Should we get this house?

[sgtdraino]

I like it with all the outhouses and such, but it will be expensive to heat, comparably, and will have lots of cold spots. I can almost guarantee more than 140 a month, unless you use wood and get that wood free.

The wood stove is certainly a part of the equation, still trying to determine how big a part of the equation it will be. At least it should be necessary during the milder seasons. And if we got really hard-up, I suppose we could retreat into the efficiency apartment during our hardest-hit months.

It doesn't appear to have insulation in the attic, does it? If the attic has no insulation then I doubt the walls do, but maybe.

The attic was added later. What we've been told is that the walls are insulated, but that the attic currently is not.

I doubt the cinder blocks were sealed and I know that it wasn't tyveked.

Tell me more about this, please. Sounds like a good question to ask, but I need to understand it first.

The windows look old and single pane, are they?

Probably.

The outbuilding roof will likely need to be completely torn off because it looks like that tree has been hanging on it for a long time which means the boards that support it are likely rotten, at least the OSB is.

Interesting point, I didn't even notice a tree hanging on it. I will definitely take a closer look at that tomorrow. I did notice that some of the wood was rotten around the edge of the utility building roof, near where the chicken coop is.

I think it'd be a great project for a do it yourselfer, but for someone who is hoping to wrap the costs into the mortgage, and have someone else do the work?, I think you might consider an alternative.

If I can figure out how, and can find the time, I'd be plenty happy to do the work myself. Hell, it can't be rocket science, can it? The only reason I'd like to wrap some of the costs into the mortgage, is for simplicities sake, and to make sure the important things get done right, and get done now.

If you decide to sell later you will most likely not get back what you put in.

Of course it's impossible to tell the future, but I am not somebody who likes to move around much. I like to pick a place, and stay there, and I think my wife is much the same. I stayed working at my previous employers far longer than I should have, simply because I just like staying put. It is definitely my intention to have this be my "castle" until the day I kick it.

I have no idea what the going prices are in your area, but unless that is a greatly reduced price I'd consider looking at other options, especially if you're not a do it yourselfer.

They started asking $139,000 in 2008, then dropped it $5,000 to $134,000. Then after 4 months, they gave up trying to sell it. Then in mid-October of this year they relisted it for $119,000... and two weeks later dropped it another $9,000 to $110,000. The property was last assessed for tax purposes in 2009 at $100,530.

As it stands as you said, it needs a new roof.

Possibly, yes.

Possibly windows, insulation,

These sound like things we could add over time as improvements.

and possibly a complete teardown of the drywall to properly seal and insualte it.

This right here sounds incredibly complicated and costly, I'd like to hear more about how high a priority this might be, and what the consequences might be of not doing this.

The fact that it has no central heat either is a huge price reducer and will make it hard to sell, not to mention it's made of cinder blocks, which isn't a bad thing, but not good for selling purposes.

Sounds like another bargaining point to me! I'm really not concerned with resellability, I want it to be mine forever and ever.

But, that said, we've hit our first snag: If it does turn out the bank's appraiser determines that the house needs certain major repairs (most likely the roof), the bank will not give us a loan. Ordinary loans do not incorporate the cost of repairs into them, the bank expects the house to be in "normal" condition at the time of sale.

It looks like our next primary option is an FHA 203(k) loan, which is specifically intended to combine initial repair costs with the mortgage. But we would need to (a) find a bank that does these, (b) figure out the application process, which seems complicated, and (c) see if we can actually afford an FHA loan.

Any tips or links that anybody has on this process would be greatly appreciated. Here's what I've got so far:

http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

http://www.fhaloanpros.com/resource/...e-mortgage.php

Again, thanks for all the advice, guys!

[rwc1969]

Cinder blocks have to be sealed with a certain "paint", plastic or tyvek to make a moisture barrier between the outside and inside. It prevents moisture from builing up and running down the inside of the walls.

I may not be correct on the details, but know it should be done or else you can get mold and such.

The only reason I mentioned that was due to year it was made, very unlikely they did those things back then, maybe they did though. I've not worked on any houses made of cinder blocks, only factories and such. And with factories they used to not bother sealing anything, as long as the paint won't sink thru that's all they cared about.

But, I would make insulating the attic a first priority as that should greatly reduce the utility bill in the winter, except I'd assess the roof first and if it needed a tear off I'd wait on the insulation and do it all at the same time.

I'm no expert homebuilder, so I'm probably not the best person to ask for specific details, but these are the concerns I would have based on the age of the home and the limited stuff I saw in the vid. even if the walls are well insulated the windows leaking, and fireplace, etc. will suck the heat right out.

I think it's a good idea to use the need of clean up, roof work, windows, insulation, and central heat/ a/c as a buying advantage even if you don't intend to make the improvements. But, it sounds like they've come down quite a bit already. I think it's still quite the buyers market for homes though.

For me all the junk would be like a kid in a candy store. All kinds of things to make stuff out of. Maybe even some antiques, lol.

You can do a roof with little know how, but it does take some research and help to get it done right. The valleys and such can be tricky, but I'm sure there's books, and google to help you along the way. Most of the cost of a roof is labor, because it is labor intensive. I had a friend to do the valleys and I did the main roof on my old place. We added extra ice shield and replaced 2x4's and plywood that would not have been done if we'd have hired a contractor, much better job in the long run at a 1/10th of the cost. A few mashed thumbs, sore back and knees.

Oh, and considering it was made in the '50s it most definitely has lead paint and I would think lead solder too, or probably galvanized threaded pipe. Any home built before the seventies has it.

[Rick]

We have a professional roofer on here....if you don't mind the roof being covered with deer skins. I'm sure he could answer any questions you have. I think the tail is used in the valleys. Don't quote me on that.

[LowKey]

The trick with getting a bank to roll repair costs into a 'mortgage' is to get instant equity in the house. That means you pay less to the owner than the bank thinks it's worth. The tax appraisal is not a good indicator of what a bank would think the house is worth.

If you can get equity, you can draw a loan against that.

I was just looking at a small house that needed quite a bit of repair and the mortgage officer at the bank tried that route. I couldn't get my offer high enough for the owner to consider but there would have been about 20k in equity if I had.

Of course that means you have two loans going.

I don't know what area this house is in. The current showing condition of the house and property may work against any large gap between asking price and bank worth.

[crashdive123]

Many banks have a list of inspectors that they recommend. Since the bank would be motivated in having an accurate assessment of a property, I figure those lists should be pretty good to go by, no?




How about inspectors recommended by our bank or credit union?

Banks generally have no idea what goes into an inspection, or what qualifications it takes to perform a thorough inspection. The only assessment of the property that they probably have a real concern with is the appraisal. Again - that list is often the list of inspectors that create the "path of least resistance".

Here's an example - I was hired by a bank to inspect a home for a pending sale. During that inspection I found several things wrong, including extensive termite damage. I was then asked to submit a bid for treating the home. Today I got a call from the prospective buyer asking what all my contract covered. I explained that I had not treated, but rather inspected and submitted a bid for treatment. The banks response was - he's the pest control guy - he handles that sort of thing.

Banks are terrible realtors, property managers, inspectors, etc. Too bad they are now in those businesses.

[sgtdraino]

Banks generally have no idea what goes into an inspection, or what qualifications it takes to perform a thorough inspection. The only assessment of the property that they probably have a real concern with is the appraisal. Again - that list is often the list of inspectors that create the "path of least resistance".

I should elaborate: We first spoke to a loan officer at my State Employees Credit Union. She was the first person to tell us about inspectors, that the Credit Union requires an inspection (not just an appraisal), and that because not all inspectors are created equal, we would need to choose from a list of approved inspectors that the Credit Union keeps. It really sounded like this particular Credit Union had a vested interest in really determining whether the property they were about to lend money on is viable, or a money pit.

Okay, here's an "outside the box" idea that I came up with all by myself: I call it "poor man's FHA loan."

Step 1: Get estimates for the repairs.
Step 2: Agree to buy the house for a reasonable price + the cost of repairs.
Step 3: Get a post-dated check from the sellers for the repair estimate.
Step 4: Get the Mortgage for the full amount, and pay the sellers.
Step 5: Cash their post-dated check, and get the repair money.

Thoughts?

[crashdive123]

I don't know how to say it any other way. They want the inspections becasue they are required (in most cases). As to your steps...
1 - great idea
2 - might be too early to make decision
3 - pretty sure that is illegal
4 - get a real estate attorney involved
5 - see my response to #3

For most closings attorneys are involved. Make sure you have one looking out for your interests, not the interests of the listing agent/seller. It is not difficult to accomplish what you are trying to do, but better (IMO) ways to do it. There are actually quite a few ways. There are loans that will include repairs - kind of like construction loans. Another example would be - say you agreed on 100K selling price and there is 10k needed in repairs - an agreement would be made between you and seller and then at closing, they are handed a check, and so are you.

[Rick]

I think what you are proposing might constitute bank fraud. Unless the bank knows full disclosure you run the risk of having your loan called in because you violated its terms or prosecution if they want to get nasty. Check the loan agreement. I'm sure there's a full faith and disclosure clause.

[sgtdraino]

I don't know how to say it any other way. They want the inspections becasue they are required (in most cases). As to your steps...
1 - great idea
2 - might be too early to make decision
3 - pretty sure that is illegal
4 - get a real estate attorney involved
5 - see my response to #3

Well, obviously I can't do it if it's illegal.

Another example would be - say you agreed on 100K selling price and there is 10k needed in repairs - an agreement would be made between you and seller and then at closing, they are handed a check, and so are you.

Well, hell, that sounds like practically the same thing, but if it's all done at the closing, it wouldn't be illegal?

I think what you are proposing might constitute bank fraud. Unless the bank knows full disclosure you run the risk of having your loan called in because you violated its terms or prosecution if they want to get nasty. Check the loan agreement. I'm sure there's a full faith and disclosure clause.

Well, I definitely don't want to do something that's going to get me in trouble. Perhaps I'll speak to an attorney that I know.

[crashdive123]

Well, obviously I can't do it if it's illegal.



Well, hell, that sounds like practically the same thing, but if it's all done at the closing, it wouldn't be illegal?

Well, I definitely don't want to do something that's going to get me in trouble. Perhaps I'll speak to an attorney that I know.

No - everything is above board and in the sales contract. There is no attempt to defraud the mortgage lender because everything is out in the open - as Rick said - full disclosure. Now- whether or not the seller or lender agree to that is a whole 'nuther story. It all depends on how "motivated" they are to sell.

[kyratshooter]

DUUUH!

In what nation is this house located? What state, county, neighborhood?

What is the one primary factor in real estate value????? Location.

How much land is included in this parcel?

Is $110,000 going mkt value for this parcel of land. If so you are being robbed. No one is paying market value! In spite of what the market in your area says, if you qualify for the loan you can set the terms and price. I know that in our area the Real estate people are trying to convince everyone the national figures do not apply and buyers should be prepared to pay premium. We are special! It ain't working!

If the house was built in 1953 with no major remodeling you are primarily buying land, not the house. In my area this "compound painted yellow" would subtract from the land value. The members here have already advised you to spend at leats $25,000 on inspections and quizz show questions.

Also check your area for various zoning situations. You may wind up with the health dept, standing in your yard when the moving van arrives telling you the septic system is no longer approved and a new one is impossible due to perking problems. You can not move in without a $$$$ waiver. NO, they do not grandfather everything in. In my area you can not set a tent up in the back yard without a building permit and you can't get a building permit unless you heel on command. This may affect the price of any repairs you do, including who can do them and cost to meet codes.

When the inspections are done have the present owner make the repairs with the price holding firm. Do not deduct them from the cost. You are deducting estimates and requirements, not costs and results.

Find out what the seller's situation actually is, not the sale hype he gives you. Is he carrying two notes? Is the tax burden eating him up? Is his insurance co dropping him for vacancy and the bank calling the note?

No, "We just figured it was time to sell." is not enough in this crappy market.

You are the buyer. You are the one with the $$$Money$$$. Squeeze them by the throat untill they croak like a frog. NO MERCY!!

It is still a buyer's market and you are the buyer. Do not forget that.

[sgtdraino]

No - everything is above board and in the sales contract. There is no attempt to defraud the mortgage lender because everything is out in the open - as Rick said - full disclosure. Now- whether or not the seller or lender agree to that is a whole 'nuther story. It all depends on how "motivated" they are to sell.

Ah, I get it. So, as long as the bank knows that the sellers are going to pay me, say... $10,000 at closing to put towards repairs, everything should be kosher.

Of course, if the house doesn't pass muster with the bank's appraiser, I get no loan, period.

Unless I go FHA, of course.

[hoosierarcher]

Everyone has given you some good advice. To tell you how much wood you'll need for your wood stove per year, I'd need to know how cold and how long Winter is there. Here in Southwestern Indiana, Winter is much milder than in Michigan where I grew up. In Michigan if you didn't have 6 cords up by August you were in trouble and you'd have to kick it into high gear. That of coarse is for a house with fireplaces AND wood stoves, With wood being the ONLY heat source AND women in them(the delicate creature seem to not like it cold in there living spaces). Efficiently insulated homes with soap stone wood burning stoves get by with less; but It's always good to have more than you'll need. Because if you have a harder than average Winter you want to be prepared.

[Rick]

I'm nothing if not delicate, myself. I hate cold rooms, too.

[hoosierarcher]

Personally I never heat my bedroom. In the Summer mt window AC is set so low when I first walk into my bedroom I can see my breath, it's deliciously brisk! Most of the women that have walked into my bedroom have all questioned how I could possibly sleep in a "refrigerator?" "Very well thank you, would you like to stay and find out how warm it gets under my covers?" My ex-wife called me her "Electric Teddy bear." She freaked out when she found out I slept with the windows open in Winter, in MICHIGAN! She got used to it though. On those occasions when I had to be out of town in Winter she would close the windows and open the heating vents and crank the heat up, plus sleep in a flannel nightgown and flannel sheets with a quilt and a down comforter on the bed. I found out from her brother that she never has had a gas bill under $150/month during Winter since she left me. I take some small but of solace from that. I on the other hand have not had someone put their icy cold feet in the middle of my back since she left. Although after the initial shock out of slumber it actually felt rather good.

[sgtdraino]

Well, we took another much more detailed look at the house today, and there are some SIGNIFICANT problems with it. My father-in-law, who has some experience with construction matters, guesstimates $30,000-$40,000 to put it right. I do not think the house would pass muster with a bank appraiser, so it seems that a FHA 203(k) is our only option at this point, if indeed we still decide to move forward. I suppose we would base our offer on what we think the property is worth in good order, and then deduct the estimated cost of repairs from that. Thing is, I'd be a little surpised if the sellers are willing to drop from $110,000 down to $70,000 or even less. So, it may be that we simply can't afford the price the sellers would settle for, plus the price of the repairs. Then again, it depends how desperate they are.

We had three cameras going at once this time, should have some video online for you shortly. Short version of major problems off the top of my head:

Significant problems with the roof on the main house. It would not surprise me if the entire roof needs to be replaced.

There is a large hole in the roof near the ajoining wall that the efficiency apartment shares with the house, and water has leaked into the wall. Looking in a closet built into that wall inside the apartment, mold is evident, as is standing water from last night's rain. No telling at this time how much would need to be done to get that mold under control, let alone repair the damaged wall.

A soft depression in the downstairs bathroom is a rotten spot in the floor, we think from a tub leak. I went under the house to that spot, and my wife could see me through a small hole in the floor in that spot. Looking around at the wood of the floor in that area from underneath, I saw a lot of dark-colored, probably rotten wood.

Try as me might, we haven't been able to locate a breaker box inside the house. We probably just don't know where to look, though. The main house does appear to be on breakers, though ironically an old-style fuse box was seen in the apartment. We don't know if it's actually hooked up to anything though, or merely a relic from when it was switched over.

The utility building has extensive roof damage. The primary support beam holding up the roof has broken, and is currently being held up by some two-by-fours and an old wooden door!!!

There are various places around in the house where it looks like there was at some point some water damage from a leak.

Definitely more problems than we were hoping for. However, we have still not quite given up on it.

Even though perhaps we should?

[Rick]

I wouldn't bat an eye. If you really want this place do exactly as you said. Calculate the cost of repairs, add 10% for the stuff you haven't found yet, and shoot them a counter offer citing all the problems. Add in the attic insulation, too.

When the agent tells you she doesn't think they will go that low tell her then this might not be the right house for you. Remember, she's not concerned about you. All she's concerned about is her commission. Period.

[crashdive123]

Yep...........Instead of an additional 10% for unknown repairs, I would make it at least 20% for the hassel of having to live in a house under construction.

[LowKey]

The house I had looked at had a branch go through the roof a year ago. They had a mold abatement company come in and do a complete cleanup with certification that it was clean. I'd have still gotten my own testing done, if it had gotten that far but mold abatement is available. Don't know the cost.

[crashdive123]

During the heyday of mold lawsuits, and before insurance companies changed homeowners policies to put a $$$ limit on policy coverage - it was not uncommon for mold remediation to run into the tens of thousands of dollars. If you do-it-youself it can be alot cheaper. Stop the moisture source, replace damaged wood and sheet rock, treat all new (and old if exposed) with a product called Mold Care. Mold Clean works pretty good when replacing wood is not an option. Those products are made by Nisus. I've used both.