flipping a house with major issues

[Frankies Girl]

My dad passed away last year. My sibling and I have equal shares in his house - our childhood home. It's a small 1100 sq ft 1950/60 ranch and the house should have been worth around 120K.

But he was a hoarder, and we just spent 3 days with a professional cleaning crew and four dumpsters to cleaning it out. (rotting food/mice/bugs/household items and filth).

Good: Hardwood floors (in restorable shape), 2 year old roof, new siding/soffit and windows, structure sound and it's a cute house. Great little neighborhood and beautiful large lot with lots of mature trees and a brand new 30 x 20 ft garage workshop in the back (he had built but didn't live to see - so not used or junked at all).

Bad: Black mold in a bedroom and bath, 1.5 baths need down to the studs remodel (gross or broken everything), kitchen needs gutting, electrical, plumbing, HVAC systems all need major updating. Water heater probably as well. Recommended to replace all the drywall in the house, paint and remove several trees (60-100 footers planted 40 years ago) in addition to some smaller, with basic yard cleanup. Flooring in kitchen and baths is nasty.

The cleaners (not local, and no vested interest as they would not be getting anything for recommending) believe that for a $20,000 investment getting all the above fixed up (builder grade bathroom and kitchen cabinets/fixtures), we'd probably get at least 80K. House is paid off, so that would mean 60K profit. We have the investment in cash and can afford the wait to get it fixed up. They also said that the whole "black mold is the apocolypse" thing is a bit of an overreaction - get someone in that knows what they are doing to strip down to the studs and remove the mold and put in new insulation and drywall and there is no problem.

I live out of state and can't take off to do any of this stuff myself (I'm already using 2 weeks to get the cleanout done and get household donations, old appliances, and a popup camper with a broken axel hauled off and other stuff set up), and my sister is not the least bit frugal or interested in DIY, so we would be getting contractors for all of it. But good news - the next door neighbor is an amazing person we've known for a while and he loved our dad and has been amazing about offering whatever help he can, and is an electrician/plumber. The AC was out for most of the first day, and when we went to ask if he had a guy we could call, he came over and fixed it himself i about 10 minutes. He has contacts for practically every thing we need done (may need to get a specialist for the mold remediation). So we'd get a discount for being his friend, and he lives next door and would help monitor and supervise everything.

I'm still pretty shell shocked from the cleanout (hoarding is horrible and it's really been just heartbreaking all of the garbage and things that were ruined due to mice/bug or liquid damage) and I am pretty sure this is a good idea, but is there anything I should be aware of in this sort of situation? Neither my sister nor myself have ever had to handle this sort of thing, so advice or info would be super.

(would like to ask if ya'll could please be not be judgy if at all possible about the contracting out. I know that part isn't very mustacian, but I am having to spend 2 weeks of my very meager vacation time covered in garbage and sweating and bone-tired and also dealing with the fact that my father lived in filth and it probably helped to kill him, and then seeing most of my childhood and family treasures thrown in a dumpster - I'm a bit fragile right now)

[ncornilsen]

What do you think you could get for it, as is? 

[ep114]

That must have been really difficult for you and you sister. Actually I can't imagine NOT having paid help. 
Perhaps you could talk to a realtor and see if you can sell it as is.    Being frugal and smart about money is great (and that's why we're all here!!) but trying to organize this remodel, especially from far away and with the emotional element of your father's recent death and hoarding might be a bridge too far.

[Bank]

First of all, condolences on the loss of your father.  That is very tough. 

As for the home, the value proposition is pretty strong for a remodel, but you need someone there you can trust.  Is there a potential to enter into a business arrangement of some type with the neighbor where he gets a percentage of the value add and handles most of the legwork?  If were him I would jump at the chance to improve the neighborhood, do a good turn for a friend's family, AND make some money.

[Steve Ainslie]

Condolences on your father.  I am sure that is tough.

I will be in the same situation in a few years. I am not handy in any way and live several states away from my mother.

First off, know that it is not just your father and that it is not your fault.

I knew my mother was a "slob" but had no idea she was a hoarder until I moved her in with me 9 years ago while she was recovering from surgery.  Before sending her home, I went to visit her house and this is how I will describe it...."Imagine taking a small 3 BR house full of stuff, dump at least 10 years worth of trash, newspapers, and unopened items on the floor, open all cabinets and drawers and stack items in/under/on top.  Now turn the house upside down and shake it all up then cover with 3 years worth of dog piss and shit."

I was pretty horrified and couldn't send her back to a house like that.  I told her I would help her with this and in my naivete I thought if I could just help her get a fresh start, she would be able to live like a normal person.

So I hired 1-800-Got-junk and 3 dumpsters, 8 guys and 2 days later we had thrown out everything except the sofa, TV, computer, appliances, and BR furniture.  The crew used shovels and 80 gallon bins, air masks etc. and I could not save the real treasures because it went fast and was overwhelming.  Then I swept and mopped and scrubbed. 

My mother wouldn't talk to me for months afterward.  She said I had thrown out her entire life. The whole experience pretty much sucked. 

2 years later my sister told me the house was the same as before.  Now it is 10 years later and I am certain it is awful.

When my mother passes, the house will go to my sister and me.  In fair condition it would sell for about 60K. It will have a mortgage balance I estimate of around 30K.  My plan is to front the money to do another clean-out, pay someone to scrub down the walls and floors and then sell it at a lowball price to someone who wants a handyman special to gut and flip or live in it.  If we cannot sell it without a loss, the bank can foreclose on it.

My sister can keep all the profit.



 

[footenote]

My sincere condolences both to Frankies Girl and steveinNC. This is a serious disorder and (like any serious disorder) it's very tough on the families impacted.

Frankies Girl - More support from me on not DIYing this task from a distance!

Many great suggestions here, I'll just add one more: have you considered paying to have the structure leveled and selling the lot? It could be cheaper if there is a market for buildable lots in that area. The lot sounds gorgeous.

[aj_yooper]

I am saddened by your loss.  It is a very difficult thing to empty the family home after a death and, if there are complications, it is a lot harder.  We had to sell my dad's house and we were all not in the area; it took awhile. 

Some things that I would do:

Make sure you pay the home insurance and taxes.
Retain a local real estate lawyer to help you with the process. 
I would get a market analysis (typically free) from several realtors who are familiar with your dad's neighborhood.  Find out what the as is value of the property is now.  That might be a cost and time efficient way to proceed.
Ask the realtors who does a good job of mold mitigation in the area. 
Most people would not have the expertise to handle the house issue so use contractors and know it is the best way to go.  If you decide to rehab the house, use licensed, insured, bonded professionals for the mold mitigation to protect yourself from any claims that you are trying to scam buyers.

[SnackDog]

Get three reputable realtors to appraise the house, as-is.  Make sure they understand you need a fair valuation and not just a high one to get them a listing.  Make sure they provide extensive comparables in their analysis and  that all three are within 10% of one another.

Show this to the contractor guy next door.  Tell him you want him to project manage the refurbishment and you will pay all receipts he provides.  Then instruct him you will split with him, 50/50, the difference between the current average value of the house and the final sales price minus realtors fees.  This is his profit motive and will keep the refurb costs low and/or at their best value.

[Another Reader]

Because I work in animal rescue as well as invest in real estate, I have been asked to deal with a couple of these.  When selling any house, there's a huge value difference between an as is sale of a house that cannot be financed and a house in minimal financeable condition.  Usually the financeable value is so much higher, it's worth doing the work when it's feasible to do so.  However, if the damage is structural, even flippers may not take the risk. 

Seek out the advice of experienced agents as aj_yooper suggests.  Hoarding is actually fairly common, so an experienced agent likely has dealt with it.  We had no problem finding agents that prepared before and after values and had contacts for repairs.  I would be wary of using the neighbor without references. 

Mold mitigation can be very bureaucratic, so get someone that is licensed if the infestation is severe.  Surface mold can be cleaned - detergent and a lot of bleach.  Fresh air and sunshine will prevent most recurrences.

From what you have said about your sister, I would not want her involved in the project in your shoes.  I might consider buying her out based an the current "as is" value if it makes sense to do the rehab.  If there is a lot of emotional noise from her over the house, I might consider just selling it as is for your peace of mind.

[totoro]

Sorry about this and your loss.  I feel overwhelmed reading about everything.

One thing that strikes me is that the home should be worth 120,000 but you are only looking to get 80,000 after a 20,000 investment.  Where is the additional 40,000 and what would it take to get there? 

[Frankies Girl]

Thanks so much for the condolences. It's has been pretty difficult dealing with all of this...

Basically, the house "as is" would not sell for much. It has never been updated since it was built, so original 1960s plumbing, cabinets, fixtures, etc. The wiring is pretty crappy - we're just lucky that there was a box of fuses next to the fuse box as it took the old screw-in type fuses and that might have been a problem locating now!

Selling "as is" would net us around $20-40K. Selling for land value, would probably net on the low end of that estimate (I researched the property values in the area and land values as well before I came in). We have a realtor scheduled to do a walk through to discuss on Monday, and she is familiar with hoarder house situations and can give us the numbers but I'll be surprised if I'm far off the mark.

The amount of rehab - 20K investment - would bring the price up to 70-80K (instead of the 100-120k average) because even with us doing basic renovation, the house would still need major updating to match up with the others in the neighborhood. The ones selling at 100K and up had the one car garages converted to dens, kitchen reconfigurations and expansions and the master bed/bath expanded out to be a master suite (the master is a small room and the bath is a half - toilet and sink right now). We're not going that far as we aren't interested in that extent of renovation since our goal is to get it in nice enough condition to sell and the buyer can do the updating and expansions themselves.

Next door neighbor would not be doing any of the work, but would not mind supervising the renovations. He probably won't take any money - but we will offer it. We don't want to lean too heavily on him as he's already done so much. He has been mowing the yard and cutting down the overgrown brush, and hauled off many, many truckloads of junked and rusted crap dad had built up in the backyard, and he wouldn't take a penny for all of that... he's truly a neighbor and a friend that anyone would be lucky to have and knowing that he won't take money I don't want to take advantage of his good nature. Sister and mother live about an hour away, and mother actually could come check work progress as well, so I think we'll be good with the supervising of the work itself.

The mold situation was caused by a leaking window - windows were replaced last year to prevent further damage, but there is mold discoloration right under the window in a small area (you have to look for the mold tho as it really just looks like water streaking), and in the master bath it was caused by him piling food items in there and leaving the door closed for the last 20 years. Neither areas look really bad - but we don't know what the inside of the wall will reveal. Still, I don't think it's going to be super difficult to remove, and we'd be redoing all the house drywall most likely anyway.

GREAT idea about tapping the realtor for her contacts - I'm sort of brain dead exhausted still and that didn't even occur to me!

And definitely will make sure all of the contractors will be licensed/insured/bonded or we won't hire - I don't want that kind of headache.

Will check on the realtor for firm reno/pricing advice and resource on mold removal specialists. I also have a lead on a home inspector that we could call in if necessary, but we'll also check to see what contacts she has as well. I have two other realtor contacts that operate in the area, and will call them in if we get the least little bad vibe off the first realtor, but we've heard good things about this one.

Sister is on board for reno up to 20K (she's iffy if it goes over) but she'll take whatever the realtor says under advisement. She's good with listening to expert opinion, so I don't think buying her out is going to be necessary (and not sure how that would go over either, so probably not on the table).

All utilities and taxes are being paid through the estate (sister is executrix) and we're good on those for the foreseeable future. House is paid off and there is nothing outstanding at all other than the extremely low utility bills. Honestly, with 2-3 months renovations, I'd be surprised if we didn't more than double our initial investment.

I do not want to sell the house "as is" since that would as far as I can see mean that we'd probably walk away from somewhere in the neighborhood of $20-30,000 pure profit. I just can't do it. I also kind of feel like it would be cathartic to get the house fixed up and beautiful again and sell it to a family that will love it and put into it what it should have had all along. Sort of a exorcism of all of the ghosts and bad memories with a cash bonus. 

and steveinNC
I am so sorry for you and your family being in similar circumstances. I never took the step of forcing a cleaning on my father due to his violent refusal and denial about the situation, but I was really close many times. Everything I've read indicated that without intensive counseling to deal with the OCD hoarder's mental issues first, that they will return to the same levels as soon as they are back in their (cleaned) homes, and your experience just confirms what I already suspected. You tried, and you should not feel bad about that - it is a serious sickness.

I'm going to have nightmares over this situation for a very long time, and I truly sympathize with what you're going through. It is just so damned stupid and frustrating and heartbreaking that you can't just fix it somehow. I think you're smart for stepping back and just will deal with it when you have to. If your mother isn't willing to face what she is doing, then you can only do so much. I have no idea if you've tried getting her to go to counseling, but if you can, just keep pushing for her to get help.

Have no idea if this would even register, but can tell her that for my family, my father's hoarding shortened his life, caused him injury and sickness, caused strained relationships and has tainted the memory of my childhood and my father. There were many angry words said and many tears shed, and all of this could have been prevented if dad had just admitted he needed help and then let us help him - both with counseling and with cleaning his house. Your mother is going to leave you and your sister the same legacy, and that is wrong. Material items are not worth destroying and hurting your family for, and hoarding is doing exactly that.

[Frankies Girl]

Minor update:

I'm back from the initial cleanout and whirlwind of contractors and have had some pretty surprising news...

The house is in good shape overall. Solid construction and no real issues other than very minor updating and repairs (and cleaning).

The mold is contained in one area and cleaning it out and getting it certified clear won't break the bank. The electrical will not be a whole house replacement as the wiring is excellent - just move and update the fuse panel (had screw-in fuses and the panel was located inside the master closet - has to be updated to breakers and increase the load so as to handle modern day appliances and electronics, and update the outlets and such). The walls, while dirty, are mostly solid; just replace drywall in kitchen, baths and master pretty much. The fixtures and cabinets are all easy to replace with builder grade items. The floors... wow. When we got the carpet out and other than being dirty, there was still a slight gleam on them and the main areas will just be a light sanding and reseal. Some painting, landscaping and cleaning, and it's going to be amazing.

The realtor was super - she's really helped with the contacts, and we also had the awesome neighbor as well, so my sister and I really just have to get the contractors going.

I'm exhausted and sad, but this house for a very reasonable investment is going to probably return at least double if not triple the cost of the remodel. I'm also pretty excited about seeing it clean and pretty and hopefully loved again.

[Rural]

That's wonderful news, and I'm so glad to hear you got some good news now. Congratulations and keep on handing in there!

[ep114]

Fantastic news.  You (and your sister?) did a great job turning this around.

[iris lily]

Ok, you've said that you won't sell "as is" but that's what I would do, given your long-distance status and the fact that you've got to put money into the thing with your plan.

We buy gut rehabs in my city and I know that there are people with cash who want a project house. But perhaps not so much where you are. If the market is slow, the cash developers aren't milling around.