Author Topic: Dumping more money into property or sell condemned?  (Read 727 times)

leroyjenkins

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Dumping more money into property or sell condemned?
« on: March 24, 2019, 04:16:50 PM »
I apologize for the very generic thread title, is a lot more complicated than that. My mother-in-law is facing a balloon payment soon in the next two years on the dilapidated 1 bedroom house my wife and her grew up in as a single-mother household. Her mother still resides there, and we've been attempting to figure out the best course of action to get her out, sell the house, and pay off the debt left on the house.

Their current course of action is restoring the house to a state which it can be sold with no issues, and hope the sale amount significantly reduces the remaining balloon loan payment. This is difficult, given MIW more or less couldn't afford to maintain the house over the decades and it fell into disrepair. They're close to paying off a small loan that updated all of the plumbing, but still would have to shell out for roof repairs, structural floor repair, electrical update, and a portion of the house that is very likely plagued with black mold. The plumbing more or less was needed so she could continue living there.

MIW heard about those federal "grants" for revitalizing run down houses in rural farming communities, and seems convinced it would be a better solution in terms of interest than throwing down more loan money at another bank. Of course from my perspective you're simply adding another loan (which really is what the "grant" is in the end) on top of the current balloon loan you can't pay off, just to pay off the balloon. To her credit however, I read that condemned properties sell for less than the land it sits on if the house wasn't there to begin with. This makes repairing the house seem like a no-brainer but I'm not entirely convinced. This is a small house in a small town with a declining population and underwhelming housing market. I would guess that the expensive repairs would eventually total what the original loan was, but a price that high couldn't be justified years later on the market in this dying town, even if it was functional and clean.

Obviously researching what similar dilapidated houses are going for in the area would help. I also forgot that the WeBuyUglyHouses type companies exist, but only consider that as a possible last resort. Looking for other avenues, routes of advice that I'm ignorant about or haven't considered if any. I know this is a pretty specific detail oriented question, but any suggestions or discussion is appreciated. Thanks!


Another Reader

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Re: Dumping more money into property or sell condemned?
« Reply #1 on: March 24, 2019, 04:45:27 PM »
The ugly house buyers will not be interested if more is owed on the property than it is worth.  Depending on MIL's credit needs, handing this one back to the bank might be an option.  That or a short sale.  If she is going to move into a rental or in with you, future credit might not be necessary.


Freedomin5

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Re: Dumping more money into property or sell condemned?
« Reply #2 on: March 24, 2019, 05:38:23 PM »
What do the numbers say?

What is the house worth in its current condition? Get a realtor to price it for you (don’t just randomly guess).

What would the realtor want to see fixed up, and what would the house be worth after the imrovements?

How much will repairs cost? Get a contractor to give you an estimate, then add 10-15% on top of that estimate for unexpected expenses.

What are the details for this “grant”? It’s all hearsay at this point of time — does your MIL even know the name of the grant and has she read over the terms and conditions? Read over it with her to make sure she doesn’t miss any of the fine print.

If the realtor thinks you can recoup the costs of the renovations, then it might be worthwhile to go for it. Otherwise, just get as much money from it as possible and walk away with the loss.

leroyjenkins

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Re: Dumping more money into property or sell condemned?
« Reply #3 on: March 24, 2019, 06:52:46 PM »
The ugly house buyers will not be interested if more is owed on the property than it is worth.  Depending on MIL's credit needs, handing this one back to the bank might be an option.  That or a short sale.  If she is going to move into a rental or in with you, future credit might not be necessary.

Hi Another Reader, can you expand simply on "handing this one back to the bank"? I.e., selling house to the bank? Forfeiting the house to the bank? What's the legal technical term for such an action you're suggesting?

Miss Piggy

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Re: Dumping more money into property or sell condemned?
« Reply #4 on: March 24, 2019, 07:18:07 PM »
I suspect Another Reader means letting it foreclose.

Another Reader

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Re: Dumping more money into property or sell condemned?
« Reply #5 on: March 24, 2019, 07:27:12 PM »
Foreclosure or deed in lieu of foreclosure.  Short sale means selling it for less than the remaining principal and accrued interest and the bank accepting that amount.  Any of these options ruins the credit of the borrower.  However, they may be less expensive in the long run, especially if the property is in a non-recourse state (the bank can't come after the borrower for the deficiency).

Rick Imby

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Re: Dumping more money into property or sell condemned?
« Reply #6 on: March 27, 2019, 06:42:08 PM »
It depends a lot on the state of the market in the area.  If she has been paying on the loan a long time there should have been significant paydown.

It is amazing what painting and cleanup can do to change the outlook of a property.---A lot of it is just sweat.  Black mold is not a big issue---in my opinion---spray on bleach and a bit of scrubbing and it goes away---my advice is worth what you pay for it---nothing--grin.  It occurs naturally in probably over 50% of houses--especially in exhaust fans of bathrooms. 

Get a contractor you trust over to look at the house--or pay for a house inspector to inspect.  If you are there when the inspector is he will probably give you a ton of ideas on what to do.  $250 well spent.