Author Topic: Should we buy a house for $7,000?  (Read 6289 times)

Landor n Stella

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Should we buy a house for $7,000?
« on: May 14, 2012, 10:38:58 AM »
So, a house just came up for sale where we live for $7,000. It's in very rough shape. I think we could make an offer and buy it for less than the list price. Details on the house include: 1 block from place(s) of work/school for both of us (a university), 3 bedrooms, 1 bath, 1 story, has fenced in lot, garage off alley. It would need many things to make it a comfortable house, but it's currently "liveable" right now, if your standards are low. Ours can be low for a time while we do improvements.

Considerations: We do not plan to stay in this area for more than 2-3 years, which is why we are renting currently and have not looked for houses to buy. We are somewhat-handy people, we have renovated a bathroom and put in windows and floors and doors before, so we could do most of the work to the house ourselves. If we can't do something, we have a network here that will be excellent for finding people with skill to help us. It's less than one block from the university, and the graduate programs at the university are growing, so in a few years when we want to move on, we will have the option to rent it out and also have pretty good flow of steady renters. Also, we know several local landlords that might be interested in buying it, or we could flat out sell and be pretty sure to make our money back. If we do rent, we will not be in the town, we will be somewhere else. Friends who are here would be able to help us show the house and keep an eye on the renters for us.

The land and structure is valued at $28,000 according to the city tax records, but that was 4 years ago at last assessment in 2008.

It seems like a good move, but I want to get your opinions as additional things to consider. What does the MMM community have to say?

Welmoed

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Re: Should we buy a house for $7,000?
« Reply #1 on: May 14, 2012, 12:03:34 PM »
Whatever you do, do NOT buy the house without getting a professional home inspection. Make sure the inspector takes a good, hard look at the underlying structure of the home (especially the foundation!). It's not a bargain if you find out you need to spend thousands to repair or replace a crumbling foundation.
--Welmoed (with my home inspector hat on)

James

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Re: Should we buy a house for $7,000?
« Reply #2 on: May 14, 2012, 12:24:44 PM »
Whatever you do, do NOT buy the house without getting a professional home inspection. Make sure the inspector takes a good, hard look at the underlying structure of the home (especially the foundation!). It's not a bargain if you find out you need to spend thousands to repair or replace a crumbling foundation.
--Welmoed (with my home inspector hat on)

 Exactly, you can't afford surprises.  You need to know very specifically what the house needs before determining whether it is worth it.  You also would need comparables for what it would be worth after repairs.  If other houses in the area have been sold recently with similar specs that would really help find the potential of the future sale price.

Norman Johnson

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Re: Should we buy a house for $7,000?
« Reply #3 on: May 14, 2012, 12:25:44 PM »
Why is it $7000? Does that seem in line with other properties in that location that are about the same? I ask because you couldn't even buy a lot in the murdery part of my city for $7000.

strider3700

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Re: Should we buy a house for $7,000?
« Reply #4 on: May 14, 2012, 01:02:05 PM »
if you do go the mortgage route definitely check the conditions on paying it off.   The penalties for paying it off early in the event that you move a year sooner then expected can be a hefty percentage.

velocistar237

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Re: Should we buy a house for $7,000?
« Reply #5 on: May 14, 2012, 01:08:57 PM »
Also, hire a good real estate lawyer. There could be liens or title issues and such.

Physics

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Re: Should we buy a house for $7,000?
« Reply #6 on: May 14, 2012, 01:44:58 PM »
Seems like a cool opportunity, and not a huge risk.  I mean, it can't sell for much less than $7000 right?  Given the super low price, the only thing I can think of is make sure you are not also buying some sort of weird ecological responsibility (someone discovered it is built over buried fuel tanks and the owner will be responsible for removal) or a structural issue or something.  Definitely get it inspected (maybe by two independent sources).

Location sounds great, you can always improve the house, sounds like fun!

« Last Edit: May 14, 2012, 01:51:01 PM by Physics »

Physics

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Re: Should we buy a house for $7,000?
« Reply #7 on: May 14, 2012, 01:52:22 PM »
Can you get a mortgage on a $7000 property?  I don't know if any bank would go for that.  You might need to buy it outright.

arebelspy

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Re: Should we buy a house for $7,000?
« Reply #8 on: May 14, 2012, 02:09:18 PM »
Merged the two topics.

You won't get a mortgage, it'll be cash.  The home inspection will basically tell you it's in terrible shape, but get one anyways so you know about any plumbing, electrical, and foundation issues.

Run a title report.. there could be major liens or back taxes due that will add thousands to the cost.
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Landor n Stella

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Re: Should we buy a house for $7,000?
« Reply #9 on: May 14, 2012, 04:28:04 PM »
Thanks for all the input! Re: area prices, there are several other houses in this town listed for less than $10,000; and upwards of 25 or more listed for less than $25,000. Rust Belt cities are gold mines for houses like this. Given the area, I highly doubt that there are any ecological issues like buried gas tanks. It's in the middle of a block of residential houses, and if none of the neighbors are having issues with EPA or ecological contaminants, I doubt this house does either.

Comparables nearby are selling in the $30-$50,000 range, all repaired and fixed up, of course. One house, a block away, is a 3 bed 1 bath with about the same sq ft and it is listed for $65,000.

I think we might be able to sell it in a few years all fixed up for about $40,000. But my goal would be to only invest up to $20,000 including the price of the house in fixing it up, and doing a lot of the work ourselves. It's not a difficult goal if we go about it very carefully.

gooki

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Re: Should we buy a house for $7,000?
« Reply #10 on: May 17, 2012, 05:27:56 PM »
If you are looking to resell in a few years do you expect there to be demand? Or is your town shrinking in population?

Landor n Stella

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Re: Should we buy a house for $7,000?
« Reply #11 on: May 22, 2012, 06:43:44 AM »
Gooki-

Yes, we expect there to be demand. Especially since the University it is close to is growing, and the University is adding quite a few graduate programs in the next few years. Which means older students and also many more professors coming to the area.

In other news: we bought the house. Purchase agreement is signed, and the home inspection is scheduled for Thursday. I also went on an adventure last weekend and found an awesome architectural salvage store in a nearby town! Think claw foot tubs, farm sinks, old solid wood doors, stained glass windows, porch columns...lots of salvage selling for the same or less than buying the same item with lower quality at local home improvement big box store. I'm quite excited about the prospect of installing this kind of thing to give the house character!

I'll start a thread in the DIY section when we get going on the home renovations. You can follow our progress there if you want. I hope to also keep a log of everything we spend on the house renovations, so that we don't go overboard improving to the point we can't recoup our investment when we want to. :-)

erwannabe

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Re: Should we buy a house for $7,000?
« Reply #12 on: May 22, 2012, 07:15:59 AM »
Congrats on your new home!!

Wish there was houses even remotely close to this price where I live :)

James

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Re: Should we buy a house for $7,000?
« Reply #13 on: May 23, 2012, 08:32:00 PM »
Gooki-

Yes, we expect there to be demand. Especially since the University it is close to is growing, and the University is adding quite a few graduate programs in the next few years. Which means older students and also many more professors coming to the area.

In other news: we bought the house. Purchase agreement is signed, and the home inspection is scheduled for Thursday. I also went on an adventure last weekend and found an awesome architectural salvage store in a nearby town! Think claw foot tubs, farm sinks, old solid wood doors, stained glass windows, porch columns...lots of salvage selling for the same or less than buying the same item with lower quality at local home improvement big box store. I'm quite excited about the prospect of installing this kind of thing to give the house character!

I'll start a thread in the DIY section when we get going on the home renovations. You can follow our progress there if you want. I hope to also keep a log of everything we spend on the house renovations, so that we don't go overboard improving to the point we can't recoup our investment when we want to. :-)


Congrats!!!  Also great to hear about the salvage store, wish we had something like that close by.  I did find one about 25 miles away, but it's really mostly excess new items, not quality old stuff.  Looking forward to hearing about renovation projects and seeing pictures!

Landor n Stella

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Re: Should we buy a house for $7,000?
« Reply #14 on: June 06, 2012, 07:37:32 AM »
I'm starting a thread over in DIY to share pictures and adventures with renovating this house. We purchased it for cash last week (one of the most thrilling things I have ever done with money in my life). We own it free and clear!!

Thanks for your advice, everyone!

~Stella