How to Sell a Fire-Damaged House (and What to Do First)

What should you do first after a house fire?

Make sure everyone is safe, then call your insurance company. Selling comes later. The first few days decide how much money you recover, and the insurance claim is usually the biggest piece.

The U.S. Fire Administration's After the Fire guide lists these early steps:

1. Do not go inside until the fire department says it is safe. If utilities were shut off, do not turn them back on yourself.
2. Call your insurance company right away and ask what they need from you first.
3. Call your mortgage lender to report the fire.
4. Secure the house. In some cases you may need to board up windows and doors so no one can get in. Let your police department know the home is empty.
5. Save every receipt for money you spend because of the fire. Your insurer may need them later.

Also take photos and video of every room before anything is moved or cleaned. Those pictures help with the claim and later with buyers.

Should you file the insurance claim before selling?

Yes. File the claim before you sign any sale contract. Your policy may pay for repairs, debris removal, temporary housing and lost belongings, and that money can be worth far more than the gap between offers.

Find out three things before you decide anything:

• What the policy covers. Dwelling, other structures, contents, and "loss of use" (living expenses) are usually separate limits.
• How it pays. Some policies pay actual cash value first and the rest of replacement cost only after you repair or rebuild. If you sell instead of rebuilding, you may not collect that second part. Ask your adjuster directly.
• Who gets the money after a sale. In many cases the claim stays with you, the policyholder. Your sale contract should spell out who keeps which insurance proceeds. Have a real estate attorney review it.

Do you need a public adjuster?

Not always. A public adjuster works for you, not the insurance company, and is usually paid a percentage of what the insurer pays on the claim. It can make sense for a large or disputed claim. For a small, clear claim, it may just cost you money.

Fee limits depend on your state. Florida, for example, caps public adjuster fees at 20% of claim payments, or 10% for claims tied to a declared state of emergency in the year after the declaration. Florida also bars a public adjuster from charging on money the insurer already paid or agreed to pay before you signed with them. Read any contract carefully, and check that the adjuster is licensed in your state.

How does the mortgage company handle insurance checks?

If you have a mortgage, the insurance check is usually made out to both you and your mortgage company. According to the CFPB, the servicer typically releases part of the money before work begins, more as repairs move along, and the rest once the job is finished and the home passes inspection.

This matters for selling. If you plan to sell instead of repair, call your servicer and ask:

• Whether they will apply the claim money to your loan balance.
• What they need from you to endorse or release the check.
• How the claim money and the sale payoff will be handled at closing.

Keep paying your mortgage while all of this is worked out. The loan stays in place even if the house cannot be lived in. If you cannot pay, ask the servicer about help right away. Our guide on selling a house facing foreclosure covers your options if you fall behind.

Is it better to repair or sell a fire-damaged house as-is?

It depends on how bad the damage is, how much insurance pays, and how much time and energy you have. Repairing usually gets a higher price. Selling as-is gets you out faster and with less risk.

Repairing is usually the better choice when damage is light (one room, smoke damage), insurance will cover most of the work, and you can manage a contractor.

Selling as-is often makes more sense when:

• The damage is structural or the house is not livable.
• Insurance will not cover full repairs, or you are underinsured.
• You inherited the house or live far away.
• You cannot afford to keep paying the mortgage, taxes and insurance on a house no one can live in.

Run your own numbers with the cash offer calculator, which compares an estimated investor offer to what you might net by listing. Our cash offer vs listing with an agent guide walks through the trade-offs in more detail.

Who buys fire-damaged houses?

Cash buyers and real estate investors buy most fire-damaged houses that have not been repaired. That is because regular buyers usually need a mortgage, and lenders have strict rules on condition.

Fannie Mae, for example, will not buy loans on homes rated C6, meaning damage severe enough to affect safety, soundness or structural integrity, unless those problems are repaired first. Some buyers use renovation loans like the FHA 203(k) program, which rolls the purchase and repair costs into one loan. Those deals take longer and need contractor bids up front.

Cash buyers skip all of that. They buy the house in its current condition and handle cleanup and rebuilding themselves. The trade-off is price: they usually pay less than a repaired house would bring on the open market. Many investors use a rule of thumb called the "70% rule," which puts an offer around 70% of the after-repair value minus repairs. Read how cash home buyers calculate offers to see the math.

Get more than one offer. Cash Offer Desk can be one of them. It looks at the house and makes a written as-is cash offer in the areas where it buys. It is free for sellers (how Cash Offer Desk makes money), and you can say no to any offer.

Do you have to disclose fire damage when you sell?

In most cases, yes. Most states require sellers to disclose known material defects, and fire damage, smoke damage and the repairs done afterward usually count. The exact rules and forms vary by state.

Selling as-is does not erase this duty. "As-is" means you will not make repairs. It does not mean you can hide what you know. Disclose:

• When the fire happened and which areas were affected.
• What was repaired, by whom, and whether permits were pulled.
• Any known smoke, soot or water damage from firefighting.
• Open insurance claims and what has been paid.

With a cash buyer, the damage is usually obvious, but put it in writing anyway. Check the rules in your state guide, read our guide on selling a house as-is, and talk to a real estate attorney if you are unsure.

How do you keep a fire-damaged house safe while you sell?

Secure it, check your insurance, and limit who goes inside. A burned, empty house draws trespassers, scrappers and squatters, and you can still be liable if someone gets hurt.

• Board up broken windows and doors. Your insurer may cover emergency board-up as part of the claim.
• Ask about vacancy rules. Many homeowners policies limit coverage, such as for vandalism, once a home has been empty for a set number of days. Read your policy and ask your agent.
• Keep utilities off unless the fire department or a licensed pro says they are safe.
• Do not let buyers walk through alone. Be there or have someone you trust there, and keep visits to daylight.
• Check on the house often, and ask a neighbor to call you if they see anyone.

Once the claim is filed and the house is secure, you can compare repair estimates to cash offers with a clear head and pick the path that leaves you in the best spot.