When Is It Ok To Sell Your House At A Discount?

Published: August 4, 2016 at 7:03 pm Updated: August 8, 2016 at 10:29 pm
Need Money for Surgery

Most home sales are of the traditional variety, between one family and another. When you need to move fast, however, selling below market value can guarantee a quick turnaround without many of the hassles that accompany retail sales.

In this type of sale it is usually an investor who purchases a property for cash with the purpose of flipping it or renting it out. Investors tend to act fast as there is no need to wait to secure financing, preferring to expedite a transaction in favor of competitive pricing. However, this comes with a downside: working with an investor means sacrificing cash for speed. You’ll sell for less, but can walk away with cash in your pocket in a matter of days.

Selling to for less than market value is not ideal. However, under the right circumstances, settling for less can be a life saver, literally.

You Need Cash Now

Whatever the reason, you need cash now, and waiting for a traditional buyer isn’t in your time line. Maybe it’s for medical bills, an upcoming surgery, or an unforeseen personal expense you don’t have the savings to handle. Or, perhaps you’ve been unable to pay your mortgage or your property taxes and a possible foreclosure is looming. Rather than allowing the bank to take your home, a lower price in exchange for a fast sale can be beneficial.

You Can’t Afford Repair Costs

As your property ages and expenses mount, you may find yourself in a position in which repair costs are too expensive for your budget. Things like a new roof, a broken HVAC system, extensive termite damage, or dangerous foundation issues can cost tens of thousand dollars to fix. In addition, most retail buyers won’t consider properties in this condition, and banks won’t grant financing. Investors buy properties as they are, giving you the freedom to sell without taking care of overwhelming maintenance.

Your House is Underwater

If your house is worth more than you owe, otherwise known as being underwater or upside down, a traditional sale can be a challenge. This can happen under a number of circumstances: you took out a second mortgage you can’t afford, the economy dropped and your home is worth less, or you have a high interest mortgage you haven’t been paying back appropriately. A property in this condition has no equity value, and is thus unappealing to retail buyers.

You Don’t Qualify for Conventional Financing

In some cases, even a home in mint condition can be disqualified from conventional financing. A home with too many liens or code violations can be ineligible for bank financing, leaving most retail buyers out in the cold. If these issues can be fixed or if the underlying property has value, many investors will still consider purchasing a house in this condition.

Your Inherited a House

Inherited properties, especially those in questionable condition, can be more trouble than they’re worth. Homes received in an inheritance come without an existing owner to talk to, leaving a costly inspector as your sole resource for determining a home’s condition. Selling to an investor can make things easier, especially if you have no intention of living in the home and would prefer not to worry about possible renovations or repairs.

You’re Just Too Tired

For many people, there comes a time when ownership simply isn’t desirable anymore. This can come from many different turns of events, including downsizing once children move out, alleviating monthly expenses, or handling the challenges that come with old age. Rental properties can also become disenchanting to manage for tired landlords, especially when units aren’t filling, tenants aren’t paying, and property repairs are stacking up.

Your Situation Will Benefit

Sometimes, things change for the better, and you need to move on for another reason. If you are doing very well and taxes seem substantial, certain ownership arrangements can allow you to take a loss on the sale of your home if prices have dropped. For example, if your house is owned by a corporation or other holding entity, selling in cash at a loss can offset your tax liability. Divorce or other property dissolution can be expedited through an investor sale, as well, cleanly dividing the equity in the home with no need for future negotiation.

You Should Not Sell at a Discount If…

While there are many reasons to consider selling for cash, there are plenty of instances in which a cash sale isn’t a good fit. If you are not in a rush to sell, you aren’t losing money on the cost of ownership, your mortgage is current, and you want to make as much on your property as possible, selling to an investor probably isn’t right for you. Under these circumstances, working with an agent and seeking the highest profits possible is generally for the best.

Making the right sales decision can be a struggle, but understanding your options can put the ball back in your court. If you are paying too much to own your home, need cash quickly, or are facing the threat of foreclosure, a cash sale can be a worthwhile financial tool, providing the payment you need to get back on your feet.

1 Response

  1. Also, sometimes if you take into account additional expenses such as agent commissions and holding costs, selling at a discount may be more profitable than selling for market value.

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