for cosmetic repairs is non-existent. Buyers are almost forced to overlook cosmetic and minor issues when trying to purchase homes.”
Aaron Mighty, founder of Florida-based Mighty Realty, recently convinced a client to list their townhouse without making $10,000 worth of repairs. While the client was hesitant at first, the home received multiple offers the first weekend it was on the market.
“We had planned to get the carpets cleaned during that first weekend, too, but canceled that after the showings started coming in,” he told Inman over email. “New townhome construction can actually be purchased just a few blocks away starting at $10,000 more so that goes to show that buyers aren’t deterred by an older home either. They just want a home period!”
In addition to buying homes as-is, Madden told Inman that buyers are waiving inspections or signing contracts that state the inspection is for the buyer’s information only, a trend that has been solidifying across the country for several months.
Buyers are even forfeiting appraisals, according to Redfin and agents who spoke with Inman.
“Lenders require an appraisal, so when buyers waive that contingency, it just means that they promise to pay the difference if the appraisal is lower than their offer,” a real estate professional told the Post. “If they can’t pay the cash, they can lose their earnest money deposit. Sometimes the buyers will write in a specific amount that they will pay to make up the gap, such as up to $10,000.”
This seller’s market won’t last forever
Looking ahead, the housing market has been showing early signs of cooling, which means sky-high prices will eventually float back down to earth. According to a recent report by the U.S. Census Bureau, sales of newly built homes in June were the lowest since the onset of the pandemic.
While sellers can get away with not doing cosmetic repairs right now, Madden warns that the bigger maintenance issues, like roof replacements or leaks, should be addressed.
Not only can bigger repairs chip away at the sale price, but a seller runs the risk of losing time on the market if the prospective buyer terminates the deal.
“At this point, as we start to cool down, if you lose time on market because someone does an inspection and decides they don’t want to take on that cost, then you could be shooting yourself in the foot,” Madden said.
Rick Abbiati, owner of Colony Property Investments, LLC, explained that while sellers can get away with doing the bare minimum, they should put some thought into the decision because repairs could mean a higher return on investment.
“Yes the market is hot, however if you want your property to be at the top of the pile in terms of consideration, then make it nice,” he said. “Regardless of market temperature, when a buyer is looking at one home that is move-in ready and one that is a dump, they will pick the move-in ready home most of the time.”
Current listings are lacking visuals
Not only are sellers ditching repairs, but there isn’t much effort being put into the visual representation of listings either.
A recent study by BoxBrownie, a real estate image enhancement company, revealed that the majority of listings on the market right now lack good visual marketing.
As Inman previously reported, the study looked at over 25,000 U.S. listings on Zillow and realtor.com from March 2021 to June 2021 and found that 94 percent of them didn’t offer virtual tours and only 16 percent included a floor plan.
“It’s fairly safe to assume that right now agents are cutting corners on visual marketing for listings because of the speed of sales right now,” BoxBrownie general manager Peter Schravemade said.
But listings that focus on virtual marketing are bound to catch more eyes than those that don’t, regardless of the state of the market.
“We have found that buyers are more receptive to listings when they have professional photography, virtual tours, and floor plans,” said Vanessa Bergmark, CEO of California-based Red Oak Realty, in a statement. “Homes that offer these features to prospective buyers almost always sell quicker than those that do not.”