How to Sell a House As-Is in Houston

How to Sell My House As Is in Houston

Get Your Ask in the Fastest Way to Sell Your Houston Home As-Is

What "As-Is" Means Under a Houston Real Estate Contract

"As-is" clauses in Texas real estate contracts mean the seller conveys the property in its current condition, with all the faults it may have at that point in time. The terms do not cancel the seller's obligation to his buyers to make an honest and complete disclosure of the property's condition. When a buyer signs a Houston home purchase contract, it's likely he'll include a provision allowing him to inspect the roof, foundation, plumbing, electrical system, HVAC equipment, grading and drainage, and flood potential. If he pays for the inspections (or if the seller agrees to do them at his expense), he'll be given a specific period of time, often 5-10 days, within which he can terminate the deal, owing the seller nothing.

When To Sell Your Houston Home As-Is

The most common situations where a seller wants to sell his Houston house as-is include:

• Inherited property
• Recently damaged by fire or storm
• Deferred maintenance on exterior items and home systems
• Code issues

Other than repair needs, the other key issue for home sellers deciding how to sell their properties as-is has to do with the most important aspect of their sale. Buyers of all kinds:

• Do want the highest possible net proceeds from the sale of the property.
• Do want the sale to close quickly.
• Have some say over the process, but can ultimately not control the results.

Texas Disclosure Duty

Sellers have disclosure responsibilities to prospective buyers of their Houston property. Specifically, they must provide the buyer with a Seller's Disclosure Notice, a form provided by the Texas Real Estate Commission (TREC), that generally covers any known conditions like flooding, structural movement, roof leaks, termites, old repairs, lawsuits, vacant notice, unpaid utilities, and a wide range of other miscellaneous information that might be relevant and important to potential home buyers.

Choosing a Route to Sell Your As-Is House

While there are more than three methods for selling an as-is home, here are three practical routes available to Houston home sellers today. Remember: The value of any prep work you do (e.g., painting, decluttering, staging, mowing the yard, removing trash or pet messes, and so on) will depend on which of these sale routes you're taking. What may help your home grab interest from prospective buyers on the Multiple Listing Service (MLS) won't help much with a local demolition company buying your vacant house at a discount.

The MLS Listing Route

This route usually fits simple real estate transactions involving houses that are financeable and safe to show to parties who've come legally with an earnest money deposit. Such homes are more likely to draw interest from multiple buyers, who'll want to inspect and enjoy a period of time (usually 5-10 days) within which to terminate the deal (with no obligation to the seller) following his initial inspection of the property. The MLS listing process usually involves:

• Obtaining photos, making copies of the deed and key documents, and listing the property on the MLS.
• Showings, usually with a real estate agent.
• Showings and option period.
• Inspection and appraisal.
• Many repair credits, full repair credits, or seller concessions of up to 3% or more.

The cost is the commissions paid to the listing agent and the buyer's agent. The one-time costs are likely in the range of about 5-6% of the agreed purchase price if both agents are paid fees from the seller's proceeds, but your net proceeds (i.e., cash in hand after all the various fees and offsets are considered) will depend on multiple factors, including title fees, real estate taxes, existing mortgage payoffs, concessions, seller and/or other credits, and the purchase price.

The Direct Cash Buyer Route

This route is usually best suited when a major repair project is necessary, when you have a tight move date, when there's an abundance of inherited stuff that you don't care to sort through, when you have existing tenants, or when you'd rather not take the time to prepare your house for showings and so on. You'll find a cash buyer's offer for your as-is Houston property to be somewhat lower than the going rate today since the buyer has to factor in the cost of the repairs he'll have to do. But selling directly to a cash buyer removes the need for you to deal with additional responsibilities and obligations, and the buyer can usually close faster than a regular buyer who requires financing and compliance with real estate lender guidelines. Don't accept any cash offer until you have verified the following:

• Proof that the buyer has the funds available (proof of funds).
• Proof that the buyer has selected and is working with a title company to "close" the deal.
• Agreed-upon close of escrow date.
• Written proof that the buyer assumes the contract and assignment clause.
• Apportionment of all real estate-related fees.

As such, it's important to make sure you're getting a "clean" commitment from the buyer just like you would with any other real estate deal.

The For Sale By Owner Route

Being a FSBO (for sale by owner) gives you direct control over everything – the price you want to sell at, who has access to your house, and all the subsequent negotiation. But the catch is, you're also responsible for everything – setting the price, advertising the property, screening the people who come and inquire, preparing the disclosures, dealing with the contracts and obligations involved, getting a title insurance policy, and handling disputes. This work can be easier if you have a ready buyer in mind and/or a local investor, but it's harder when condition issues of your property have limited your target audience and require some sort of lender approval or inspection.

Seven Steps to Sell Your As-Is Property in Houston

As with any property, you'll want to follow the same process to sell your as-is Houston home and know all of the relevant facts before making an offer. It's important to treat the process of selling an as-is property with the same seriousness as selling a property in move-in condition. The seven steps are as follows:

1. Photograph the Condition Before You Clean Up – Before you start to dust off your furniture, take a few minutes to snap some pictures of your home that reveal its true condition. These are far more useful than merely talking about the current state of your home.
2. Gather and Organize All the Necessary Documents – As discussed in an earlier section, you'll need to gather all the hard facts, including your payoff balance, property taxes, any outstanding HOA obligations, insurance claims, repair invoices, permits and traffic tickets, existing leases and rental agreements, outstanding court cases or probate papers, and the status of your utilities. All of these will provide important context for any potential buyer and should be put together in a file for easy reference.
3. Complete the Required Disclosures – Create an honest disclosure to potential buyers that accurately describes the property's condition. If there are major defects or issues with the property, attach copies of repair price estimates or professional reports showing the current status of certain items.
4. Estimate the Repair Gap – Get a contractor's opinion of what it would cost to fix up your home and make it livable. Focus on the high-cost items first, such as the roof, foundation, electrical and plumbing systems, HVAC equipment and ducts, drainage systems, and sheetrock damage. This way you have an accurate idea of the amount that will need to be spent before you can sell your property in move-in condition.
5. Compare the Offers You Receive – Subtract the different real estate commissions, credit offered by the buyer, and repair costs from all the offers you receive. Also consider the amount of money you're going to lose by holding the property, your ongoing personal property taxes for the time it's on the market, anticipated relocation costs, and the risk the deal could fall through and you'd have to start over—and compare that with the price of a fast sale.
6. Create a Contract That Matches Your Property – Based upon the condition of your house, select proper contract terms. This includes an appropriate option period, financing contingency period, if an appraisal is desirable, if the buyer wants to assign the contract to a third party, whether or not title objections can be raised by the buyer, and a closing date that everyone can agree on.
7. Close the Deal Through a Title Company – Once you've accepted a buyer's offer, proceed to close through a title insurance company. This company will handle payment of the payoff balance, pay off any remaining liens, facilitate the signing of the deed, and record the transaction with county officials. They'll also handle proration of property taxes and other charges and disburse the proper amount of funds to you after the transaction.

Houston Issues That May Affect Your Home's Value

In Houston, many potential buyers and their agents will closely examine your home's flood history and drainage patterns, age of roof and foundation on expansive clay soils, condition of the air conditioners, and whether or not all permits have been pulled for any renovations. Be prepared for additional scrutiny if your house is located in close proximity to a bayou—Brays, Buffalo, Greens, White Oak, or Sims, for example—which may raise questions about potential flood damage.

Depending on your home's location and condition, a different type of buyer may be attracted to your listing. A house in a good school zone may attract owner-occupants; an empty lot in a neighborhood undergoing redevelopment may attract a builder; a home with title defects or unpaid taxes may attract a specialist or investor; or a residence with existing tenants could appeal to a property management company.

Comparing Offers – Use a Net Sheet

When comparing the cash offer you received to your net proceeds should you decide to list your property for sale, subtract all expenses that you will be responsible for that are associated with putting your house on the market and keeping it there until it sells (referred to as selling expenses). Starting with your sale price if you decide to go ahead with the listing, subtract real estate commissions, credit your seller is willing to provide to the buyer, repair costs, and monthly holding costs (including interest on mortgage assumed by buyer, taxes, insurance, utility costs, any required association assessments or other fees, cleanout and staging costs), plus the potential loss should the contract fall through and you have to start over. Then compare closing dates and how certain or unsure you want to be of the sale proceeds at that date.

Some situations are well suited to the as-is sale route, while others will be better suited for a traditional for-sale-by-owner or listing arrangement through a real estate brokerage. The as-is route is best suited for a property that is underwater or in default; when repair costs exceed available cash or equity; when the home has been inherited and heir/beneficiaries are not readily available to make decisions; or when sellers have little time to sell and go through the process of repairs and listing as their relocation date is approaching or fixed. As-is is also appropriate when the only repairs needed are surface-level or cosmetic, and your home is in a neighborhood with a strong retail market to attract buyers. That said, you may not find the as-is path to be the best fit, for example, when you have time to make repairs that can add value to your house, your home is not in need of significant exterior or structural repairs, and there are strong retail market factors that can bring a higher net even after paying for repair costs, if needed. In such a scenario, completing repairs and listing on the MLS may bring you a higher net than selling it as-is.

Recommended Documents

Gathering up the following documents will help streamline the transaction process if you choose the as-is route:

• Government-issued photo ID and power of attorney, if applicable.
• Mortgage payoff figures, tax information, and/or any mandatory HOA fees.
• Seller's Disclosure Notice and any optional flood insurance, roof, foundation, termite, and/or mold reports.
• Repair bids, repair/sale invoices, repair claim letters, warranties, permits, and receipts.
• Probate court documents, divorce decree, trust documents, or estate planning documents, if applicable.
• Lease, deposit, notice to vacate, and/or rent ledger documents, if applicable.

Final Thoughts

Remember that selling as-is refers to the contract strategy, not necessarily permission to hide or ignore known deficiencies or damage. Opt for a listing price that realistically takes into consideration your property's as-is condition and aim to compare offers by looking at net proceeds alone rather than gross price.

If speed is the name of the game, request a written cash offer and look at the net sheet right away to compare against offers you can expect from a real estate brokerage listing in the MLS. If you're looking for a higher net, you should enlist the help of a qualified real estate agent in Houston who has extensive experience with the heavy repair volumes that characterize many of the city's as-is properties. He or she can provide you with a realistic range based on your house type and neighborhood that will allow you to proceed confidently.

Sources and related reading

• Seller's Disclosure Notice