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Whether to buy or not...

Posted by winspiff (My Page) on
Sat, May 10, 08 at 18:22

Hello everyone...

Well, we found a house we love. It's a great house, fits our needs perfectly in terms of having a separate area for renters, great location. All the houses in the neighborhood are very nice and it's in a great area. We are fortunate to have great credit and technically shouldn't have trouble buying it. Everything's awesome on that end.

But...

Well, it's over 100 years old, and not in a good way. We had a contractor come to look at it. Looks like there's a whole porch that needs to be fixed or removed ($5-8,000), a ton of clapboard damaged or down to the ground that needs to be replaced (expensive), new gutters, and the supporting wood posts in the basement need to be replaced with steel - jacking up the house and replacing them ($300 each, not sure total, maybe $2,000). We learned that when I noticed the ceiling in a room was sagging.

He estimated $20-30,000 just in repairs. That's on top of the work we want done (adding a bathroom, adding forced air, installing a washer/dryer, place to park.) But, knowing how repairs go, I wouldn't be surprised if we got up to $40,000 to $50,000. I think the best we could do would be to budget $50,000 for the whole project.

The assessment is $215,000. The asking price is $195,000. The real estate agent doesn't think, from the *little* that he knows, that we could get less than $160,000. In terms of funding the repairs, they can't afford it, we can't afford it. In this state, they will not let us take out a mortgage for, say, $210,000 and have the sellers give us a check for $50,000. So we could possibly have a contractor agree to do the work prior to payment while the sellers lived in the house, but not many contractors would be willing to do so.

I asked the real estate agent whether, if we got the repairs done, we could sell it for $200,000. He didn't seem to think that would be any problem at all.

Of course, all of this in the context of the declining real estate market.

If we purchased this house, we would want to get the majority of this work done in the next 3 months, including:
- jacking up the ceilings, replacing wood with steel (est. $2,000)
- washer/dryer installation (maybe $2,000)
- painting a small room (can do ourselves)
- installing a bathroom ($5,000)

Things we could take care of later (next year):
- fixing clapboards (could be a ton of money)
- install forced air ($4,000 for appliance, up to $4,500 duct work)
- fixing the porch ($5,000 - $8,000)
- fixing the gutters (few hundred)

So... what would you do? Buy the house that would really work out well for us... or keep looking?


Follow-Up Postings:

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RE: Whether to buy or not...

To a knowledgeable buyer & lover of architecture, really old houses are wonderful & a labor of love; as a quick, stable financial investment - not so much. Which are you?


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RE: Whether to buy or not...

Unless someone else has renovated them already, most old houses require some major fixing. Ours needed new wiring, roof, pipes, and furnace. The house needed to be bolted to the foundation, and asbestos covered ducts removed. Then every wall and ceiling were covered with multiple layers of paint and wallpaper, which all had to be removed and a thin layer of plaster put on. Every window (about 40) had to be removed and the weight cords replaced. Floors repaired and refinished. Complete interior and exterior painting, after needed repairs to the exterior wood. We added a bathroom. There was no landscaping to speak of, so I designed a garden, including a brick patio, wisteria covered pergola, raised beds for vegetables, fruit trees, and a perennial garden in the front.

In our neighborhood, though, it is possible to find either partially or totally renovated houses. You do pay much more for them. You just need to decide if you want to pay for the work, do it yourself, or some combination, or buy the house already fixed.


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RE: Whether to buy or not...

I think your timeline is too short.
If you have contractors lined up ready to do the work you might be able to finish your list in 3 months. You will need to interview contractors, get prices, and sign a contract. Then the builder will need to schedule the job. That in itself could take a month.
A new bathroom could take longer and cost more than you have allowed - more complicated plumbing than anticipated, subs having to be scheduled, fixtures back ordered, etc..
Jacking the floors, replacing posts, repairing the ceiling can uncover other problems that need to be fixed while the house is opened up.
Always assume with any existing house renovation that something unforseen will crop up. Allow money and time in your budget for it.
I always suggest that people wait a year when they move into a new home to renovate. Each house has its own character and your family will change how you live in response. The new bathroom you plan may turn out to be in the wrong place. The porch might be much better larger or with second door leading into another room. Or really, the first thing you should have done is put in a new heating system!

The best jobs I have worked on are ones where we weren't hurried. I don't see the best solution when I design too fast. Owners make mistakes when they don't consider their choices over time. Builders aren't quite as proficient when they don't have time to step back and think out the whole construction process. This is especially true with old houses, where no job is quite the same as the last one.
If this is a house you want to live in a long time, take the time to do it right.


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RE: Whether to buy or not...

I agree the time frame is a little crunched. It can be done if you don't set such strict limits. And I'd want someone with substantial old house inspection experience/knowledge to look at it before I believed how much extensive work it really needs.


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RE: Whether to buy or not...

Jetgr has given you the best advice about not doing stuff until you've lived in the house for a year, or so. Surely there's some form of heat, so you don't need to change the entire heating plant right off. Things you think you may need to do could easily disappear, and I guarantee stuff that isn't apparent now will demand attention and buckets of money.

Make an offer on the house for what it's worth now, and either the sellers will accept, or not. They will have the same issues with other buyers if the defects are obvious. After you've owned it for a period, with your good credit, take out a HELOC and make some repairs and changes as you find necessary and have the time, patience and funds.

People have gone a little nuts over the resale calculations of houses. A house that you live in should primarily be shelter appropriate for your family. And while you would be wise not to over-improve relative to prospective resale your life will be simpler if you think of renovations as something that will improve the quality of your experience, and only secondarily increase the size of your bank account. Unless, of course you're a serial rehabber/flipper, but it doesn't sound like that's what you're about.

If the house would be great for your family, and you can afford to buy it at a price that will still leave you money to renovate it as necessary down the road, then it's a good deal for you.

Old houses take a special frame of mind and many are greviously damaged by owners doing an up-front "This Old House-style" renovation that turns old houses into shells around gutted and revamped interiors.

You mentioned an "assessment amount" (210K) did you mean appraisal, i.e. market value or did you mean tax assessment? If the later, you can prettty much ignore that number in your calculations of price since tax figures are not the same as market value or sales price. Tax assessment figures almost inevitably lag (going up and down) the trend of sales prices. Up-to-date appraisal numbers are more accurate, and "comps" will be in the ballpark, too.

And don't put any weight on what the real estate agent tells you that you could sell a hypothetically-renovated house for at some point in the future. Real estate values are too volatile, particularly right now.

HTH,

Molly~


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RE: Whether to buy or not...

I've lived in, rehabbed and loved a number of old houses through the years. The only thing I can tell you with any certainty is that the time frame is overly optimistic. If you choose to take on this act of love, and believe me breathing new life into an antique house is just that, I'll stand in line to say that it's something one usually does over a period of time. Unless you rip everything out and essentially build a new house on an old frame, much of the existing structure will be custom built, not necessarily standard and made of material only Bill Gates could afford to use today.

If you are just buying this house because of perceived resell value, or that is fits your needs (but could just as well be a new build) then give it some thought before you tie into it. One buys old homes primarily because one wants an old home. There are eccentricities with old homes, and most of us who have them, accept them as part of the package.

I have lived in this house for 22 years. I am not done with it yet. Some of the cosmetic stuff I did then has been done a second time again and each year brings on a new project. Some are minor (mudding a wall and painting) some are major (new stucco, chimney removal, tearing the floors out of two rooms down to the dirt below, putting in a septic system and doing a complete rewire and roof, and getting central heat.

I think your biggest danger when buying an old house is when a previous owner has spruced it up for the purpose of resale. They tend to hide things under panels, drywall,and lots of wallpaper. I'd rather see a dilapidated do it yourselfer or even a cobbled up mess than one of those where things have been purposely hidden.

It sounds like you are doing everything 'right' inasmuch as everything else you said seems very logical and well thought out and you don't appear to have rosy glasses on. You KNOW some of the house's basic faults and have addressed them.

Know also that when and if you ever sell the house, a lot of people will covet it, and want it but be afraid of it for all the same reasons you are. Most of my friends who are in love with my old house wouldn't take it on as their home when push comes to shove. It's a niche market no matter how much you have renovated it.

In our area, believe it or not, the tax appraisals on old homes tend to be disproportionately high. I bought (a few ago) and just sold an 100 year old home a few months ago. The appraisal for taxes was twice the home's actual value at which I purchased it. It depends on how your real estate is evaluated. Here a major part of it are things like square footage, number of rooms, type of heating plant, and mostly school district. I ended up selling it for more than the tax assessed value, but not after I put most of what would have appeared to an onlooker as profit back into it.


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RE: Whether to buy or not...

Winspiff, do you live in a big city? The prices that the contractor quoted you sound low to me. I bought the same type of house two months ago--almost 200 years old with foundation problems and in need of central air/heat, new plumbing, bathrooms, and kitchen. I have a contruction loan--I took out $60,000 to purchase the house and $80,000 to renovate, though I think that I will need closer to $100,000 and that's for the most basic kitchen and baths. Since I haven't yet used any of the money set aside for the renovation, I only pay a note on the $60,000--so the note's really small right now--less than $300/month.


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