thinking about buying this reo home-need some input please=pics

14 years ago

We found this REO property in a really nice area, but like most foreclosed homes, it needs a lot of work.

The house first listed for $139k in April, dropped to $129k in May and now dropped to $119k, so it seems the trend is going down $10k every 30 days that it doesn't sell. The county property records list the FMV around $155k but homes in the subdiv. go for way more.

My unknowledgable "guesstimate" is that it probably needs about $50K in repairs/improvements. I'm going to see it again beginning of the week to decide whether or not to place a bid on it.

I'm wondering what type of offer I should place on it. At first I thought $90K then $84K, but after reading some of the posts on this board, I'm wondering if I should start lower.

If I do decide to put in an offer it would be contingent to inspections. The electric wasn't on, but when my REA called the lsting agent they said we just need to hit the breakers. If I don't get it, I won't be heartbroken, I like the house but I don't absolutely LOVE it.

I'm going to have a handy man meet us there when I go and if they accept my offer should I decide to put one in, I'd have a full inspection done, including the necessary mold inspection.

I know there's a problem with the roof, (there's some water stains in the ceiling) wood is rotting in areas around the exterior, needs 2 new single garage doors, back patio that may have been a sun room is basically a shell, needs a lot of cosmetic work as well. What I don't know is...if it's electrically sound - for some reason they took off the breaker box door and frame so I see LOTS of wires. If there's any problems with the septic tank, termites, pipes/plumbing, etc. etc.

From what I could find out from public records was that a loan of $118K was taken out, for a 15 yr mtg. What I don't quite understand, and it may not make any difference whether I do or not is that I was able to find info that the bank "bought" this property for $20K 3/2008 and then again, with the same owner listed, and the same bank in 3/2009 for $2,500.

Can anyone who's gone this route give me their opinion on what to possibly offer for this house? If it helps, I would be doing a cash deal as my parents will be giving me a mortgage so the bank wouldn't be waiting for me to get a mortgage.

Thanks for any input!

Comments (8)

mariend
14 years ago
last modified: 9 years ago
You might consider a structural engineer to look at this house. Many things can be repaired, but if the main beams are damages, and you have to replace walls, siding, instalation, electric etc, it could be more than it is worth. There is no way a reg. HI can handle this. You probably will need permits, etc. DO NOT turn on the electric. Probably new wiring, and plumbing. You may need a new septic system also. Are you in a area you can talk to the building dept? Check to see if there are liens on the house? like water? electric? You will also need a RE lawyer , and a clear title. Personally, just looking at the house, I would not buy it.
Linda
14 years ago
last modified: 9 years ago
Its hard to say what someone should offer when we dont know the market in your area. Making an offer based on what a current listing price is, in most cases, pointless. In foreclosures, typically the house is valued higher than the listing price. Appraisals typically have had many appraisals done before it hits the market right up until the time it hits the market. Banks don't want to hold on to homes which is why they reduce every 30 days (most of them). You might be surprised to find out that there are multiple offers on this property when you decide to make your offer. Especially, if its in an area of higher priced homes. Also, I dont know how things work in your area, but in my area, the bank DOES NOT turn on water and electric for inspections on foreclosures, it is as is and you take your chances. You being a cash buyer is a good thing. They will consider your offer, even if lower over a higher offer submitted by a buyer who needs financing. Best thing to do is get the offer in there quick. They can be gone in a day.
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How urgent is your need to buy a house? Could you move into a rental while you look for something that meets your needs? There is a serious misapprehension about old houses that many people get stuck on. It's not an either/or proposition to live in an old house Tthere is no need not to have modern conveniences if you want them: this means electricity, running water, central heat, indoor plumbing, etc. You can often re-designate rooms to more modern uses; i.e. small rooms adjacent to bedrooms can become baths and former sitting rooms can become kitchens, for example. In a general way none of this is harmful to old houses, because it is reversible. However, what really is unfortunate about many remodeling projects, though, is the relentless desire to turn buildings that were orginally made up of distinct rooms into the vast, trendy, spaces that define the modern open plan house. You can see this playing out in the large room in the pictures with the fireplace and the tuructural members exposed by the gaping loss of the partition wall and the four windows in the ell which is a clear - and glaring - example. On one hand you have the lovely fireplace, with its (likely orginal) fireplace surround with delicate Federal-edging into Greek Revival period detailing. But by tearing out the wall and exposing the wooden structural pieces you have a jarring style collision. Exposed (and now empty) mortice pockets and rough hand hewn beams while they look old-timey to our eyes were not intended to be seen, ever. Even on very early houses, exposed structural beams (like summer beams or gunstock posts) often had careful dressing, and even carefully made beaded molding profiles. And then there's the bank of windows in the ell. That room is likely a much later addition (late 19th, early 20 or even later) and may even have had that bank of windows when it was orginally erected. But the look of an array of windows like that is not a match with the rest of the now-combined room. And keep this in mind: houses weren't "thick" as they are now in an era where day time light was mainly provided by windows. So while there were often rooms extended backwards in wings, the massing was often only one room wide, or just two rooms wide on either side of a stair hall. You don't have to choose against modern functions, but you ought to think twice about any impulse to turn an old house into a facsimile of a modern house that is vaguely styled to look like old houses. In other words, you need to understand that old houses, especially really old houses like this one, were always divided into smaller, distinct spaces. If you want a modern, open-plan house, then buy a modern house and decorate it with details that harken back to former styles. As for how you train your eye: well, books like the McAlesters' is good for classifying housing periods. The Midwest has its own set of building traditions, but keep in mind that early settlers to there were likely immigrants from NE and the Mid-Atlantic regions who brought their building traditions with them. At first, of course, they lived in settlement-period houses which were often small and primitive, but as soon as practical they built themselves better housing, an example of that style is this house. It may pay to study housing styles of NE and the Mid-Atlantic regions. Do you have access to a public library? I'd start there by borrowing - and sending via inter library loan- as many of the glossy- picture books showing houses from the late 18th and early 19th centuries. Look at the size of the rooms, and study any floor plans. If you want to do this I could offer sme suggestions for titles that are especially useful. Another (though not with many pictures) excellent resource which every old house owner, including people who are considering buying an old building, should be familar with is the set of Preservation Briefs from the National Park Service. This series of essays is about caring for old buildings, from those of great historical significance (Presidential birthplaces, for example) to just ordinary old houses that are have become extraordinary simply by their survival. (I'll attach a link, below to this series. It will give you a working understanding of the issues surrounding older buildings which will put you light-years ahead of many old house buyers.) You do not have to live without modern conveniences; you do not have to spend endless amounts of money on a money pit; you do not have to live in an unaltered museum piece. But you really should think twice about buying an old house and promptly obliterating those distinctive characteristics that make it a cohesive example of an older building. If you want a modern-style open-plan design then, please don't choose one of the remaining old plan houses to impose this on. Now, the house example you have linked to has had a good deal of this destructive choice applied to it, already,so in some ways it may be a lost cause. But if you buy it supposing it to be an example that has not been enormously altered, you may be disappointed when you encounter its reality. As a starting point, and to begin to learn the vocabularly of old houses, start with reading the Preservation Briefs linked below. There is even one on inspecting old houses and inventoring their conditions, which will help you at the home-inspection stage. This house still has a good deal of "character", but has lost a lot of it in its updating. You shouldn't kid your self about that fact. 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There is one other thing I want to point out: Old houses reuire an above-average amount money or time, and sometimes both, from their owners. Their owners get a great sense of personal delight and satisfaction from them. But you can't realistically expect to reap those benefits without also expecting to pay those costs. Perhaps if you have no time, and don't want to make up for that lack of time by investing more money in having someone else do things for you, this is not the right time in your life to own and old house. There is no shame in that. Post back if you want a list of books to help you train your eye to see what's old, and what's just styled to look old. Liriodenron Here is a link that might be useful: Preservation Briefs, Technical Bulletins on caring for old houses
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ncrealestateguy
14 years ago
last modified: 9 years ago
Find out what the market value is for the home, subtract the $50,000 rehab costs, and then subtract another $20,000 for a buffer and a bit of equity at end of day. This is the number that you want to end up at, not start at. Your agent shoulkd have already given you the after rehabbed market value of the home.
Some banks will turn on utilities, some won't. Some allow you to put the utilities in your name during escrow so you can have them on during inspections.
Don't worry about what the last owner paid for it, or what the bank bought it for. Just figure out what YOUR numbers are and then go for it.
Don't worry about the first posters remarks... they probably are not used to seeing homes in disrepair. I see them everyday, and a lot of these are diamonds in the rough.
Good Luck.
Carol_from_ny
14 years ago
last modified: 9 years ago
Because this is a foreclosed home the less complex you make the deal the better your chances are for getting it. Making it contingent on it passing a bunch of inspections is going to sour the deal UNLESS you can get them done VERY quickly and at no cost to the bank. They've already lost money on the deal they aren't going to spend any more than they have to to be rid of the property.
Most foreclosed homes do have multiple offers on them and most take longer than you'd expect to be sold BECAUSE you often have a group of people from the bank overseeing the sale. Ever try to get a group of people to do anything you know it takes longer.
Having cash to buy helps and making that very clear in your offer is important.
A far as what to offer that's going to have to come from you based on a educated guess of what it's going to take to fix the place up so you can live in it. I've seen far worse.
eldemila
Original Author
14 years ago
last modified: 9 years ago
mariend, I'm definitely going to have the house inspected, wasn't planning on a structual engineer, but maybe the home inspector I go with will tell me if he thinks it's needed - I think, from the looks of what I saw (not that I really know anything) beams look fine. Wouldn't title insurance protect me from any liens the previous owner has outstanding? Will definitely ask the realtor all these questions tomorrow - for sure I want to protect myself! Why not turn on the electric if the listing agent says it's okay?? Why from the looks of it wouldn't you purchase a house if you got it at a steal??

linda117- not sure what offers have gone in on that house, if any. The area is gorgeous, and this is probably the worse looking house in that area, even after it would be spruced up. The house isn't exactly what I want, but the area is. Seems I have to make some adjustments of what I want, especially if the price is good. I can make the offer, they can reject it, and who knows, if nothing else comes in in time, they may just call me back. One thing that's good - I'm in no hurry. I've been looking for a longggggg time, and time is definitely on my side.

ncrealestateguy - thanks for the info - I love NC! The FMV that's listed as public records through the county is around $158k I think, something around that area. Is this the FMV you refer to, the one from the county? So, given your info, you'd say $78K would be a good offer to start, or to go up to? If you put in an offer through the REA, do banks counteroffer? I was thinking if I put in an offer to go $74,990 and see where it goes from there. If I have to only put in $50K in improvements, it would be a nice deal, but if I need to put more, I'd much rather try and get a house without so many problems and work that needs to be done. It's the neighborhood that's the keypoint, not the house (definitely not the pool that I really don't want either) I really appreciate the time and help!

carol, I expect to pay for the inspections and I'd have to do it quick as I'm going back home in a week and a half, so this would be quick. I don't know how long the bank will drag their heels with giving me any type of answer though, if it's after I leave, then it won't be so quick - I can't come back til mid August at the earliest due to a family wedding and people coming in and staying with us. That's been one of the hard things about finding a house in another state - not only am I not here, but finding a house with the critieria I'd like is hard - which is why I'm bending a bit with this house - not exactly what I want, but if I can get it at a steal, I'll go for it.

What I forgot to mention that I found about the previous sales was the first time it shows the amount due was about $154k and the second time, this past March, it was $150K Again, not sure if this means anything or would have anything to do with what the bank may sell it for.

I'll be going back tomorrow morning for another look, more pictures and more measuring. I'm also meeting a guy I met that knows construction for his opinion. Lucky to find this guy - he only lives 1 mile from the house. At least I'll have some insight to what needs to be done, at least what he knows. He doesn't do electrical, and some other things but at least I can get some information about what he thinks it may cost to do what he knows how to do.

If it's meant to be, it will - I'm a firm believer in this. I won't be upset if the bank doesn't take the offer I give, I'll just keep looking.

Thanks again to all who replied. I'm definitely interested to hearing more from anyone who'd like to give me their 2 cents. I've learned quite a bit just reading these forums!!

THANKS!!!!
mariend
14 years ago
last modified: 9 years ago
The reason I suggested talking to the building dept, is my DH was an inspector for a very large county in CA and was the rehab inspector. He saw and condemned many buildings per code more than most of us see in a life time. I too saw many of those buildings and since we have built houses and remodeled houses he is very knowledgeable. Thru the pictures, we saw alot of red flags. That is why I suggested talking to the building dept, mainly to find out what permits are required and how much. You will definitely need a electric permit, that is a federal requirement. As to leans? You will need a septic tank inspection. You might check with the electric company etc to see if anyone owes money. I am not exactly sure what the Title company will cover as each one is different.
sweet_tea
14 years ago
last modified: 9 years ago
From the photos provided above, the home seems to be a nice style and I think you should go forward with your plans. The issues that it seems to have are totally fixable . The needed drywall repair and even some of that replacement of rotted wood are not that big of a deal but are massive improvements in the "wow" category. Getting the leaks fixed (if they still exist) is the biggest issue,though a new roof or roof repair should solve that immediately.

The exterior rotted wood seems to be because they didn't have gutters/downspouts. So you might add those to your "to do" list as well.

One important thing to check - is there termite damage and/or termites?
brickeyee
14 years ago
last modified: 9 years ago
"You will definitely need a electric permit, that is a federal requirement."

Permits are a state. city, county thing, not federal.

thinking about buying this reo home-need some input please=pics

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thinking about buying this reo home-need some input please=pics

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