Return to the Old House Forum | Post a Follow-Up

 o
Help! Style and renovation loan questions!

Posted by tinkersouthernbelle (My Page) on
Thu, Apr 19, 12 at 12:28

Hi. This house was built it 1920 in Tennessee. It was a single family home until 1957 when the hideous additions were added to make it a FUNERAL HOME!
We are insanely looking at this home to buy & renovate/rehab/restore.

Can anyone tell me the style of this home? Victorian?
Photobucket

Photobucket

This is the main addition running down the side of the house. You can see the original roof line & the side dormers. The original front porch was enclosed across the front & side. There is a "curved" wall inside the house which follows the original porch and the original brick is inside the house as well.

Photobucket

I have found a photo of the original home. It has a beautiful curved wrap around front porch. Sorry I don't have that photo to upload right now. There is a "bay" window on the front and side. The attic area has 2 dormers on each side of the house and the dormer you can see on the front.

Our second question is.....funding/loan. This house is a complete GUT job. We would be knocking off about 5000-6000 sq feet of that horrible "addition". This house can not be lived in right now at all! We would like to live in our current home while the renovation is going on. So is there a way to get a purchase & reno loan but defer payments until it is complete & ready to live in?

Thanks for your help. This is a pipe dream, but we've been looking at this house for 4 years...its been on the market for 4 years!


Follow-Up Postings:

 o
RE: Help! Style and renovation loan questions!

Tinker, definitely too late for a Victorian--she died in 1901, and the style in America then was favoring Colonial Revival or Classical Revival.

Without seeing the original photo (you can take a pic of it with your digital camera)...I can't advise more on style than that. I"m kind of puzzled why it needs a total 'gut job' and can't be lived in while the additions are removed--is the structure in that bad shape?

I only have experience with my own mortgage, which was a standard 30 year--but I can't imagine any lender giving you money, and then saying 'don't bother paying it back for four years'! There is no such thing as a free lunch, as the saying goes.

If it were me, I'd keep searching for another property.


 o
RE: Help! Style and renovation loan questions!

CB1, thanks for your feedback. I know the info I gave wasn't too clear, so here's some more.

I'll try to scan the copy of the photo. It is a newspaper clipping from 1957...so i'm afraid it won't scan well.

Its a total gut job b/c it has been sitting empty for at least 4 years and has lots of water damage. We've been told it is "structurally" sound. But when I say gut job...I mean the ceiling, floors, walls all need to be removed. New roof, HVAC, wiring, plumbing. The exterior has peeling white paint from the bricks, broken windows, fallen gutters. This is a gut job and no it can not be lived in.

The sections we would removed were added in 1957. They are not historically correct to the home. It is cinderblocks and flat roof...yuck.

Yes I know about a standard 30 yr mortgage. We are going to have to do a construction/renovation loan b/c this house CANT be closed on a convention loan b/c it is uninhabitable. I didn't know how construction/reno loans worked on a existing property that is not inhabitable. We wondering if we have to pay on the loan WHILE the reno is happening (which we estimate would take about 12 months)? Or do you close on the loan once reno is completed & inspections done? NOT 4 YEARS! Its been FOR SALE for 4 years. And its been vacant for much longer than that!

Our interest in this property is the location & land that comes with it. Also it would be a huge contribution to our historic town by bringing this back to its glory and that is exciting. We're not "looking" for anything...just exploring this one unique situation.


 o
RE: Help! Style and renovation loan questions!

Here is the photo of the original house in 1957. Hope you can see it

Photobucket


 o
RE: Help! Style and renovation loan questions!

That style is a one-story Queen Anne Cottage. The people in Tenn. did not get the memo that the Victorian Period had ceased, and kept right on building them because they liked the design. They are very often built on corner lots so the wraparound porch could be seen and admired to full effect.
Appears that in your case someone finished off some of the attic, making it a 1 1/2 story.
Casey


 o
RE: Help! Style and renovation loan questions!

On a construction loan you typically get a certain term (not over a year typically) and during the term of the loan you are required to pay interest only. Funds are disbursed based on regular inspections and progress reports which are required for each draw typically. At the end of the term the loan converts to a conventional loan.

Have you even considered the costs to return this house to a rather sweet, but pretty simple home ? Your loan value will not exceed 80% of an anticipated appraisal which will be done in advance of the loan using local comparables. In addition you will need to deal with the legal paperwork to convert it from a commercial property to a single family residence prior to ever applying for a loan. Your appraisal will be effected by the fact that it is a commercial building which could screw the whole pooch....

As an ex banker, but a pretty smart one :). I'm going to save you the trouble and just decline the deal now. You would thank me for this if some silly banker ever did do the deal (and it's been there for a reason unsold). Historically significant means nothing to a bank. Sometimes as a buyer you have to just sigh and walk away.

Now FYI...I bought a commercial building and converted it and was only borrowing 1/4 of the houses value and still went through hell with the bank. I wouldn't even consider it if the house wasn't habitable, but I wanted to share that you might have a small chance IF you are putting in a very large chunk of change and are borrowing less than the tear down value (raw land value). I'd guess though that you likely don't because you are wanting to defer payments.

There are other houses :). Sometimes the old ones get so butchered they can't be saved :(. Often due to abuse, but more often due to economic feasibility issues. This house is the kind of house that will only be saved by a cash buyer most likely. And those are few and far between.


 o
RE: Help! Style and renovation loan questions!

"Have you even considered the costs to return this house to a rather sweet, but pretty simple home ? Your loan value will not exceed 80% of an anticipated appraisal which will be done in advance of the loan using local com parables"

Do you mean the 80% of "after construction value"?

Yes...what we would be doing to the house...the house would be worth more than the cost of doing it.

What are you saying decline the deal? This house has already been rezoned residential. So there is nothing we have to do to convert it from a commercial property. The city planning office has already determined that.


 o
RE: Help! Style and renovation loan questions!

I couldn't comment on the economics of this particular property, but I did notice that the town in which it is located has some really beautiful (and expensive) properties. Tinker --I don't know much about TN, but I am curious -- what is the appeal for this part of the state? Is it horse country?


 o
RE: Help! Style and renovation loan questions!

I'm sorry...you don't want reality...I was supposed to say go for it...ok here's the thing....it's a commercial building because since 1957 it's been a funeral parlor. It's had changes to the structure to accommodate being a commercial property. When appraisal is done (an as proposed) that is going to be a huge determining factor in doing the deal. That is likely why no one has managed to purchase it yet. If it was a slam dunk, easy peesy, less needed to make it a fine/finished home than the costs to do so, it would have sold by now.

I was obviously joking because the deal isn't sitting at my desk but what I was saying is the reality of the deal. It's not a doable deal if you don't have wads of cash to put into it and a significant cash flow that would cover the loan risks for the bank.


 o
RE: Help! Style and renovation loan questions!

igloochic...I do want reality. That is why I asked my questions. Not sure why you thought otherwise

I was just trying to clarify what you had written. I am not familiar with this circumstance of using a construction loan.

Yes its going to take a lot of $$ to transform this place. I never assumed it was "easy peesy".

Thanks for your input.


 o
RE: Help! Style and renovation loan questions!

You mention the land that comes with it. Could you talk to a bank about purchasing the house and selling some of the land for cash? Igloo, can that be done?


 o
RE: Help! Style and renovation loan questions!

"You mention the land that comes with it. Could you talk to a bank about purchasing the house and selling some of the land for cash?"

Hi Lucille. Yes! That is exactly what we are thinking about doing! It is actually a "double lot" so it can be divided. We already know a 3rd party interested in the empty lot....so that would reduce our loan amount quite a bit!

A lot of pieces/quotes are coming together this next week or 2 so we'll see if it works!


 o
RE: Help! Style and renovation loan questions!

Another possible concern that may need to be addressed is a clean bill of health by an environmental study or the EPA; being a mortuary for 50 years quite possibly tainted the land, if not the building, with toxic chemicals. The owner of record is the party held responsible for the contamination cleanup - & that's one person you never want to be! At least that's the way it was in the early '90's but I haven't kept up with it since. I remember that some types of formeldehyde were on the list.

Is the listing agent a commercial realtor? He/she should be able to provide you or your realtor with any environmental studies that may have been perfomed on this property. Regardless, ask questions - any lender will.


 o
RE: Help! Style and renovation loan questions!

Likely not through a conventional lender and the predatory ones (who love deals that are all client risk) have been generally shut down. If you were purchasing the land and subdividing than you fall under the terms for a contractor. The loan becomes a commercial deal on speculative property and the bank is a highly unlikely partner in the deal. (meaning if you aren't an established builder you won't qualify).

Because the structures are attached you would have a hard time getting the property decided anyhow, but more so given that this isn't a builder with history (the borrower or op I mean). And assuming you can devide the property because it is currently more than one lot, can be a challenge. I live on a double lot but while that looks good, it would be highly unlikely the county would let me build given current restrictions. It's something you would need to verify, but given its an almost impossible deal I wouldn't waste too much time there.

I'm not saying any of this CAN'T be done, but I am saying that to do it you need to have deep pockets. Kind of like the old saying....you only qualify for the loan if you don't really need the money.

I'm honestly not trying to be mean. I'm trying to present the financing position that any bank is going to take. They can't and won't be a part of a land transaction partnership (meaning they cant give a loan on the hope it will sell via a parcel split) and for all of the reasons above as well as the possible contamination issues, it's only going to fly on this deal with a very shady lender...and I hate to see people go down that path because that's what caused much if this economy mess in the first place.


 o
RE: Help! Style and renovation loan questions!

Tinker, I'd consider what Igloo and Antiquesilver have said. Older houses are unique just like people, and it is hard to walk away once you think you have fallen in love.
What if it is uninhabitable and it takes more funds than you anticipated to fix it? You are still going to be on the hook for insurance and property tax, and if it has been on the market for 4 years it is unlikely that you could turn around and resell it if it became a burden.
We all see these little old houses with loving eyes. I bought a small house less than a year ago and I have already spent WAY more than I had budgeted on renovations. Fortunately, a lot of the stuff that is left such as painting and window fixing I can do a little at a time while living in it, but for a large house like the one you are looking at, what if costs are two or three times what you anticipated? Stuff like ceiling replacement is not the kind of work an ordinary person with no experience is going to enjoy or do well if all of a sudden the funds for renovation run out..
It is easy to sit in an armchair and imagine that house fixed up, a jewel in an affluent neighborhood, a one of a kind treasure.
No one ever sits back in their armchair and thinks of foreclosures, of living on a shoestring for months because an underground water pipe broke, of mold and permits and taxes.
Like everyone else I am not trying to dissuade you, only that you are prepared in case your efforts for a loan succeed and suddenly much more funding is needed even if somehow you can divide and sell.


 o
RE: Help! Style and renovation loan questions!

Ok a moment of extreme sanity please! This house (or building) is a million bucks. Per sq ft in its existing condition it is priced in par for the neighborhood for commercial space (125 vrs 124.8) and the neighborhoods surrounding it are primarily homes of similar size (if you rip off the addition) which are valued (recent sales) generally at or below half a mill. You want to gut it, make it half the size or smaller....and somehow realize a value of what? You would be in backwards just to start even if it stayed commercial.

This is exactly what you described it as in your first post. Insane.

Sorry, but it isn't a doable deal in any way shape or form. You are talking about a minimum of hundreds of thousands of work on a house that cut in half (the price) isn't worth the money they are asking for it.


 o
RE: Help! Style and renovation loan questions!

Yep you're right. The numbers are way out there. Not a doable deal with the asking price. Too much money for us.

igloochic can you tell what the value of the land is based on comps you are looking at? It is 2.9 acres. Just curious.

Thanks for everyone's help & input. I thought it was a pipe dream & crazy but just had to walk through the process to make sure.


 o
RE: Help! Style and renovation loan questions!

The land is only assessed at $275,000 (I'm on another computer but it was close to that number) with the improvements (buildings) adding up to a total assessed value of around $1.1MM. They were asking 1.7MM so coming down to just under $1 was probably a stretch to them, but when the company was sold in 200? (I think it was 2007?) they only valued the property at $600,000 and some change when they made that sale (it was a corporate sale to a bigger entity). I think honestly...they have been smoking too much enbalming fluid....but given their recent drop, and their crazy previous asking price, I'm guessing they won't sell for $100,000 which is about all you'd want to pay with the work you say is necessary.

FYI, I was actually just curious about the condition of the property, hence looking it up. I love an old house like no body's business :) I was hoping the damage you were discussing was overblown and maybe it wouldn't need the amount of work you mentioned...but given they show NO interior photo's...I'm guessing they know how bad it is.

The other comps in the 8 surrounding blocks were all sales including a home and land at half a mill or less, a couple above that but just barely. Given most of them are on lots half the size, I'd guess they're in the 100,000 range but you could enter an address on your local tax records search engine and get that for sure. It is not taxed as two parcels so if you were to sell one, you'd have to have that approved (my land is similar) and in some places that's easy...some nearly impossible.

Even if there are some multi-million mansions within the historic area (are there?) you still have to compare them with the other homes when doing a comp. If the local mansions are 6000 plus sq ft (seemed like big old homes are more on larger property? but I don't know for sure) than you'd have to have this place end up near that size or larger for a comp. THat's a big challenge...I'm guessing the old house used to be more like 3,000 to 5,000?

The old house that was there was charming! And it saddens me to see that it's been destroyed, but sometimes you just have to sadly walk away and put your hard work and money into something that is more reasonable to save. :*( Makes you want to just shoot the people who destroyed it doesn't it?

FYI, my house was a hospital...they can come back :) But in the end we will likely spend 1 to 2x our purchase price to get it there :( and it won't be appraised anywhere near what has to go into it. Such is life in the major old house remodel sadly! I was just lucky they didn't add flat roofed cement buildings to the back! (But we did find embalming fluid bottles as well as poison's in the cistern)


 o
RE: Help! Style and renovation loan questions!

Igloochic. One more question. My realtor is wanting to know how you
Got those numbers. She said the $600000 is from 1991
You show it from 2007?
Also where did you find that land assessment of $275000?
Thanks!


 o
RE: Help! Style and renovation loan questions!

I agree with igloochic in that $100k is a realistic sales price - & depending on the deteriotion, maybe less. And like I said above, if there are environmental hazard issues, don't take it if they pay you! Without knowing the area, the market, & seeing the property IRL, all of this is a big guess, but the following is my rationale:

Find a nearby house that has the approximate original footprint of this one on an average size lot & check the city's assessment; then allow a heavy discount for very bad condition. That's how I'd calculate sale price because I don't think you're going to find many properties similar enough to use as true comps.

As far as an argument for land value, large lot sizes in my historic district don't necessarily mean a substantially more valuable parcel; the real value lies in the improvement, unlike a commercial property. Even if you're allowed to subdivide the lot, it's sometimes almost impossible to build on that lot without conforming to the size & quality of old properties which usually kills the deal. If the location has heavy traffic, it's even less desireable for a residence & may be one of the reasons it was converted to a funeral home in the first place.

The Listing agent(s)/owner obviously think they're sitting on a gold mine due to the location & acreage but IMO being rezoned to single family residential in a historic area makes it more of a white elephant. Perhaps they think an investor will buy it to turn into condos or apartments but making that happen in a historic district is tricky in a good market & may not be possible with the zoning (your agent, if she's up on historic ordinances, should know).

Maybe you can negotiate with the owner for him to demolish the excess crap, theoretically turning it back into a residence, and then you buy it.


 o
RE: Help! Style and renovation loan questions!

I'm sorry tinker. I confused the year of the sale of the business with the building (when I mentioned I was on another computer in the last post) so that was in error. It was in 91 and the article was about when they moved.

As to the tav...she should have that. It's part of any listing disclosure and available online in the county records. I was looking at both zillow and loop net if that helps. I should have mentioned it has a weird assessed value for taxes. It's in the 408,000 range (so that is what they are taxed on now, not the mill the county says its worth) In my experience a lower value for tax charges indicates either a homestead waiver or a district waiver (ie historical Reno etc) and these are not always transferable (meaning the taxes could go from their current ten grand annually to upwards of thirty if that waiver isn't transferable).

I should have known to check my brain against the net earlier lol. So sorry about that. Btw...it does say there is a tenant in there who makes about a hundred grand in annual sales as well....is someone still...how shall we say this......processing bodies....in the back? It's a mortuary service....


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Old House Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here