Are we crazy to consider this?

weedyacresJuly 15, 2014

We are currently living in a 100-year-old 920 sf house that is mid-DIY remodel. We expect to be done by year-end. We downsized from a 4000 sf house, sold off tons of stuff, and are trying to make our current house work for the 2 of us, size-wise. We're kind of 60/40 on whether it will, when all the remodeling is done. It has no garage...a big deal for Mr. Weedy.

We've had our eye on a house around the corner that is a bit overgrown, but from the outside seems to have good potential curb appeal. It's all brick, solid, probably 100-year-old vintage, with a giant detached garage in matching brick. Mr. Weedy would love to rent the garage.

Yesterday evening we saw a car parked there, so we knocked on the door, got a tour, and learned what the scoop is on the place. The owner's wife died a few years ago and he went into a nursing home a few months ago. Relatives who live a bit out of town are trying to take basic care of the place and sell off stuff, to clean out the house for eventual sale. They are feeling overwhelmed by the task.

The house is crammed full of stuff, from a few very nice antiques to just junk. It seems to have solid bones and decent mechanicals, but shows some wear, so it's a fixer. The layout is decent except I'm not sure that we can adequately improve the kitchen size and layout.

I'm guessing the house is in the range of 1500-2000 sf + basement, 3 bedrooms, 2 bathrooms. Laundry hookups on all 3 floors. :-) Value in current state is probably somewhere in the 30-50K range. Theoretical fixed-up value might be 90K (depends on sf), but I think that's tipping up at the high end of the neighborhood.

So now we've got pertinent contact information and a basic idea of the project, should we choose to take it on. Are we crazy to consider this when we've not finished the one we've started? One thought we had was to do a basic clean-up and rent it out for a year, and then boot the tenants when we're ready to really renovate.

And let's say we decided to go for it. Thoughts on how to go about ascertaining a good (for us) offer price? I think there's a mortgage on it (need to check at the courthouse), the relatives didn't know any of the details like age or square footage. We definitely got the sense that it would be a huge load off the relatives' minds to get rid of the thing as quickly as possible, so perhaps an as-is offer (take what you want and we'll clean the rest out) coupled with not needing to pay a realtor or do any fixing up would be very attractive.


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No more crazy than the rest of us. If you know and like the neighborhood, and especially if you think it has any upward potential as the economy recovers it sounds as if it has potential. The rent and wait scenario is good if your local rents would come close to the mortgage plus taxes amount. You'd need to see what it needs to meet rental property standards, they can be more stringent than owner-occupied in terms of alarms, lead abatement, etc, requiring up front work. Unless you're also young and strong two major projects at once would be a lot.

Having a good garage/workshop is worth a whole lot ;-)

I'm looking at building a small garage and it's going to cost nearly what that house plus garage is going for. Clearly doing something wrong.

    Bookmark   July 15, 2014 at 3:33PM
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You have been around this forum (and maybe others) for awhile and also have experience buying/selling. If you could get everything at a price you could afford, go for it. Would it include the antiques and junk? Maybe there is something there that could/will pay for redoing it. Can't remember if you have had experience renting out or not---
Would this be close enough for you to use and lock stuff in the garage? Not sure about renting--just for year etc Check with your tax person. Would this be something you might want to move into yourself? Is there a basement?
Does the interior show leaks/water damage? Does sound interesting and for the right price to you, might be something to do in your spare time (LOL)
Good luck--oh yes, check to see if there is a mortgage/or liens firsl/
Yes I have enjoyed your past adventures.

    Bookmark   July 15, 2014 at 5:14PM
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This is in a working class neighborhood in a small town in the midwest, so we never expect major price appreciation. It would be a case of buying right and being smart about what to spend making it pretty. We would plan to move into it once done, since it's bigger and has a garage and basement. The renter would just be a cash flow thing until we have time to renovate.

Our ability to do 2 projects at once is more a question of time than energy (or youth).

We have experience landlording, and the rental ratios are good here (houses cheap, rents relatively high), so we could likely rent it for around $700/mo. Even if our expenses were 50% of that, if we bought it for $30K, that's a 14% return (any renovations would drive that down, of course).

We didn't see any signs of water damage on the inside, and the brick is pristine: no settling or cracking.

The city does do inspections of rental properties. I'll get the details on that as well as look up liens at the courthouse tomorrow.

    Bookmark   July 15, 2014 at 6:33PM
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Rent the current house, and fix up the other one for yourself.

    Bookmark   July 15, 2014 at 6:39PM
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You have taken so much into consideration regarding buying the other house. I don't think too much gets past you, so you will make the best decision for you and your DH. For the record I think it sounds like an opportunity.

    Bookmark   July 15, 2014 at 8:29PM
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Can't wait to see where Grandpa Weedy's chest ends up next!

    Bookmark   July 15, 2014 at 8:51PM
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A trip to the courthouse told me:
Original mortgage in 1996: $70K
at least 6 refi's/2nd mortgages since then
Most recent mortgage in 2006: $87K
The owner has a creditor judgement on him from March.
Methinks he's likely in arrears on his current mortgage and this would be a short sale. Advice on how/if to proceed? Should/can I contact the bank? Is there any hope of gaining traction there?

Assessor also told me taxes are $2900/year and estimated market value $100K (she said assessment x 3 = market value is the rule). That's very high taxes for a house this old, usually seen around here on I need to find an appraiser to help me with comps/market value, and see if anything in the neighborhood can really sell for $100K.

    Bookmark   July 16, 2014 at 10:59AM
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One of the things is that short sale/bank transactions can be very long, like almost a year, at least around where I live.

    Bookmark   July 16, 2014 at 1:32PM
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I think you are going in the right direction. We never sold the house we raised our kids in, and have been empty nesters for eons. But now our kids (in their late 30s and early 40s) are marrying and having babies, and we can put them all up here for visits of several days or a quick over night. It makes holidays delightful and busy. New housing has skyrocketed, and our 35 year old house offers us more than any new place. Besides, it is almost paid off.

If your kids are having families now or soon, this extra room will allow for easy visits in the future.

    Bookmark   July 16, 2014 at 3:19PM
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Read up on why Chase is dumping "FHA"-sponsored mortgages... Has to do with ave time to unload a bank-owned house (something like 547 months).

Short-sale, maybe not as long? I'd tip my hat in the direction of the kids and/or bank, but if it is tied up until the owner is "gone" (deceased) it might take a long time. And, I'd definitely get an appraisal. I'd also look at getting the county to reconsider the taxation before I purchased it.

    Bookmark   July 16, 2014 at 3:47PM
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More detective work, courtesy of the assessor's office:
Built in 1935
1801 sf + basement
Last purchased in 1996 for $87,900
Assessed value: $37,000
Market value rule of thumb: 3 x assessment = $111,000

That's $61/sf, which is in the ballpark for a fixed up house in this vintage/neighborhood. I just don't know if the neighborhood would support that absolute dollar amount. A couple nice houses in the $100K range in the area have sat for months. I need to get more "what's sold in the neighborhood" info.

    Bookmark   July 16, 2014 at 6:33PM
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P.S. We're not in a hurry by any means (one of our reservations is that we're not ready to start another reno), so I wouldn't mind if the short sale took a year. We'd just like to be first in line and get a great deal on it.

Here are some photos of the exterior.

    Bookmark   July 16, 2014 at 6:46PM
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More findings: there are actually several homes in the neighborhood that are on the larger side, have bigger lots and/or are newer (i.e., 70's vintage) that have sold in the past few years. So I'm much more comfortable with a house with a 100K+ potential.

Update: the owner has a realtor they had been talking to, so it looks like they're going to list with her. I talked with her tonight and asked her for details (square footage, asking price, whether it had a mortgage, etc.) and she didn't know. Said she'd try to get to the courthouse tomorrow or Monday and look it up. I didn't tell her I'd already been there and done that. :-)

So, realtors, am I thinking correctly if I assume that this agent would be motivated to make a quick deal work with us (and get both sides of the deal) before listing it and giving up half the commission? And methinks it's also a plus to have a realtor working a short sale with the bank? Though perhaps not so much if she's not experienced with short sales?

Any further advice on how to play this?

    Bookmark   July 17, 2014 at 10:30PM
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How long will you stay in this area before your next move?

    Bookmark   July 18, 2014 at 2:07AM
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azmom: I have no idea. I own a business here (which is what brought us here initially), so not likely anytime soon.

    Bookmark   July 18, 2014 at 8:16AM
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Years ago we found a perfect house, in a small town of the best school district. We were about to make an offer then we learned that we had to relocate.

That was a terrible company relocation for many colleagues. In a small town when a major employer leaves, the local housing market tanks.

We heard plenty stories from friends who had to take loss in similar situations.

This won't be your concern; since as a business owner you have more control of your future than being an employee.

    Bookmark   July 18, 2014 at 7:03PM
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Update: After not having heard from the realtor for a week, I called her back. It sounds like the owner's POA hasn't made up their mind on the price, and they've apparently decided to spiff it up a bit. The realtor mentioned cleaning the carpets, which is the least of the house's problems.

The POA does live 4-5 hours away, so they probably don't understand the condition of the house. But there's no way a bit of clean-up is going to make it worth more than the mortgage.

I'm tempted to call the realtor back next week or meet with her and say, "look, there's an $80K mortgage on this house. These poor, overworked relatives are probably doing what they think is best for the owner and his estate, but the fact is, shampooing the carpets isn't going to make the house sell for more than is owed on it. This is going to be a short sale. The owner's not going to get anything out of it. If I were you, I'd advise the POA to save their time and energies, sell it as-is or let the bank take it and deal with it."


    Bookmark   July 26, 2014 at 4:56PM
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I think owning it would be a plus for you especially if the price is right. It might make a good rental and being close will be easy to keep an eye on it.

I think I would email the realtor and ask that they forward your email to the POA. They might go with a different realtor and have no idea you are interested. You could also snail mail the property owner hoping the mail is being forwarded.

    Bookmark   July 26, 2014 at 5:06PM
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weedy--respectfully, I think you're making some assumptions here that may not be true. First is your assumption that this will be a short sale. Unless I've missed something you have no proof that the mortgage is behind. People will often make sure a mortgage gets paid even if other bills are unpaid. That judgment may have been a bill that was overlooked by the owner after the spouse died or overlooked by the POA.

Simply being underwater on a mortgage is not a sufficient reason for a short sale. There are other qualification requirements and they will vary from lender to lender. If the owner has any other assets to pay down the mortgage, s/he may not be eligible for a short sale.

Short sales are very difficult to see through the end and VERY time consuming for agents. Even if the mortgage is with a bank that has a clear chain of command and policies in place for short sales, they take a lot of phone calls, emails, documentation, etc. If there was ever a listing an agent would not agree to discount the commission on from the start, it would be a short sale. Banks also often dictate the commission which is often low. I think it's a "dream" to imagine an agent would essentially take a pay cut for doing triple the amount of work. Just my opinion and a bit of a reality check.

    Bookmark   July 26, 2014 at 7:36PM
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To expand on rrah's post- It is not that hard to see if the mortgage is behind enough that the lender is making attempts to foreclose. First check the county auditors site for owner information (weedy already knows who the owner is but for others I am posting the how to).

There will be information if the house is owned by the owner or mortgaged by a lender. Most mortgaged properties will have a "bank code" which will identify the mortgage lender. There will also be information if the house is current in it's taxes or delinquent. There may also be info on tax liens or tax "sales".

After owner information is gained, next step is to check the county's clerk of courts site. Enter owner information and search civil cases. You will find there if the lender or the government has made a complaint for foreclosure (and/or other liens) and can read through the dockets for actions or dispositions of any cases.

    Bookmark   July 26, 2014 at 10:47PM
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Kippy: the owner's relatives/POA know we're potentially interested. They let us in the house to look around a couple weeks ago and referred me to their realtor.

Rrah: fair point that I don't know that the mortgage is behind. But a judgement doesn't usually mean "oops, I forgot to pay this bill," it's the result after lots of collection attempts and a court date. That's pretty tough to not be aware of. Given that the owner had multiple cash-out refi's over the years and now owes more than their original loan 18 years ago, I'd bet money that there aren't any assets sitting around waiting to make good on an underwater mortgage.

So perhaps I'm jumping the gun to say this will be a short sale, given that short sales only happen if the bank agrees, and they might not agree. But what I meant was the owner is not going to get any equity out of the place. So it seems pointless, from their perspective, to do a lot of work, or pay any money to make it look nicer. Maybe they get $60K instead of $50K, but there's still no cash for them at the end of it.

Acadia: I do know what bank holds the mortgage (local credit union) and that the taxes are current. I'll see if I can find any foreclosure info (not much is publicly online; may need to go back to the courthouse). Would the bank give me any info if I stopped in?

    Bookmark   July 27, 2014 at 9:11AM
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Update: I stopped by the bank that holds the mortgage. They wouldn't disclose anything, which I appreciate, but it's not an impending foreclosure, so we won't get anywhere right now except through the owner/POA.

We're not in a hurry on this, and we're not sure it's going to even be a good deal, so we're just going to bide our time and see what the POA decides to do. No major cleanup going on as yet....

    Bookmark   August 5, 2014 at 6:32AM
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