My friend Karen and I still have so much faith in the real estate marketplace that we have recently embarked on a project to bring a 1970’s townhouse-style condo kicking and screaming into the new millennium. I have the real estate knowledge and a handle on what sells in this market, as well as experience in renovating properties all over the country. Karen, a senior mortgage lender with a local firm (klucey@masondixon.com), is both financial and design consultant on the project. We’re gonna have some fun!
Our “flip,” as they say on TLC, is a 4-level building that currently has 5 bedrooms, 2 baths, an outdated kitchen, plain Jane baths, carpet everywhere, an unfinished basement, more than 1500 square feet of finished space, a great location, central air conditioning, huge closets, a fenced yard and gated parking. I hope you will understand that until we close on the deal, I must keep the address to myself.
I am an avid watcher of HGTV and TLC, but Flip That House really makes me cringe. I commend those who are lucky enough to stay on deadline, not overextend their budget and sell the property in a reasonable amount of time. For the others, well, I feel their pain. Yet my main concern is that while people get drawn into renovating properties by the promise of large financial gains, TLC merely adds what the people paid for the house to what they spent in renovations and subtracts the total from the final sales price to arrive at the “profit.” This, I believe, does a real disservice to John and Jane out there in Viewerland, who are sitting on the sofa munching Cheetos and thinking this would be fun.
Where are the costs associated with buying the house? Where are the costs of carrying the mortgage, utilities and, in some cases, condo fees? Where are the costs of selling the house? What about the time involved in researching properties, locating and monitoring suppliers and subcontractors, and even doing your own demolition? Isn’t your time worth something? All these costs play a prominent role in figuring profit. And that figure is only a pre-tax profit, so you haven’t really even reached the bottom line until you pay Federal and State tax on the gross profit you received.
So, by using this Blog as a reality series, complete with photos, descriptions and recommendations for the uninitiated renovator, I have several objectives.
1) To let people who are thinking about renovating live vicariously through Karen’s & my experiences,
2) To point out pitfalls and celebrate successes,
3) To provide a more accurate analysis of the time and money involved in this type of work, and of course
4) To let would-be buyers follow our progress and provide input.
Stay tuned as we march from contract ratification through inspection to settlement and beyond. If all goes as planned, the Open House will be in June.
Wednesday, January 30, 2008
Friday, January 18, 2008
A Modern Day "Bidding War"
(Note: There is a sad start to this story, but IMHO the happy ending outweighs it.)
I recently had the pleasure of helping my new clients, Robert & Onelio, purchase their first home at an incredible discount. No, this was not a “fixer-upper” or some shell in a “down and going” neighborhood, but a lovely, recently renovated condominium in Columbia Heights. So lovely, in fact, that they had rented it two years earlier and were the existing tenants when we met.
Robert & Onelio had learned from their landlord that he was going into foreclosure. He even went so far as to give them the name and number of the foreclosure trustee. Nonetheless, when they decided to try to buy the condo early in the process and shoo the wolf from their landlord’s door, he failed to respond to all attempts at contact. Since he still owned the property, there appeared no way to buy it except to bid at the upcoming foreclosure auction. It was at this juncture that their neighbor, also a client of mine, suggested that they call me for help.
Well, even old dogs can learn new tricks, I thought, as the questions poured out. “Do we have tenant’s rights?” “Will we be evicted from our home?” “How does the auction process work?” And the kicker: “Can we really afford to buy it?”
After putting them in touch with Karen Lucey-Guess at Mason-Dixon Funding (klucey@masondixon.com), who helped them through the pre-approval process, I started to make some inquiries about foreclosure auctions. I don’t purport to be an expert by any means, but here are some basic tips from my research.
1) You can find out which properties are to be auctioned at the websites belonging to the auction houses. There are several in the area.
2) The trustee (person selling it on behalf of the bank) must publish the auction in the paper in advance, so check legal notices in the Post or the Times to find out more about the property you want.
3) If you are interested in a DC property, for a mere $4 each, you can download from http://www.dc.gov/ any document available in land records, including the Notice of Foreclosure which will tell you when and where the auction will be, as well as how much is owed on the loan.
4) Go to a foreclosure auction in advance, just to see how things work. Then it won’t be as stressful when you go on “your” day.
5) You must have a certified check to play this game. Each foreclosure notice will tell you how much to bring. Make the check out to yourself.
6) Be on time. Auctions can be scheduled for as few as five minutes each. If you’re in the parking lot or the restroom when the auctioneer begins, you’ve already lost.
7) The bank will set the opening bid and it will be announced those in the room. After that, the auctioneer will invite bids. The highest wins.
8) At the conclusion of each auction, the winner will sign a contract document and endorse the certified check to the trustee. In some cases, there will be an additional deposit needed soon thereafter. Most settlements must occur within 30 days or the deposit will be forfeited.
Please remember that this process may not be for the novices among us. It is not like traditional real estate sales; this is an “as is” deal in the strictest sense. No inspections, no contingencies and no closing cost assistance. In fact, you pay both your own closing costs and those of the bank. Then, as the happy winner, you might find a tenant or the previous owner still living in the property who is not welcoming you with open arms.
So what about our heroes? Well, when all was bid and done, Robert and Onelio had left their home as tenants in the morning and returned in the afternoon as future homeowners. Maybe it was winning the auction, maybe it was the thought of instant equity, or maybe it was the celebratory bottle of champagne we shared at the Cheesecake Factory at 11 am, but the three of us were on a high all day!
I recently had the pleasure of helping my new clients, Robert & Onelio, purchase their first home at an incredible discount. No, this was not a “fixer-upper” or some shell in a “down and going” neighborhood, but a lovely, recently renovated condominium in Columbia Heights. So lovely, in fact, that they had rented it two years earlier and were the existing tenants when we met.
Robert & Onelio had learned from their landlord that he was going into foreclosure. He even went so far as to give them the name and number of the foreclosure trustee. Nonetheless, when they decided to try to buy the condo early in the process and shoo the wolf from their landlord’s door, he failed to respond to all attempts at contact. Since he still owned the property, there appeared no way to buy it except to bid at the upcoming foreclosure auction. It was at this juncture that their neighbor, also a client of mine, suggested that they call me for help.
Well, even old dogs can learn new tricks, I thought, as the questions poured out. “Do we have tenant’s rights?” “Will we be evicted from our home?” “How does the auction process work?” And the kicker: “Can we really afford to buy it?”
After putting them in touch with Karen Lucey-Guess at Mason-Dixon Funding (klucey@masondixon.com), who helped them through the pre-approval process, I started to make some inquiries about foreclosure auctions. I don’t purport to be an expert by any means, but here are some basic tips from my research.
1) You can find out which properties are to be auctioned at the websites belonging to the auction houses. There are several in the area.
2) The trustee (person selling it on behalf of the bank) must publish the auction in the paper in advance, so check legal notices in the Post or the Times to find out more about the property you want.
3) If you are interested in a DC property, for a mere $4 each, you can download from http://www.dc.gov/ any document available in land records, including the Notice of Foreclosure which will tell you when and where the auction will be, as well as how much is owed on the loan.
4) Go to a foreclosure auction in advance, just to see how things work. Then it won’t be as stressful when you go on “your” day.
5) You must have a certified check to play this game. Each foreclosure notice will tell you how much to bring. Make the check out to yourself.
6) Be on time. Auctions can be scheduled for as few as five minutes each. If you’re in the parking lot or the restroom when the auctioneer begins, you’ve already lost.
7) The bank will set the opening bid and it will be announced those in the room. After that, the auctioneer will invite bids. The highest wins.
8) At the conclusion of each auction, the winner will sign a contract document and endorse the certified check to the trustee. In some cases, there will be an additional deposit needed soon thereafter. Most settlements must occur within 30 days or the deposit will be forfeited.
Please remember that this process may not be for the novices among us. It is not like traditional real estate sales; this is an “as is” deal in the strictest sense. No inspections, no contingencies and no closing cost assistance. In fact, you pay both your own closing costs and those of the bank. Then, as the happy winner, you might find a tenant or the previous owner still living in the property who is not welcoming you with open arms.
So what about our heroes? Well, when all was bid and done, Robert and Onelio had left their home as tenants in the morning and returned in the afternoon as future homeowners. Maybe it was winning the auction, maybe it was the thought of instant equity, or maybe it was the celebratory bottle of champagne we shared at the Cheesecake Factory at 11 am, but the three of us were on a high all day!
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