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Old 02-26-2011, 04:48 PM
 
1,429 posts, read 2,441,273 times
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It's too late to renegotiate but I'm wondering what others think of our plan. My wife and I are in our early 20s, make about $65,000 combined, and the house we will be closing on soon was listed at $75,000. The accepted price we agreed on is $72,500, and we will be getting a $1,000 credit at closing towards some repairs. The house was appraised at $75,000, which was a surprise since we thought we saw it appraised 2 years ago at low $90,000's.

Here's the bulk of what the inspector noted:

* Older layer of lead paint, chipping in some areas (the most recent non lead layer) and needing a new coat.
* Radon level at 5 pCi/L
* small area of suspected asbestos tiles in the basement and attic
* Rusted sewage pipe (visible, easy access to) needing replacement - our biggest concern, first to fix.
* Roof with about 3-5 years of life left.
* 30 year old furnace, but with some parts replaced and actually working pretty well.
* Some window frames will need to be replaced due to cracks, water damage, etc. Some just need a new layer of paint, and rust to be removed.

Here's our thinking - it's a cheap house. The mortgage payment will be easily taken care of by just what one of us makes in less than a week. We plan to be able to pay off debt, and start saving for the more expensive areas of town. We want to get the house paid off asap, and continue schooling (which will give us approx $110,000 combined once we're done and employed).

Looks like we're going to be paying more in repairs than what the house is worth (new roof, furnace later, windows, etc) - but...is it wrong that neither one of us are bothered by that? We love diy projects, will get to enjoy/use whatever upgrades we make (kitchen cabinets, space saving bathroom sink, etc), and we will get the experience of actually doing it.

I should also mention there's an odd floor plan, which works well for us and will allow space for a baby in the future, but it may definitely have a limited appeal once it turns time to sell or rent it (another idea we're considering).

The reasons we like the house are:

* Location (very close to hospitals we want to work at).
* Nice, new deck and big fenced in back yard (we have dogs).
* Good area in a small city with a low crime rate.
* Floor plan works very well for us.
* It will get us on our own and out from living with my wifes family!

So..what do you guys think? Are we forgetting anything, is our thinking not realistic, do we need to watch out for anything...?

Also, houses in the area go for approximately $60,000 - $120,000.
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Old 02-26-2011, 05:04 PM
 
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
44,331 posts, read 80,658,912 times
Reputation: 57341
Be careful about the permit requirements. If you do anything requiring a permit and inspection, they can make you bring everything else up to code including removal of the lead and asbestos. Like you I am a DIYer and it saves a lot of money on labor, but if you don't get a permit you can have problems on resale with the next inspector.

Will the amount you would spend to do all the upgrades/repairs will make your total investment more than it's worth? Remember, these are all maintenance items, so unless you go high end are not really adding to the value of the home. If you go to sell it in 2-3 years that's not enough time to establish equity, and values are not likely to go up like they used to.
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Old 02-26-2011, 05:07 PM
 
Location: Louisiana
290 posts, read 571,862 times
Reputation: 70
Quote:
Originally Posted by TheEarthBeneathMe View Post
It's too late to renegotiate but I'm wondering what others think of our plan. My wife and I are in our early 20s, make about $65,000 combined, and the house we will be closing on soon was listed at $75,000. The accepted price we agreed on is $72,500, and we will be getting a $1,000 credit at closing towards some repairs. The house was appraised at $75,000, which was a surprise since we thought we saw it appraised 2 years ago at low $90,000's.

Do know if the seller had it appraised prior to listing her/his property for sale?

Has your bank appraised the property, yet?

it looks as though this property may have been close to selling a few times; before you were the buyer. I hope this is the case according to what I read in the above paragraph.


I practice Real Estate Appraisal.
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Old 02-26-2011, 05:21 PM
 
Location: Columbia, SC
10,940 posts, read 21,914,344 times
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Get some input from your agent about the price vs. the repairs i fyou really have questions but it seems like your plan is well though out and you're comfortable financially. If you're in a market that declined it could explain the lower appraised value easily. Best of luck with your home.

Greenbuck, wth difference does it make if the property was appraised before listing in this case? I would think the appraiser took condition into consideration. Also, I also fail to understand you could infer the "house came close to selling a few times" based on the fact it appraised for 75k.
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Old 02-26-2011, 05:42 PM
 
Location: Louisiana
290 posts, read 571,862 times
Reputation: 70
Quote:
Originally Posted by Brandon Hoffman View Post
Greenbuck, wth difference does it make if the property was appraised before listing in this case? I would think the appraiser took condition into consideration. Also, I also fail to understand you could infer the "house came close to selling a few times" based on the fact it appraised for 75k.


Hi Mr. Hoffman,

I hope the Appraiser took all elements and units, as well as the cost approach to value into consideration. I hope the Appraiser verified all relevant data, as well. Thank you for reminding me of something.

To the original poster: did your lender/bank request this Appraisal through an AMC (Appraisal Management Company) or was it requested direct?

Mr. Hoffman, look at the listing price $75,000.00 and the appraised value of $75,000.00. When the appraised value meets the listing price, then a red flag may be present. However; without knowing more, the issue may be this or that, more or less (assumptions can become reality)

One reason why an appraised value may very well meet the listing price, in this case, will be because the property may have been appraised a couple of times prior to listing or competently reasoned with. If this is true, it may have came close to selling; the property value/price may be readjusted to meet the market's expectation so a sale may take place.

Another reason why the appraised value meets a listing price, is because the listing price was a darn good shot -- it happens sometimes; but, only with a good appraisal providing a check for it.

Once a few initial questions are answered, another question may pop up.

Note: I am not focusing on the contract price as of this time. Edited to add: I did focus on the contract price for a bit, and then my focus went more to the other two; I will provide reason for this, to you, later on.

Let me know if you have any more questions.
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Old 02-26-2011, 05:47 PM
 
Location: stow
2 posts, read 4,337 times
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How bout a home warranty at least it covers some of the major mechanicals for the first year. I also dont think the lead based paint is not that big of an issue as long as you dont have small children and dogs that chew. I think that it sound like a good deal but hopefully your realtor is helping you through this process, negotiting is the name pof the game.
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Old 02-26-2011, 06:03 PM
 
Location: Columbia, SC
10,940 posts, read 21,914,344 times
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Quote:
Originally Posted by Greeenback View Post
Mr. Hoffman, look at the listing price $75,000.00 and the appraised value of $75,000.00. When the appraised value meets the listing price, then a red flag may be present. However; without knowing more, the issue may be this or that, more or less (assumptions can become reality)

One reason why an appraised value may very well meet the listing price, in this case, will be because the property may have been appraised a couple of times prior to listing or competently reasoned with. If this is true, it may have came close to selling; the property value/price may be readjusted to meet the market's expectation so a sale may take place.
You're still not making much sense. Even if had been appraised previously why would that appraisal be known about or shared with the new appraiser? How can you infer again that because appraised value was close to contract price that it may have come close to selling previously?
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Old 02-26-2011, 06:38 PM
 
Location: Louisiana
290 posts, read 571,862 times
Reputation: 70
Quote:
Originally Posted by Brandon Hoffman View Post
You're still not making much sense. Even if had been appraised previously why would that appraisal be known about or shared with the new appraiser? How can you infer again that because appraised value was close to contract price that it may have come close to selling previously?
No, no...

I saw the red flag first. The new Appraiser saw the purchase contract, because he should have analyzed it. And, he should have analyzed the listing, too.

Second question: Not the contract price, but instead, the listing price. There are a few reasons why a selling price will equal an appraised value. One of them is because the property may have been appraised a couple of times prior to listing. And, I hope this is the case, so the sale will go smoothly for the buyer and seller.
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Old 02-26-2011, 06:46 PM
 
1,429 posts, read 2,441,273 times
Reputation: 1909
The bank requested the appraiser, I don't have the paperwork with me right now, but they just sent us a copy of it. I remember seeing that the area we live is in marked "stable" rather than in decline.

Apparently the story on the house is a young couple owned it for 8 years, they started a family and outgrew it, then found a house they wanted being offered by this real estate company. It sounds like they did a switch - the RE company bought their house (for $88,000 just last year, saw the paperwork), and the family got credited towards the house they wanted, which the RE company owned. Does that make sense at all?

I should also say the realtor representing us is the agent trying to get it sold. We already signed him as our representative..

I'm positive we're making mistakes with this (such as not having a non interested representative), I'm sure we could of negotiated down some more, asked more for repairs, but...(and I would like feedback if this way of thinking is wrong) - it's a cheap house. There's nothing severely wrong with it, it's significantly cheaper than renting, the property taxes are very low ($1,400), we could have it paid off while we're still in our 20s, and it will allow us the opportunity to save for something significantly better.

Regarding the permit and inspection issue - I think the biggest improvement we plan to do ourselves if we can is to replace the old windows with new ones, would that require a permit? No knocking down walls or adding to the deck in the back, or anything of that sort.

I just looked on Zillow, and it's the tax assessment that came back at $90,000 in 2008. It was last sold in 2002 for $74,500, then is next listed as being for sale in 03/2010 for $107,000. It drops slowly until it ends up at $75,000 in 12/10...where it just happens to be appraised at. Does that make sense..?

Edit - it does come with a 1 year warranty. Forgot to mention that.
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Old 02-26-2011, 07:01 PM
 
Location: Louisiana
290 posts, read 571,862 times
Reputation: 70
Quote:
Originally Posted by TheEarthBeneathMe View Post
The bank requested the appraiser, I don't have the paperwork with me right now, but they just sent us a copy of it. I remember seeing that the area we live is in marked "stable" rather than in decline.
The "stable" box in the neighborhood section is sensitive. Real Estate Appraisers may not find much work after they choose the declining box, even in this environment.

When you get the appraisal report back into your hands and when you have time, or if you have the time and want to tak about it:

There should be a place for the lender's name and the Client's name. Do you see a name other than your bank? I do not need to know the name.

I cannot comment further on that until I see another form: When you get the report back in your hands, let me know if there is a 1004MC page (called Market Conditions) - It should be located close to the form in which you read the neighborhood section (stable box)

Also, if you do not mind, count how many pages there are in whole report, less the qualifications and license at the end.

I appreciate it, TheEarthBenathMe, and I did read the rest of your post. I am observing it.
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