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So we just bid on the house of my dreams (sort of). It has everything you could want, a beautiful kitchen, huge walk-in closets, the yard has a view of the lake and the deck has a built-in gazebo... seriously, it's beautiful.
Except for the mold. The mold is not dreamy.
Apparently, the sellers abandoned the house last year (weird for a short sale, right?), a pipe in the upstairs master bathroom burst, and the water flowed down the foyer walls (which need replaced) to the kitchen ceiling (which needs replaced) down to the basement, where it sort of pooled in the walls and turned into mold. All this happened about a year ago. Weirdly, the wood flooring in the kitchen looks FINE, as does the basement carpeting. The problem is all in the moisture damage and mold in the basement. Our realtor, who I really like and trust a lot, felt that this type of damage is not a big deal and that a contractor would fix it for at most, 30k probably. My parents' house had sort of similar flooding and they had to replace the walls and flooring in their basement. We will have to turn on the utilities when the inspection happens,
The prices of the nicer houses in this area range from 350-400k. We determined that the most we could pay would be around 330k, and we estimated (we have no idea what we're doing) that if the damage were about 30k we'd be paying a fair 360 in the end for the house. Our bid was 300k (asking price) with an escalation clause of up to 315k. Our realtor felt that our bid (we're offering cash) was really strong and that we should give ourselves some negotiating room in case we do win and the banks (there are two in this situation) come back with some sort of counter-offer. The house is gorgeous and there was a lot of traffic so we don't know, there could be a better offer and we won't even get it.
So my question is... does anyone have any advice or a similar experience in this kind of situation?? I mean anything, the short sale, the mold, the inspection, anything would be appreciated.
If this was an all cash offer, I would've offered 280K and max out at 295K.
Mold is great, gives you a huge negotiating tool with the bank. Also being a cash offer, your offer will be the most enticing to the sellers as you don't need to get an appraisal and bank-approval for a mortgage loan.
Short-sales are great..but short-sales with mold is even better as you can get an even bigger deal on the property.
Good luck on the house..we're in a similar situation with a moldy short-sale, but we don't have that kind of cash and had to get a bank loan.
Also, try getting bids for the work to be done as you can take that to the bank and ask for a price reduction.
Cash is good because the house isn't financeable. That type of damage doesn't have to be a big deal. if the water has been turned off and the area has dried out the mold has stopped growing so what it is, is what it is. If it is coming through the sheetrock it will be really gross on the underside of the sheetrock. I have seen many water damaged homes like that and typically the frame and such is just fine, depending on how long it was being hit with water. If there is structural damage it would likely be in the framing close to the basement where it would have pooled up longer and had a chance to cause more damage. The reason the kitchen floor is probably fine is because the water ran over it and drained away fairly quickly allowing the wood to try out. Water running over things isn't as big of a deal as something standing in water.
If this was an all cash offer, I would've offered 280K and max out at 295K.
Mold is great, gives you a huge negotiating tool with the bank. Also being a cash offer, your offer will be the most enticing to the sellers as you don't need to get an appraisal and bank-approval for a mortgage loan.
Short-sales are great..but short-sales with mold is even better as you can get an even bigger deal on the property.
Good luck on the house..we're in a similar situation with a moldy short-sale, but we don't have that kind of cash and had to get a bank loan.
Also, try getting bids for the work to be done as you can take that to the bank and ask for a price reduction.
You know, it is hard to tell what we should have done. The house came up for sale on a Friday, we saw it Saturday morning, and bid Saturday afternoon. People were coming in and out of the house as we saw it, and the selling realtor told ours that it had already been shown 13 times by Saturday afternoon. We're in the Washington, D.C. area, where apparently people have swimming pools filled with money, like Scrooge McDuck, so I wouldn't be surprised if there was another cash offer because that is just our luck. A relative of mine very kindly offered to pay for the house and have us pay her back every month, so we're very grateful for that and will probably be sending her checks for the rest of our lives LOL. We didn't even think about the problems people would have financing a house like that, that just wasn't in our considerations.
Quote:
Originally Posted by Silverfall
Cash is good because the house isn't financeable. That type of damage doesn't have to be a big deal. if the water has been turned off and the area has dried out the mold has stopped growing so what it is, is what it is. If it is coming through the sheetrock it will be really gross on the underside of the sheetrock. I have seen many water damaged homes like that and typically the frame and such is just fine, depending on how long it was being hit with water. If there is structural damage it would likely be in the framing close to the basement where it would have pooled up longer and had a chance to cause more damage. The reason the kitchen floor is probably fine is because the water ran over it and drained away fairly quickly allowing the wood to try out. Water running over things isn't as big of a deal as something standing in water.
Can you elaborate what you mean by not financeable? Do you mean that a bank would hesitate to finance a house with mold or there'd be problems like that? You know, we just didn't think of this! Hmph, maybe we should have bid less LOL.
I doubt there is big structural damage to the home. It's not even that musty when you go into the basement, and the mold does not look *too* terrible. It's also a newer home, around 2003, so I don't know if that makes a difference.
EDIT: Given this info, should I just ask my realtor to take off the escalation clause and offer 300k flat since they haven't answered? Or is that a bad idea? Any opinions appreciated, LOL, I am so backtracking LOL.
It is finance-able, but the buyer would need to do either a 203K loan or some kind of renovation loan.
These loans require you to hire licensed contractors that are willing to work on jobs that only pay off after the work is completed. This usually costs the contractor more, and that is passed onto the buyer.
With a cash offer you are not strained by these requirements and the seller would find that the most attractive as those close the fastest.
Where in the DC area is this house ? - just curious. Didn't know there were waterfront properties going for 350K around here.
Our realtor, who I really like and trust a lot, felt that this type of damage is not a big deal and that a contractor would fix it for at most, 30k probably.
Unless the realtor is going to do the construction work for you, that 30k number means nothing. And you trust this realtor? LOL. Get a free estimate from a local contractor to get something a little more in the ballpark. And even it wont be accurate because no one knows what is between the walls without tearing them out. And when they tear out the walls, they may find other issues.
Personally I would buy a house with mold damage because I can do the work myself. If I had no construction ability, and relied on a contractor, I would never do it. Your 30k project could turn into a $100k project. Ever see Holmes on Homes HGTV? Yeah, projects can go very wrong.
That said.... good luck!! You will need it!
Quote:
Originally Posted by Zimar
We will have to turn on the utilities when the inspection happens
Water damage for over a year and nothing fixed? Who is going to turn on the utilities? Hopefully the house doesn't burn down.
Last edited by 399083453; 09-10-2012 at 08:10 AM..
Can you elaborate what you mean by not financeable? Do you mean that a bank would hesitate to finance a house with mold or there'd be problems like that? You know, we just didn't think of this! Hmph, maybe we should have bid less LOL.
Yes if there is mold even conventional lenders want it gone prior to doing a traditional loan. The property would require a rehab loan, but the problem with them is they take a minimum of 60 days to close and sometimes 90. Short sale lenders typically give 45 days max to close. No way to close a rehab loan in that time frame.
Yes if there is mold even conventional lenders want it gone prior to doing a traditional loan. The property would require a rehab loan, but the problem with them is they take a minimum of 60 days to close and sometimes 90. Short sale lenders typically give 45 days max to close. No way to close a rehab loan in that time frame.
Actually Wells Fargo has a home renovation loan program that can be used in these cases.
If you have all paperwork ready to go they can close within 2 weeks.
Thats what I'm using... the biggest holdup was the contractor needed to get his license renewed as it was expiring within 2 months after closing, and also the fact that the utilities needed to be turned on for bank appraisal.
Unless the realtor is going to do the construction work for you, that 30k number means nothing. And you trust this realtor? LOL. Get a free estimate from a local contractor to get something a little more in the ballpark. And even it wont be accurate because no one knows what is between the walls without tearing them out. And when they tear out the walls, they may find other issues.
Personally I would buy a house with mold damage because I can do the work myself. If I had no construction ability, and relied on a contractor, I would never do it. Your 30k project could turn into a $100k project. Ever see Holmes on Homes HGTV? Yeah, projects can go very wrong.
That said.... good luck!! You will need it!
Water damage for over a year and nothing fixed? Who is going to turn on the utilities? Hopefully the house doesn't burn down.
You are right, the risk is that the house is a total fiasco, and I HAVE seen Holmes on Homes LOL. What a nightmare! The utilities have to be turned on in many short-sales/foreclosures because the people will be long gone anyway, so that is not a huge deal. However, usually the people on Holmes on Homes either buy a house that "looks" perfect or is recently remodeled, or they have already had a bad (nightmare) contractor.
However, the signals on the outside of this house do appear to tell a story- there is no damage on the upstairs floor whatsoever... then, in the foyer, you can see the bubbling effect that happens in drywall from a leak, which is also on the ceiling in the kitchen... then the basement has no damage except for mold around 12 inches from the floor in a few of the rooms. Because this is a newer house and the houses in the area range for about 350-400k (and this house would be on the higher end of that), and the basement is a walk-out so it is not underground and prone to a lot of moisture (it does have a sump pump) we figured the risk might be worth it. In our worst-case scenario, we figure we'll fix any structural damage and leave the basement without drywall (which I think we can eventually figure out and do ourselves). Because this type of scenario happened to my parents, it's not quite AS scary I guess. I know a couple that bought a home, but when they turned on the hose outside, apparently the pipe leading to it was broken (which the inspector didn't catch) and the entire basement flooded without them even realizing for a day I think. They had to replace the basement and they had just bought the house. So yeah, even buying a regular house is a risk, and hopefully we're walking into this house realizing that it is a big risk (and I normally hate risk). If the inspection (we'll get a bunch of contractor estimates before buying the house too) tells us there might be more to it, we can still walk away.
Because this is a newer house and the houses in the area range for about 350-400k (and this house would be on the higher end of that)
Hey, its your money. As long as there is more shadow inventory, housing will not hit bottom. That house could easily be worth $250k in 1 year and you will be underwater. I shake my head when I hear of people who dont know how to repair anything would want to take on a project like this.
Caveat emptor.
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