How to sell a money pit house?
What are the 4 best ways to sell a problem money pit house today?
The money goes in and in and in……
Here are the best 4 ways to sell your money pit property.
1. The first choice is try to sell to a retail home buyer
- The first choice is try to sell to a retail home buyer and try and get more of your money back or sell “as is” to a cash buyer.
Selling retail sounds good on paper but in real life there are some major issues. Finding a retail home buyer who wants a fixer upper house is not easy.
- They need money for the down payment and to fix the home.
- They also want to do work before they can move into the property.
- If they can get a loan for the property, is a major problem. The property may not qualify for the FHA or VA loans.
- After the inspections are done, the retail buyers most often ask for repairs to be made or a concession on the price. The lender could also make issues; for example, the pest report be cleared before closing.
- Retail home buyers are more likely to take you to court if they feel you cheated them.
- If the property sellers are not open and disclose all the issues to the home buyer the sellers could be liable for a large settlement.
The true cost of selling retail may not be known for years. They can sue a long time after closing. Selling a money pit property to a home owner is not really putting the problem behind you. It is like that sword of Damocles hanging over you.
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2. Selling to an “as is” cash buyer
Selling to an “as is” cash buyer can be a good alternative. Many home sellers soon find out that not all cash buyers are the same. First, the corporation house buyers have rules on what they can buy. Most heavy repair homes do not qualify. Also corporations as we know have lawyers on staff. It may be wise to stay away from corporations when selling this type of property. Find a Sacramento “as is” cash buyer
3. The local house flipper that buys ugly homes
The local house flipper that buys ugly homes is a good “as is” home buyer. They generally pay the lowest price because they will do all the repairs and resell the house for a profit. That quick turnaround business model only works if they can buy the property for cheap. And a money pit house will be very cheap. Check out tips for selling a fixer upper house for more insights.
4. The other “as is” cash buyer is a real estate investor.
The other “as is” cash buyer is a real estate investor. They want to buy a value added property and make the repairs to rent out. These cash buyers can pay more because their time horizon is much longer. They are also looking at the tax benefits of real estate ownership. If they earn a large income they can use real estate to lower their current taxable income. These “as is” cash investment buyers generally pay the most in any given real estate market. The We Buy Houses in Sacramento is a good way to sell your property in “as is” Condition.
I’ve been working with frustrated home sellers for a long time now. The quick and easy “as is”, no clean up, no showing, no commission, all cash sale to real estate investors is by far the best way to sell a money pit property.
Our easy three step process will get your real estate sold stress free.
1. Fill out the form for a free property valuation
2. Receive a no obligation offer
3. Verify and close the sale
Now that is an easy, no hassle, top dollar cash sale of your property.
Take the first step and get your free property valuation now.
What is a money pit house?
Money pit homes are not as fun as the money pit movie. There are two types of money pit houses. The first is well-known for the house keeps having major repair issues. The house just reveals more and more costly problems to fix until it costs much more than the property is worth to fix. The next type of money pit properties is like a vampire. It sucks money out every month. The owners don’t realize how bad the problem is. The Sacramento housing market can have a few types of buyers for this type of property.
Either money pit property is unpleasant to own. Neither one will create wealth. And both create one of the most difficult decisions we have to make. Cut our losses and get rid of the money pit property and move on.
The story behind the money pit movie house?
The actual house based in the money pit movie Christina and Rich Makowsky in 2002 purchased the house for $2,125,000. The couple told the New York Times in 2014, “We didn’t realize how bad it was, the house was falling apart when you went from room to room.” They invested $5.9 million in renovations. The 14,000 square foot home is situated on 5.4 acres in Lattingtown, New York on Feeks Lane. The Federal-style, three-story home was built c.1898 and purchased by Christina and Rich Makowsky. The couple told the New York Times in 2014, “We didn’t realize how bad it was, the house was falling…”
To finish the story the Makowskys decided to list the house in 2014, they felt justified in asking for the purchase price of $12.5 million. No buyers where interested at at the $12.5 million and after many price cuts for five years. They sold it for $3.5 million. With nearly $6 million spent on renovations, plus the home’s $2.1 million price, the sellers have a 4.5 million dollar lost on the property. That is a real money pit house.
What are the hallmarks of a money pit house?
Our definition of a money pit house is expensive major repairs to make the house functional. A property owner can spend a ton of money to improve a property and it is a great investment. But having to replace the electrical system or plumbing issues is very costly and just makes the house livable. This is a functional cost not a home improvement. If the roof leaks, the basement has mold, the electrical system is outdated, the water pipes are corroded, the HVAC system is not working, and the house has several other cosmetic and structural issues you have a money pit house.
Many times the owner of a money pit house inherited the property and sometimes the property must go into probate which adds to the cost of the house before they can sell the probate property.
One of the biggest surprises to a money pit home owner is that repairing somethings cost much more than it cost to build new. For example replacing the wiring of a house can cost 2 to 3 times more than the cost to install new wiring. And that is not adding in the cost to fix the damage to the walls and other areas the rewiring caused.
One sad fact is a true money pit house could be worth less than the land it sits on. This is because the cost to tear down the building and dumping costs would have to be subtracted from the value of the land. On the plus side, there could be some permit savings versus a non-developed land. But the cost to dispose of the old building could also go sky high if there is some hazardous waste like asbestos. Coming to the realization that the true value of a money pit is dramatically lower than anticipated is one of the biggest heart breaks of owning a money pit property.
How to know you have a money pit house?
One bright sign is that not all money pit homes are that worthless. Some money pit properties realize only a 10% to 50% negative value. In other words, when all the money is spent there is a negative value on the property. A sample to illustrate this is buying a house for $100,000 as a fixer, understanding that the market value of repaired homes in the area is $150,000. You think it will cost $50,000 to fix. But when the real cost comes to past the cost was $100,000. This money pit property cost $200,000 but its value is only $150,000. If this is where you want to live, no problem, just enjoy the home and in time the property value could raise. But if this is an investment property, then that is a $50,000 cost of experience.
How to lower the cost of owning a money pit house?
The key to saving your money with a money pit property is understanding the numbers. Run the numbers and cut your losses as soon as possible. Cutting your losses and moving on is the wisest move with a money pit property.
What are the 10 warning signs of a money pit property?
Bye the way a home inspection report should find all these issues. So before you buy a home that looks old and in poor condition get a home inspection. And if you are buying a newer home that looks good still get a home inspection. Check out How important are home inspections to a home buyer?
1 Foundation issues
1 Foundation issues are one of the most concerning problems.
Check for cracks, bowed walls and shifting foundations. If any of these issues are present, bring in a structural engineer or a foundation specialty service. Also get quotes from a few specialist contractors to address foundation issues. Understand the numbers before you buy or decide if it is worth investing in this type of major repair.
2 Sloping floors
2 Sloping floors are another sign of structural problems. The golf ball test is a good way to see how bad the problem is. Place the ball on the floor and see if it rolls in one direction or another and how fast it rolls. The faster it rolls, the bigger the problem.
Houses do shift somewhat as they age. But the less even the floors are, the greater the cause for concern. Sloping floors could be a framing, joists, or subflooring problem or with a slab house could indicate a foundation problem.
3 Warped walls
3 Warped walls are another indication of problems. Warping walls could be a warning sign that a home may have a moisture problem. Warping walls could also indicate more foundation issues. Find the real problem before beginning any repairs.
This is how many money pit projects go wrong. The owners see a problem and start fixing it before they understand the full nature of the problem. Imagine fixing a wall, only to find out later that it was a foundation or other structural issue. All the money spent could be for nothing or worst it may have to be torn down to fix the real problem, then rebuilt.
4 Stuck windows and doors
4 Stuck windows and doors can be a small problem or indications of a major problem. Find the real problem before assuming it is a little issue. They could have warped from moisture. How did the moisture get in? Could the structure have shifted? Find the real cause and understand the true cost of the problem.
5 Poor drainage
5 Poor drainage can be a sign of poor maintenance or major issues. The ground around a house should slope away from it. This way the water drains away from the structure. Poor drainage can create moisture issues, foundation problems, mold troubles and a host of other troubles.
6 Roof problems
6 Roof problems can be a simple patch job or destroy the value of a home. Replacing the roof costs double or triple if there is damage to the sheathing, trusses, beams, and rafters. And if there is mold and other moisture issues the money to fix these issues can be a money pit by themselves.
7 Electrical problems
7 Electrical problems are legendary to money pit houses. Electrical issues rarely stay contained to a small area. A licensed electrician is the only way to fix these problems. They have the experience and training to deal with all the issues. Licensed electricians are not cheap. Electrical problems are not cheap. If the electrical problems are the only problem with the property, maybe it is not a money pit. But if it is one of the problems, than the likelihood of this property becoming a money pit is almost guaranteed.
8 Plumbing problems
8 Plumbing problems are the same as electrical problems. Use a licensed plumber and understand the cost of the entire plumbing project up front before starting work. If there are electrical and plumbing problems, then this is a money pit property.
9 Termite damage
9 Termite damage, if clearly understood can be managed. But if the termite damage is unknown, this can become a money pit house very quickly. Do not stop investigating until the full extent of the problem is known before beginning the work.
10 Understand government issues
10 Understand government issues or face the real chance of the house becoming a money pit. Government permits could be a couple hundred dollars to tens of thousands of dollars. Or even no permits given which could stop all work on the property. Also, if the property is in an historic or other designation area, there could be many rules on what and how the repairs could be made. The cost of not understanding government issues can not only create a money pit home but maybe an unsellable property.
Time to cut your losses with a money pit property?
Our easy three step process will get your real estate sold stress free.
1. Fill out the form for a free property valuation
2. Receive a no obligation offer
3. Verify and close the sale
Now that is an easy, no hassle, top dollar cash sale of your property.
Take the first step and get your free property valuation now.
Can a hoarder house become a money pit house?
There are two main impacts of hoarding on the property value. The first consequence is damage to the house. The second impact of hoarding on the property value is who will buy a hoarder’s property? Check out The Impact of Hoarding on the Property Value article
Sell Your Hoarder House the Best Fair Price
Is it worth your time to make some of the repairs?
You can get a free resource that can help you figure out the condition and cost to fix up your house.