Selling a Home That Needs Work: Fix It First or Sell As Is?

If your home needs work, you can fix it before you list or sell it as is and price it for its condition. Here is how to decide which repairs are worth making, what you still have to disclose, what an as-is clause can and can't do, and how your buyer's financing affects the choice.

The short version

Start by finding out what is wrong

You can't weigh fixing against pricing until you know what is wrong and what it would cost:

• A pre-listing inspection. Home inspectors in BC must be licensed by Consumer Protection BC, and an inspection is visual only. Its findings become part of what you know, so be ready to fix, disclose or price in what it turns up.
• Written quotes. A roofer's or electrician's quote turns "needs work" into a number you and your buyers can plan around.
• The permit history. Work done without permits matters to buyers, lenders and insurers, as I explain in Selling a Home with Unpermitted Work. For wiring, pipes and oil tanks, see Buying an Older Home in BC.

Which repairs to make, and which to leave

Usually worth fixing before you list:

• Safety problems. Electrical hazards, a failing furnace or a broken stair put people at risk, and buyers' inspectors look for them.
• Active leaks. Under the standard BC contract, the home must be in substantially the same condition at possession as when the buyer viewed it, and it stays at your risk until 12:01 am on the completion date, so a leak left to do more damage before then is generally your problem.
• Anything that could block financing. CMHC, for example, insures mortgages only on homes suitable and available for full-time, year-round occupancy, so a home without working heat or water can be hard to buy with an insured mortgage.
• Small, cheap fixes. Dripping taps, sticky doors and scuffed paint cost little and are easy for an inspector to list.

Usually better left to the buyer:

• Major renovations. The Appraisal Institute of Canada cautions against assuming that the money you put into a renovation will all come back when you sell. A substantial renovation, which CRA generally describes as removing or replacing 90% or more of the interior, can also raise GST questions, so ask an accountant first.
• Matters of taste. Many buyers would rather choose their own finishes, colours and layouts.
• Work you can't finish properly. A half-done project raises questions, and rushed work without permits creates a new problem to disclose.
• Big items better priced in. For a roof or sewer line near the end of its life, a written quote you can share may serve you better than a rushed replacement.

Selling as is: what you still have to disclose

Selling as is means you won't make repairs. It doesn't change the disclosure rules, which I go through in The Property Disclosure Statement:

• Your duty. "Buyer beware" generally applies to home sales in BC, but a seller can't conceal defects and must disclose known latent defects: problems a reasonable inspection wouldn't reveal that make the home dangerous or unfit to live in.
• Your REALTOR®'s duty. A licensee must disclose material latent defects they know of, which BCFSA defines more broadly, including defects that would cost a great deal to fix and a lack of permits. If you tell them not to, they must stop acting for you on the sale.
• The forms. The Property Disclosure Statement is voluntary. BCREA's Property No-Disclosure Statement is for sellers who make no representations, but it doesn't excuse you from disclosing known latent defects, and BCREA's legal column warns that it may make buyers suspicious and slow a sale.
• Don't cross out the PDS. In Sewell v. Abadian, the BC Court of Appeal read a struck-through PDS as the seller saying they knew of nothing it asked about, a misrepresentation because the seller knew an earlier owner's disclosure had noted an unpermitted addition.

As-is wording in the contract, and its limits

An as-is clause says, in substance, that the buyer accepts the home in its present condition, at their own risk, with no promise from you about its condition, size, zoning or hidden defects. It sets expectations, but it has limits:

• It doesn't cover knowingly false statements. As far back as 1994, BCREA's Legally Speaking column noted that the standard contract's no-warranty clause would not protect sellers against their own fraudulent misrepresentations.
• It doesn't replace disclosure. Your duty to disclose known latent defects generally stays the same, and so does your REALTOR®'s.
• What you say still counts. Anything you tell buyers must be accurate, and BCREA's legal column notes that a partial or incomplete answer can also lead to liability.
• Get it drafted properly. Have a lawyer draft or review it, since how it fits with the standard terms, such as the condition at possession, depends on the wording.
• Keep your insurance. The home stays at your risk until 12:01 am on the completion date, so keep your policy in place until after the possession date.

Pricing a home for its condition

I price a home by comparing it with recent sales and adjusting for the differences, including condition, as I explain in How Your List Price Is Set. For a home that needs work:

• Compare like with like. The best comparables sold in similar condition, not the renovated house down the street.
• Take out the guesswork. Buyers can only guess at costs they can't see, so quotes and reports you can share help them make a firm offer.
• The appraisal has to support it. A lender's appraiser notes any deficiencies or required repairs, and if the price is well above the appraised value, the buyer may not get the full loan. See Home Appraisals.

Buyers who need a mortgage

CMHC, Sagen and Canada Guaranty each have a program that lets a qualified buyer add the cost of improvements to an insured purchase mortgage: CMHC Improvement, Sagen's Purchase Plus Improvements and Canada Guaranty's Purchase Advantage Plus.

• How much counts. The lending value is the lower of the home's value once improved and the price (or current value) plus the cost of the work, and with less than 20% down, the value has to be under $1.5 million.
• Quotes first, money later. The lender needs quotes or estimates, holds back the improvement money and releases it as it confirms the work is done, for example with a professional's report, paid invoices or photos.
• The buyer must qualify. They need to qualify for the larger mortgage, and CMHC expects the lender to consider whether they can cover cost overruns.

BCFSA notes that lenders often require fire insurance, so an insurer also has to accept the home. If lenders won't finance the home as it is, your buyers may need cash or an alternative lender, which I explain in B Lenders and Private Mortgages.

Permits and timing if you fix it first

• Take out the permits. BCFSA counts a lack of permits as a material latent defect, so work done without them is something your REALTOR® must disclose if they know of it. Get the final inspection, not just the permit.
• Test before you renovate. WorkSafeBC says to have a home tested for asbestos before a renovation or demolition starts, using qualified contractors, so build it into your schedule.
• Leave room in the calendar. Quotes, trades, permits and inspections take time. Start early, or list with quotes in hand rather than with work half done.
• Keep the paper trail. Invoices, permits, final inspections and warranties show buyers what was done.
• Disclose accurately. If you complete a PDS, answer accurately about problems you have repaired, and explain what was done and when.

Questions sellers often ask me

Do I have to make repairs before I sell my home in BC?

Generally no. You can sell a home as it is, but you must disclose known latent defects that make it dangerous or unfit to live in, and anything you tell buyers must be accurate.

Can I sell my house as is in BC?

Yes. You price it for its condition, the buyer relies on their own inspection, and an as-is clause records that you make no promises about its condition. Have a lawyer draft or review the clause.

Does selling as is mean I don't have to disclose anything?

No. Known latent defects that make the home dangerous or unfit to live in still have to be disclosed, your REALTOR® must disclose material latent defects they know of, and the clause won't protect you if you knowingly mislead a buyer.

Will I get back what I spend on repairs before I sell?

Not always. The Appraisal Institute of Canada cautions that renovation money isn't always fully returned when you sell, so weigh each quote against what the work is likely to add to your price.

Can a buyer get a mortgage on a house that needs work?

Often, yes. CMHC, Sagen and Canada Guaranty each insure purchase mortgages that include the cost of improvements, with the money released as the work is done, if the buyer qualifies and the home meets the insurer's rules.

Getting ready to list? Read my seller's checklist, see what it costs to sell a home in BC and follow the selling process from listing to completion.

This article is general information, not legal, tax or financial advice. Disclosure duties and contract terms depend on the facts, so speak with a lawyer about your own sale. The details come from BCFSA, BCREA, Consumer Protection BC, WorkSafeBC, the Appraisal Institute of Canada, CRA and the published terms of CMHC, Sagen and Canada Guaranty, and were current at the time of writing. For BCFSA's guide, see material latent defects.