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Opinions wanted on remodeling a 'money pit'
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Kathy Aldridge    Posted 04-25-2002 at 14:35:42       [Reply]  [Send Email]
I need your advice concerning a house we own. When we were transferred to a new state we bought a small old house in a very small town (while building our homestead ) which at the time seemed cheap compared to the prices in our old state. Well, we finally were able to move onto our land in the country and we figured we'd use this house in town as a good retirement income- wrong. The wiring was the old aluminum type, the roof leaks, all the windows have rot-alot of rot, the heating system was individual room electic which after 1 yr started going out one room at a time and when we tried to get them repaired found out they are too old to repair & must be replaced, plus their was no insulation and plumbing is not up to present day codes. Now don't yell at me- my husband was the one who believed the fellow who sold it to us- he trusts folks to keep their word a wonderful outlook but not too realistic when buying property. Well this fellow just wanted to get rid of a problem and he found a couple of 'suckers'. My question is we figure it would take at least $10,000 to fix it up to code since it's in the city limits. We paid $26,500, still owe $21,000 the property is appraised for taxes at $27,500. If we add $10,000 then we'll be paying $36,500 for a property that's only appraised at $27,500 an aprraisal that won't change drastically with the repairs since these are not changes that will show for tax purposes. The land values are not going up in the area due to all the factories closing & folks leaving right & left. There's 4 auctions scheduled within 2 blocks from the house for this weekend!! Would we be better off to just hold on to it and not fix it up other than the roof leak, or doze it down and sell the land it's now in an business/residential district. I'm sorry if I'm not making sense, it's confusing even for me. I just don't see anyone paying $36,000 for a two bedroom 800 sq ft house with a large lot in a depressed area. We also have decided that renting it is not going to be an option, we have three friends who are landlords in the same area, right now all three are doing major repairs due to renters trashing their places- one so bad that they have to replace the wood floor & every window in the place! All had gotten references & checked them before renting, I guess it's just bad luck but I don't want to have to deal with that type of repair issue every time someone skips out on their rent. Any ideas on which way to go- hold on with minimal repairs and hope for the local economy to improve or doze it down and sell the land which will still leave us with a loss but not any additional expense or spend the extra money & hope to sell it for the money we'd have into it. I hope you understand what I'm asking, I can't figure out a better way to present the problem. Thanks for any opinions.

Farmer-Gene-WI    Posted 04-26-2002 at 03:17:20       [Reply]  [No Email]
Sell it as a fix me up house, lots of people looking for these, you sell it "as is" and reveal to the buyer whats wrong with it. He usually does the work himself to bring it up to code and resells it.

screaminghollow    Posted 04-25-2002 at 18:22:55       [Reply]  [No Email]
Deed in lieu of foreclosure may be an option as mentioned.
If things are depressed, do you have anything to barter. Out of work carpenter can insulate, plumber to do repairs etc. When I was growing up with four siblings my dad would paint the butcher's house for a side of beef. Get the idea?
A taxidermist near here, got his house built for little over the cost of materials because he swapped mounting folks trophies for work on his new construction house.
Definitely check the disclosures by the realtor-crook guy. You may have him for a breach of contract and even possible fraud case against him. Since the "seller" is still holding the note, some states give you a right to discontinue payments.
In this area some folks give a cheap rent with a three month security deposit. Folks tend to like the bargain rent and don't want to lose the hefty security deposit. Such folks tend to take better care of properties. In some states you can write the lease so there is a hefty discount on the rent if payments are made by the due date. My brother's tenants get a $50 discount if the rent is paid before close of business on the first. Tenants are beating down his door to make payments on time. (This is not legal in some states.) Ie, if the rent you want is $450, make it $500, with a $50 discount for each month the rent is paid by the due date.
In this area, single folks tend to be better tenants, but you can't discriminate against people with kids, unless the house doesn't qualify for kids to live there. I actually knocked down a wall between two bedrooms in a small house to convert it to a single bedroom house. The tiny third bedroom was converted to a walkin closet with no window. That way, no kids.
Not that I dislike kids, single folks appreciate the roomy areas and I can't be accused of discriminating against the kids.

8NTX    Posted 04-25-2002 at 15:09:53       [Reply]  [No Email]
I assume you have a mortgage and it was not owner financed. Didn't the mortgage co. require an inspection? If so, there could be some recourse there. Some mortgage companies will do a deed in lieu of foreclosure (deedback), which is easier on your credit. It might cost you a little bit but worth looking into. Before you go tearing it down, make sure the lot will sell for what is owed on it, and that the mortgage co. will allow it. If it were me, I would spruce it up a little and owner finance it if possible (wrap the mortgage). Or take a second and let the 1st be assumed (if the mortgage co. agrees). Homes are a lot easier to sell with good owner financing, if you can do it. You just may have to face the fact that you will probably lose your equity in it; just try not to lose any more if you can. Hate to say it, but you are probably not the only suckers out there. Just find some more (but be honest!).

Kathy Aldridge    Posted 04-25-2002 at 15:09:29       [Reply]  [Send Email]
It's being carried on a land contract by a local couple. Now the problem is the husband of the couple was a real estate agent & he sold it to us, then last spring he left his wife of 20 yrs, moved out of town and signed over the note to her for part of their divorce settlement. As much as I wouldn't mind 'sticking it to him' she's just as innocent in this as I am and I won't just send it back to her, she's dealing with alot on her own. I don't know how she'd feel about dozing it but since she's been paid faithfully & on time each month she may be open to the idea and it would be better than getting it back for her to deal with.
I appreciate the quick responses, and I will keep checking for more. Personally, I would like to just raze it, less liability in the end but my husband thinks we should weigh all the options.:(
Thanks you guys, it's nice to know you are all out there to help a member with a problem.
Blessings, Kathy

8NTX    Posted 04-25-2002 at 15:17:22       [Reply]  [No Email]
A land contract is a different matter altogether! I do not profess to know the laws in your state, but I would definitely get a lawyer's advice. If the husband is a broker, he could have some liability there since he was a licensed agent. Disclosure laws are usually pretty rigid and he could lose his license or worse if there was misrepresentation. Look at it this way, if he let the wife have a bad or flawed contract for deed, he is the one short-changing the ex-wife, not you. I just have a feeling that this deal can be unwound.

F14    Posted 04-25-2002 at 14:44:02       [Reply]  [No Email]
Ouch. I don't see any good way out of this. Will the folks that hold the mortgage even LET you raze the place? If so, I'd suspect that'd be the cheapest way out, and hope the lot sells.

Just my opinion, your mileage may vary. Maybe somebody else can come up with a better idea.

big fred    Posted 04-25-2002 at 14:41:32       [Reply]  [No Email]
You could just quit making the payments and let the bank repossess it. I would check to see what that would do to your credit rating first, but in your situation it might be the best answer. I'm not offering that as advice, just that it is another option in addition to those you listed.

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