Author Topic: Need advice on buying well/smart  (Read 3622 times)

Weedy Acres

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Need advice on buying well/smart
« on: July 15, 2014, 04:44:14 PM »
We're currently living in a small house in a working class neighborhood in a small town in the midwest, and are DIY renovating it, with completion estimated by the end of this year.

There's a house around the corner, which we've been eying for a few months.  It's got more curb appeal potential than ours (all brick), is a little bigger, and has a fantastic garage (we have none).  We've never seen the occupant.

Last night we saw cars there, so we knocked on the door and got a tour and the scoop: resident is a widower, went into a nursing home a few months ago, and family is burdened with cleaning out the house and selling it.  Our chance to swoop in and buy pre-listing!

So my question is how to determine a good (for us) price.  It's a fixer, probably worth somewhere between 30-50K now, ultimate value maybe 80-90 when beautified, but that bumps up at the upper limit of the neighborhood.  And 30-50K is a big range.  I think it has a mortgage (will check at the courthouse).  And I know the family feels overwhelmed.  It's completely full of stuff now, a few nice antiques but a whole lot of junk.  I don't even know the square footage, or the other normal stuff the realtor pulls out of the MLS.  We would do this without a realtor, but I'd like to get the info plus some good comps to tell me what the upper ceiling value is, what the current owner bought it for, etc.  What's the best way to go about doing this, and then how can I best spin a low offer to the family?  What makes an offer appealing in such a case?  How have you approached similar situations in your real estate empire building?

Because we're mid-remodel, we'd likely commandeer the garage, do some basic fixes to the interior and rent it until we get our current house done.  Then we'd renovate and eventually move in.  It would probably rent for about $700/mo.


Milspecstache

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Re: Need advice on buying well/smart
« Reply #1 on: July 15, 2014, 07:14:52 PM »
What does zillow say?

I would start with that and then call to get estimates to haul the junk off and make any repairs.  Then subtract those estimates from the zillow price.

Zoot Allures

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Re: Need advice on buying well/smart
« Reply #2 on: July 15, 2014, 07:29:03 PM »
I thought of Zillow too, though not to get an estimate of the home's value. Those "zestimates" don't seem very reliable. But Zillow will also show you recently sold properties in your neighborhood, as well as the sales history and tax history of the house you're looking at.

mooreprop

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Re: Need advice on buying well/smart
« Reply #3 on: July 15, 2014, 07:35:19 PM »
In my midwestern town, Zillow shows prices and rental values that are too high for most houses.  I would use that only as an estimate of top dollar value after you finish fixing it up.  You need to look at the prices of homes that have sold in the neighborhood in the last 6 months that were not in top condition.  A realtor may be able to provide these. 

The best way to spin a lowball offer is with cash.  I bought an estate house this year for a good price because I offered cash (from my line of credit) and told the heirs that they could leave anything that they did not want and I would dispose of it.  This helped take away their stress since it was a fast closing with no contigencies and they could walk away with their money.

Weedy Acres

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Re: Need advice on buying well/smart
« Reply #4 on: July 16, 2014, 09:06:06 AM »
Zillow is absolute junk here.  It even screws up actual sold prices.

A trip to the courthouse told me:
Original mortgage in 1996: $70K
at least 6 refi's/2nd mortgages since then
Most recent mortgage in 2006: $87K
The owner has a creditor judgement on him from March.
Methinks he's likely in arrears on his current mortgage and this would be a short sale.   The plot thickens.  Advice on how/if to proceed? Should/can I contact the bank (it's a local credit union)? Is there any hope of gaining traction there?

Assessor also told me taxes are $2900/year and estimated market value $100K (she said assessment x 3 = market value is the rule). That's very high taxes for a house this old, usually seen around here on <20 year old homes worth $175-ish. Our house is worth $60K and taxes are $600/year. So I'm not real keen on quintupling our taxes.

I need to find an appraiser to help me with comps/market value, and see if anything in the neighborhood can really sell for $100K.

Weedy Acres

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Re: Need advice on buying well/smart
« Reply #5 on: July 16, 2014, 04:40:37 PM »
And some more info, courtesy of the assessor's office:
Built in 1935
1801 sf + basement
Last purchased in 1996 for $87,900
Assessed value: $37,000
Market value rule of thumb: 3 x assessment = $111,000

That's $61/sf, which is in the ballpark for a fixed up house in this vintage/neighborhood.  I just don't know if the neighborhood would support that absolute dollar amount.  A couple nice houses in the $100K range in the area have sat for months. I need to get more "what's sold in the neighborhood" info.

What are your thoughts on whether we pursue this as a short sale?  And if we do, do we work through the owner or go directly to the bank?

Must_Stash

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Re: Need advice on buying well/smart
« Reply #6 on: July 16, 2014, 05:48:19 PM »
Wow!  Hope you keep us updated.  You've done a lot of digging.  I doubt the 3X assessed value= market value, though.  Assessments in my city don't reflect cosmetics/updates or moderate condition issues, although those things have huge impact on "market value."  My fixer-upper was assessed at the same value as my neighbors' well-maintained houses!  This is despite visibly deteriorating fascia (since replaced).  And I purchased it for well below the selling prices of well-maintained homes.  Like 25% below.  Mine too was an estate.  When I offered, it was a "get back on the horse" offer, after losing out on another property.  I tossed out a low number and they jumped for it.  Just too much of a project to be embraced by an unprepared relative, or anyone who's not mustachian I think.

I've never heard of a short sale that didn't begin with the seller going to their mortgage-holder.

Fishingmn

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Re: Need advice on buying well/smart
« Reply #7 on: July 17, 2014, 10:37:45 AM »
If it goes to a short sale your chances of buying it below market are probably not great.

Every bank is going to require a BPO (Broker Price Opinion) from a realtor who will do a CMA to determine value. The bank (or banks) would be unlikely to accept a large discount from what they believe is the market - especially since the house was never exposed to the market in the way of being on MLS.

Weedy Acres

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Re: Need advice on buying well/smart
« Reply #8 on: July 17, 2014, 05:00:35 PM »
Well, I stand corrected.  Zillow has apparently mended its past ways and does now have accurate local sales prices.  And in the past couple years several houses in the neighborhood have sold for >$100K.  There is a strip of larger homes on less cramped lots in the area that makes me feel better about the potential of this one to top $100K when fixed up.

That said, there's still the unknown of the short sale.  I called the owner's POA last night to chat and learn more, but haven't yet heard back.  It sounds like I've got to involve them, since we're in short-sale land right now, and that it's a bit of a crapshoot.  I will try and learn if the house is close to foreclosure, as it seems like that would be a simpler process.  Would the bank talk to me about such things if I were to stop in?  Or is it an "only with the owner's permission" type of deal?

Weedy Acres

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Re: Need advice on buying well/smart
« Reply #9 on: July 25, 2014, 07:07:23 PM »
Another update:  a week ago the POA called me back and said they were listing the property with a realtor.  The realtor called me, but had no info on the house (size, asking price).  Said she'd gather the info and get back to me in a few days.  Now, a week later, I called her back.  It sounds like the owner's POA hasn't made up their mind on the price, and they've apparently decided to spiff it up a bit.  The realtor mentioned cleaning the carpets, which is the least of the house's problems.

The POA does live 4-5 hours away, so they probably don't understand the condition of the house.  But there's no way a bit of clean-up is going to make it worth more than the mortgage. 

I'm tempted to call the realtor back next week or meet with her and say, "look, there's an $80K mortgage on this house.  These poor, overworked relatives are probably doing what they think is best for the owner and his estate, but the fact is, shampooing the carpets isn't going to make the house sell for more than is owed on it.  This is going to be a short sale.  The owner's not going to get anything out of it.  If I were you, I'd advise the POA to save their time and energies, sell it as-is or let the bank take it and deal with it."

Thoughts?

AlexK

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Re: Need advice on buying well/smart
« Reply #10 on: July 25, 2014, 07:59:13 PM »
I wouldn't get too involved in this deal emotionally or time wise. They seller could have a number in their mind much much higher than the actual value. It could take months of the house sitting on the MLS before they come down to reality. If the seller accepts your reasonable offer and it goes to short sale, the bank will be the one who decides. If the seller rejects your offer, it probably isn't a deal after all.

Weedy Acres

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Re: Need advice on buying well/smart
« Reply #11 on: August 05, 2014, 04:29:55 AM »
Update:  I stopped by the bank that holds the mortgage.  They wouldn't disclose anything, which I appreciate, but it's not an impending foreclosure, so we won't get anywhere right now except through the owner/POA.

We're not in a hurry on this, and we're not sure it's going to even be a good deal, so we're just going to bide our time and see what the POA decides to do.  No major cleanup going on as yet....