Selling a house with fire damage? Unfortunately, it’s a situation many homeowners face.
According to the National Fire Protection Association, from 2011 to 2015, there were 358,500 home fires in the U.S., which resulted in $6.7 billion in damage. And the record-setting California wildfires of late 2017 are bound to add to that statistic, resulting in tens of thousands of fire-damaged homes and billions of dollars in insurance claims.
So, what happens when your home is one of those statistics and you want to sell it? Here’s what experts say about selling a house with fire damage.
Should you repair fire damage before you sell?
If you’re looking to sell your home after a fire, you basically have two options: You can sell it as is, or you can repair the home.
Selling as is, of course, is the easier solution in many cases. You don’t have to deal with hiring contractors, managing the process, and, if it’s your primary residence, living through the process. However, most real estate agents agree that the convenience of not doing the work will cost you when it comes to the selling price.
“Repairing the home definitely makes it more marketable,” says Ron Lennox, owner of Lennox Home Buyers in Houston. “The average consumer is overwhelmed by the thought of rehabbing. Some investors steer clear of fire-damaged homes also, so the buyer pool is very small.”
Furthermore, buyers are going to expect a big discount if they’re buying a fire-damaged property. Making the repairs yourself, however, may get you a 100% or greater return on investment, according to Sunil Varghese, a broker associate with Keller Williams in Greenville, SC.
“Normally things like painting, cleanup, and curb appeal can be done relatively cheaply,” Varghese says. “My rule of thumb is that 1% to 2% of the value of the home, spent correctly, will net at least that much more upon sale, not to mention it will help sell the property faster and save you holding costs.”
Lesslie Giacobbi, a Realtor® with Seven Gables Real Estate in Anaheim Hills, CA, agrees.
“For the best return on the property, you should have the fire-damaged house repaired,” Giacobbi says. “Because of so many distress sales and foreclosures, there are many damaged properties on the market, and they are heavily discounted in order to get them sold.”
When to sell a fire-damaged house as is
Lennox says there are, however, a few cases when selling a home as is may be your best bet. For example, if the fire was minor and affected only a small portion of the home other than the kitchen and bathrooms, an as-is sale may make more sense.
In other situations, selling as is may be a seller’s only option (e.g., if the owners have little to no equity in the home and the cost of the rehab would leave them unable to pay off the mortgage).
“The only situation where it’s truly more advantageous to sell the home as is would be if the owner had fire insurance, which is giving them a substantial payout,” Lennox says. “This would have to be coupled with an investor that is willing to purchase the property as is. The check from the sale and the check from the insurance company could then make the owner ‘whole’ and would be the equivalent of selling the house without fire damage at full market value.”
How to sell a house with fire damage
Of course, you never want to try to cover up fire damage, no matter how long ago it occurred. Before putting a fire-damaged home on the market, make copies of all documents pertaining to the fire, including insurance claims, police reports, and any repairs you have made. You want your agent to be able to tell prospective buyers about all the circumstances surrounding a fire.
Janine Acquafredda, associate broker with House-N-Key Realty in New York, says the type of fire may influence a buyer’s decision.
“For example, if it was an electrical issue and it hasn’t been resolved, that’s a much different concern than someone who fell asleep with a cigarette burning,” she explains. “What you don’t want to do is lie, cover up, or misrepresent that there was fire damage, why it occurred, and how it was remedied.”
Also, when you sell a home, each state has a property disclosure statement on which you must detail any damage, and steps you’ve taken to repair it.
Should you buy a fire-damaged home?
So, what if you’re thinking of purchasing a fire-damaged home? Denise Supplee, operations director of SparkRental, says caution is key.
“The damage you may be seeing by the naked eye is nothing compared to hidden destruction,” she says. “Yes, it is true you may be buying a bargain; however, you may also be only purchasing a tear-down and the land beneath it.”
She says to be sure to take into account how long ago the fire happened, where it started in the home, and if there is structural damage.
Supplee also suggests that buyers use a home inspector who has knowledge of this specific type of damage, or better yet, hire an insurance adjuster.
“They have eyes perfect for this kind of damage and may be able to tell much more than an ordinary inspector,” says Supplee.