U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
 
Old 07-13-2012, 10:14 AM
 
9 posts, read 15,574 times
Reputation: 10

Advertisements

Omaha, NE here! My boyfriend and I just put in an offer on a house, and would love to get the feedback and advice from all of you here on this forum. (This forum has been a HUGE help to use while we were figuring out what to do and how to do it, so thanks to all of you!)

It's kinda a long story, but here goes:
We have been happy renters for years, steadily watching the housing market. We finally found a fixer-upper that we really like, in a great location.

It's a 100 yr old house with around 2000 sq ft finished space, and a concrete block basement (not really finish-able). It's on 10 acres that's almost all wooded with steep cliffs (so beautiful, but not really usable land).

This is definitely a fixer-upper. It needs EVERYTHING (electric, plumbing, HVAC, insulation, drywall, etc.). But it has great bones (no foundation work needed) and.... well at least the roof doesn't need to be updated yet! We know it's a lot of work, but felt if we were really smart and honest about the money it would take and the work we'd need to do - and the amount of time before we could live in the house - we would be OK. We're both weird people that like that sort of long-term project and don't mind living in dust, and love DIY work.

And, so far so good. Our estimates to start run about $100K, all in a detailed master plan of repair we've put together. Plus contingencies, we feel comfortable saying this house will take $100-$120K to fix up professionally (so not accounting for DIY savings). This includes the major items like the above, plus basic kitchen, bathrooms, appliances, hardwood floor refinishing, etc. No structural changes like knocking down structural walls, no yard work except for tree trimming above the roof.

The house is listed at around $150K. Through some investi-googling, we can see the current owners bought it at about $125K almost 2 years ago as a foreclosure. Since buying the house, they've never lived in it. They tore down most of the plaster/lath walls on the 1st floor and left them in giant piles in the middle of the floor. They haven't mowed the lawn or taken care of anything outside the home in all that time. The disclosure form is literally 80% "Don't Know" responses.

All of this in mind, with comparable homes in that area, and the land the property is on, we put in an offer of $110K. Area homes are unique, but are typically $150K (smaller homes, lots), to maybe $215K - but that starts getting into more expensive homes in this Omaha area. It is somewhat of a crap shoot on how much value this rough-terrain land will bring... We figure this will put our investment into the home at $210-$230K, and with some DIY and patience we can save some money and get a little financial breathing room.

Did I mention we're paying cash? After talking to banks about the craziness of a 203K loan, and appraisals throughout, and limits on DIY work, we decided to skip that - and were able to financially. But that also means anyone else coming to the table would have to go through that if they weren't a cash offer, and the approval process can take months and is far from guaranteed. We also bring other advantages: we can close as quickly or slowly as they want, we are saving commission they have to pay by not using a buyers' agent (yes we read all of the pros/cons and thought this was ideal).

When we stated our offer, the selling agent essentially told us that this was not enough for the home owners to break even (which is consistent with our findings). To which we think, "Not our problem." Not to be harsh, but they likely overpaid, and did zero improvements, and the house is unlivable. We don't think we should go too much higher, and would rather lose the house than make a bad financial decision.

So now we wait for a rejection, or a counter-offer. If rejected, we think we might take some time off, let it get back on the market (it was off for a while for an old offer that was never able to get financing, so it's still officially only for back-ups). With the piles of plaster in the house, the huge work involved, the overgrown yard, we just know it's not going to show well. And if someone doesn't come with a cash offer, they'll have to go through the 203k approval process (who will insist that the fixed-up value of the home is more than the purchase price + improvement budget with a general contractor, so who knows if it'll get approved.) And every month the home owners are paying more in interest and taxes and the house is losing value. Then perhaps we re-submit? At a slightly higher price?


So, city-data RE community: Any thoughts about our plans? Advice or concerns about our assumptions? Things we're missing or not accounting for? This forum has been a huge help for us during this whole process, so now that we've made our move, we'd love to know what you all think. Thanks!!
Quick reply to this message

 
Old 07-13-2012, 10:31 AM
 
Location: NJ
17,579 posts, read 38,295,421 times
Reputation: 16098
Sounds like you have a very well thought out plan. Don't be pressured to pay more than you think you should. Just move on if it doesn't work out.
Quick reply to this message
 
Old 07-13-2012, 10:49 AM
 
Location: Barrington
41,854 posts, read 31,715,364 times
Reputation: 14077
What's the seller's motivation for selling? Are they current on their mortgage/taxes?
Quick reply to this message
 
Old 07-13-2012, 10:55 AM
 
Location: The Triad (NC)
26,847 posts, read 57,851,863 times
Reputation: 29256
Quote:
Originally Posted by criv227 View Post
We finally found a fixer-upper that we really like, in a great location.
100 yr old house... 2000 sq ft... block basement (not really finish-able)... on 10 acres
that's almost all wooded with steep cliffs (so beautiful, but not really usable land).

This is definitely a fixer-upper. It needs EVERYTHING (electric, plumbing, HVAC, insulation, drywall, etc.). But it has great bones (no foundation work needed) and.... well at least the roof doesn't need to be updated yet! ...don't mind living in dust, and love DIY work.

detailed master plan of repair... Plus contingencies... will take $100-$120K to fix up
Area homes are unique, but are typically $150K (smaller homes, lots), to maybe $215K
a crap shoot on how much value this rough-terrain land will bring...
(unless those trees are harvestable hardwoods the land is a tax money negative)

We figure this will put our investment into the home at $210-$230K,
and with some DIY and patience we can save some money and get a little financial breathing room.

Since buying the house (what they paid is quite immaterial), they've never lived in it. They tore down most of the plaster/lath walls on the 1st floor and left them in giant piles in the middle of the floor. They haven't mowed the lawn or taken care of anything outside the home in all that time.
The disclosure form is literally 80% "Don't Know" responses.

with comparable homes in that area, and the land we put in an offer of $110K. <-- Too high
Did I mention we're paying cash? Then it's WAY, WAY too high.

the selling agent essentially told us that this was not enough for the home owners to break even (too bad)
To which we think, "Not our problem." Not to be harsh, but they likely overpaid,
just don't overpay yourselves!

So now we wait for a rejection, or a counter-offer.
hope for a rejection

Any thoughts about our plans?
Advice or concerns about our assumptions?
Even if I was looking for a project to pour countless hours into...
I couldn't see an offer even a penny over $70,000 for such a money pit.
Quick reply to this message
 
Old 07-13-2012, 11:04 AM
 
5,458 posts, read 6,124,370 times
Reputation: 13946
You have a good plan. Stick with it. I think your rennovation estimates are probably low, but at least not ridicuously low.

As you state, it is not your fault that the owner is under water. So what. They bought the property on spec, and their specualtion didn't work out. No bank is going to loan money based on the property condition, so it will take another cash buyer and they, like you, are smart enough to have cash and smart enough to not overpay. Just let your offer simmer for a while. Tell the selling realtor, politely, to get lost and properly present the offer. If she is smart she would like the commission.

I recently bought a lot in similar circumstances. A couple had bought it and thought they were going to make a killing in a nice development. They priced it over the years to double their money, and eventually got out with a $10,000 loss.

If you could have seen the looks the wife gave the husband at the closing.....precious doesn't do it justice.

Good luck.
Quick reply to this message
 
Old 07-13-2012, 11:21 AM
 
9 posts, read 15,574 times
Reputation: 10
Quote:
Originally Posted by middle-aged mom View Post
What's the seller's motivation for selling? Are they current on their mortgage/taxes?
That's one thing we can't figure out. Selling agent gave us a story about how the original plan was for them to build an addition. The wife then decided she didn't want to live in a fixer upper again (previous house was one?), and the husband was very sweet and said OK.

They do own their own bakery business. They did sell a previous home for $225K, not too long ago. We're guessing they live in a parent's home, since one parent may own 3 homes in the area. (It's amazing what the internet can tell you sometimes...)

Best guess is, they fell in love with the beauty of the property, and guessed after a few repairs and an addition they'd have a great house. All I can think is they quickly found out how much work it really was, and decided to get out. Another odd factor is that they didn't have to get a 203K when they bought it, they just got a standard mortgage (per their agent). So maybe they didn't have the cash/financing for repairs?
Quick reply to this message
 
Old 07-13-2012, 11:26 AM
 
9 posts, read 15,574 times
Reputation: 10
Quote:
Originally Posted by MrRational View Post
Even if I was looking for a project to pour countless hours into...
I couldn't see an offer even a penny over $70,000 for such a money pit.
That's the scary, other side of the coin for us, in overpaying. I would say the land is beautiful - edge of a forest, deer running through, views over the river. And unique - there are a small handful of homes in our area that have anything like it, especially not for the price. We're buying the land, the bones of the house, and the location (it's just a few minutes from everything).

Should land really not be considered if not materially valuable, just pretty? I know that's how banks feel (no land value included in 203K assessments).
Quick reply to this message
 
Old 07-13-2012, 11:33 AM
 
Location: Florida
18,290 posts, read 18,533,242 times
Reputation: 20967
Did you get bona-fide professional estimates (we will do that for this?) or guess-timates?
Guess-timates are usually 50% off actual end costs and include all those things you forgot about or thought were minor.
And did you mean that after all the headache and heartache, you'd still end up on the low end of higher end homes in the area?
Quick reply to this message
 
Old 07-13-2012, 11:36 AM
 
640 posts, read 592,226 times
Reputation: 587
Quote:
Originally Posted by MrRational View Post
Even if I was looking for a project to pour countless hours into...
I couldn't see an offer even a penny over $70,000 for such a money pit.
I wouldn't even go that large unless I was planning on living in the house for 7-10 years.
Quick reply to this message
 
Old 07-13-2012, 11:44 AM
 
3,404 posts, read 4,138,299 times
Reputation: 2397
You mention what other houses in the area are selling for, but are they comparable houses to this one? How did you determine the value of the house?
Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


 
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:
Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top