What To Do If You Can’t Afford Repairs

There are three clear options when it comes to making repairs on your home that don't quite fit your current budget.

One thing that most homeowners don't realize prior to becoming a homeowner is that a property needs a lot of work -- all the time.

Just because you buy a house doesn't mean that's the only time you're going to have a cost associated with it. The structure and property need a lot of repairs and maintenance over the years as grounds shift, storms cause damage, and there's basic wear and tear from actually living inside of it.

There are some really strange and unusual events that can cause a home to take some damage, and many of those things won't be covered by insurance.

When it comes to figuring out your next steps with a home that you can't make repairs on it, it really depends on what you're planning to do.

How do you get money to repair the house if you plan to continue living with it

Then there are a couple of options available to you:

1. Take a home repair loan or line of credit

2. Get a home improvement credit line

3. Look for a grant that can cover the expense

A Home Repair Loan  

Many banks have home improvement loans that you can apply for in order to do some repairs on your house.

The basic home repair loans operate just like any other loan (like for a mortgage or a car), and require the bank to run your credit and qualify you for it. 

These loans have wide ranges and depend on how much income you have and how your credit report comes back.

A Home Equity Line of Credit

HELOC for short, these lines of credits are based on the amount of equity in your home.

If you've had the mortgage for a while, then you will have some equity in the property that you can take a line of credit on. 

This would be done with banks or mortgage companies that offer HELOCs.

Typically, a HELOC will go up to about 90% of the home's value, so if the home is worth $100,000 and your mortgage balance is at $50,000, then you may be able to open a line of credit of up to $40,000.

Your credit will still affect the qualifications of the loan and the interest rate, but it's often a more feasible option because the loan is based on the house being collateral.

Using your local home improvement financing  

Home improvement stores like Home Depot or Lowe's often have options for financing, where you open a credit line with the store in order to purchase things with financing.

Normally, this type of financing will have deals on that and 0% interest for a certain amount of time. The stores will also have specials when you spend over a certain dollar amount to qualify for things like free shipping or discounts on appliances.

This may be an option if you can pay for labor out of pocket or do the labor yourself, yet you want to finance the materials that go into the entire home repair cost.

Getting a grant or government loan for home repairs  

In some areas, there are grants and loans available for making home repairs and improvements.

These aren't easily obtained, and have stringent requirements and qualifications.

For example, in the US rural development program, some of the qualifications for home improvements grants are:

• Occupied by you (the owner)
• Unable to obtain affordable credit elsewhere
• Have a family income below 50 percent of the area median income
• For grants, be 62 years old or older, and likely unable to repair the loan

On top of that, there will be eligible areas where the loan will apply, and the maximum money that can be obtained is $20,000 (for grants it's $7,500).

Code Violations

One thing we need to take into consideration is what happens if your house isn’t up to code.

What are home violations?

These violations occur when something about the home isn’t up to the standards of the local government. 

For example, many cities have conditions that must be met to consider a home inhabitable.  

Some code violations may be such as a working air conditioner (window unit or central air), running water, functioning electricity, etc.

These are the basic requirements for a home to allow someone to occupy it.

Each city/county may have different requirements, so it’s best to look up the building code for your area.

Sometimes, the city may not notice until you are attempting to sell the property or if the property appears to be abandoned. The city will send someone to check it out and see if there are code violations.

If the violations are present for too long, then the city may condemn the property, which brings it to a totally different stage where you may not even be able to stay in the property or sell it.

For some properties, if they are not up to code, there may be more costly work required in order to bring it up to code.

What Happens If You Get a Code Violation?

If you get an active code violation, then you need to tread carefully.

It’s important to get the official code violation and understand what it is that needs to be fixed.

Next, you want to make sure that you have approval and permits to do work on the property in order to fix it. 

If the home has code violations for too long, the city will condemn the property and force you to leave if you are living in it.

If you can’t afford to make the repairs to the home with code violations, then you may want to seriously consider selling the property as-is before it’s too late.

Once the city condemns the property, then they may seriously plan to demolish it. In order to sell the property, the buyer has to get permission from the city, and cities often deny that and end up tearing it down.

When the demolition occurs, they may stick you (the owner) with the bill.

What Happens When A House Sits Empty?

When a property sits vacant for a lengthy period of time, then it starts to gradually degrade.

When you are in the home, you’re doing things like running the air conditioner, sweeping/mopping, running the water regularly, addressing exterior issues that might occur because it might be required.

But when appliances, plumbing, electrical, and other components of the house are not being regularly used and maintained, then they start to deteriorate.

When the air is not being conditioned, then it may become more humid or collect more dust, which creates an ideal environment for pests, which will start to do damage to the structure little by little.

So, how long can you leave it unoccupied?

It’s tough to say, and that answer might differ based on your location, but it’s easy to tell when a house has been vacant for a few months -- the air smells different, there’s more dust, and you can tell that it’s been vacant.

After about a year, you might start to see some noticeable degradation, including holes in parts of the exterior where mice or other pests have burrowed and gotten in.

The longer you leave the house empty and unmaintained, the more damage it’s likely to incur, which means it will slowly start to depreciate.

If You Are Trying To Sell The House That Needs Repairs

You may realize that your house is falling apart and you can’t afford to fix it, so selling it is the next logical step.

Here’s what to do if you can’t afford to fix your house:

An expectation with most listed homes is that the house is "move-in ready", which makes it difficult when you are trying to compete with other listed properties that are ready to go yet yours needs some work done to it.

The only way to compete with that is really to have a lower price point to make up for the fact that the home needs work done.

However, this may not be possible if the discount plus the closing costs and commissions are going to dip below your mortgage, because then you're going to pay in order to sell your house.

In order to alleviate some of the costs associated with selling, you might consider doing a "for sale by owner", or FSBO, but that likely means it will take longer to sell the house.

A lesser-known but often preferred alternative would be to sell your house to an investor (like us!) because investors prefer homes that need work done.

Selling a house in poor condition

When considering selling your house that needs work, it might be really easy to assume that no one would be interested, but that’s actually not the case.

So, how do you sell a house that needs major repairs? You target a cash buyer such as a real estate investor.

Because an investor isn't looking to move into the home, they are willing to pay for things like closing costs and put some money into the seller's pockets when purchasing a house.

An investor, however, will look to purchase the home on a discount. So, in exchange for purchasing quickly and covering all the costs, they will negotiate to get it at a lower rate. 

This way they can make the repairs and re-list it on the market in order to make a profit. This is why you see “we buy ugly houses” signs and commercials. 

Once they seek to sell the renovated house, they will also have to deal with closing costs and commission fees, so they have to cover those costs. Just because they purchase on a discount doesn't mean they are making a lot of money from covering a closing twice, handling all of the repairs labor and materials, and paying holding costs for multiple months.

Can you sell a house with problems? Absolutely!

This is a great option if you are dealing with issues like foreclosure, tax delinquency, divorce, relocation, or any other life event that requires you sell a house fast.

Or if the house simply has issues with functioning electrical, plumbing, heating, roof, etc.

An investor will take all of that into account and come up with an offer and strategy to purchase it from you -- making it a win-win situation for both you and them.

If you need to get an offer on your house, give us a call or fill out this form so we can speak to you about your specific property and see how we can help your situation.