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Our “flip,” as they say on TLC, is a 4-level building that currently has 5 bedrooms, 2 baths, an outdated kitchen, plain Jane baths, carpet everywhere, an unfinished basement, more than 1500 square feet of finished space, a great location, central air conditioning,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!
Friday, July 27, 2007
Apples, Oranges and Co-op Fees
Many people have a misunderstanding about cooperative ownership and how it differs from condominium ownership. There are many differences that I will go into in a later posting, but the question asked most frequently is, “Why is the co-op fee so high?”
A co-op in Kalorama that I currently have listed for $775,000 carries a fee of $1003 per month. Gasp! More than a thousand dollars a month?
But is it really a higher monthly outlay than a similar condo? Maybe, but probably not. Take a look at the property I have listed versus some recent sales.
The $1003 co-op fee at 1870 Wyoming Street NW, #202, which has 3 bedrooms, 2 baths and is approximately 1950 square feet large, includes the following items that are usually covered in a condo fee.
- General Management & Oversight
- Common Area Maintenance (CAM)
- Exterior Building Maintenance
- Custodial Services
- Master Insurance Policy (covering the building)
- Water & Sewer Expenses
- Snow & Trash Removal
- Reserve Funds
It also includes the following things that might be covered in condo fees of another building.
- 24-hour security with a front desk attendant
- Heat throughout the apartment
- Extra storage in the basement
And it includes one major thing that is NOT included in a condo fee: PROPERTY TAX.
The contrasting examples below are taken from the Metropolitan Regional Information System, our local multiple listing database and are properties listed and sold this year by my colleagues in the industry.
Unit #418 at 3881 Connecticut Avenue NW, a 2 bedroom with den, 2 bath, 1550 square feet condo was listed for a similar $779,000. The monthly condo fee was $717, which included a parking space and maintenance of a pool and exercise room (not uncommon in the newer buildings). Property taxes were listed at $6478 per year or nearly $540 each month. Added to the fee, the new owner is paying $1257 per month, excluding utility costs, even if his taxes never go up! Is a parking spot, a pool, or a mini-gym important to you? If so, this might be a great deal, depending on what you would pay for these services elsewhere.
In a building without such amenities, Unit #604, a one bedroom with den, one bath, 1283 square foot condo at 1015 33rd Street NW, sold recently for $800,000, without parking. The condo fee was $644 per month and the taxes added a monthly charge of $369 for a total of $1013 before utilities.
Some cooperative fees also include montly payments toward an underlying mortgage held by the corporation, which you assume as part of your purchase. This reduces the amount you must finance through an institutional lender. Also keep in mind that mortgage interest and property tax portions of co-op fees are tax deductible; you get no such benefit from a condo fee. Check with your accountant to see what this means to you.
Yes, there are complexities involved and each co-op building is different, but then again, so is every condo building. Before you remove a cooperative apartment from consideration as a potential home purchase based solely on the fee, be sure to add up your total living expenses to ensure you are really making a fair comparison. You might be pleasantly surprised.
A co-op in Kalorama that I currently have listed for $775,000 carries a fee of $1003 per month. Gasp! More than a thousand dollars a month?
But is it really a higher monthly outlay than a similar condo? Maybe, but probably not. Take a look at the property I have listed versus some recent sales.
The $1003 co-op fee at 1870 Wyoming Street NW, #202, which has 3 bedrooms, 2 baths and is approximately 1950 square feet large, includes the following items that are usually covered in a condo fee.
- General Management & Oversight
- Common Area Maintenance (CAM)
- Exterior Building Maintenance
- Custodial Services
- Master Insurance Policy (covering the building)
- Water & Sewer Expenses
- Snow & Trash Removal
- Reserve Funds
It also includes the following things that might be covered in condo fees of another building.
- 24-hour security with a front desk attendant
- Heat throughout the apartment
- Extra storage in the basement
And it includes one major thing that is NOT included in a condo fee: PROPERTY TAX.
The contrasting examples below are taken from the Metropolitan Regional Information System, our local multiple listing database and are properties listed and sold this year by my colleagues in the industry.
Unit #418 at 3881 Connecticut Avenue NW, a 2 bedroom with den, 2 bath, 1550 square feet condo was listed for a similar $779,000. The monthly condo fee was $717, which included a parking space and maintenance of a pool and exercise room (not uncommon in the newer buildings). Property taxes were listed at $6478 per year or nearly $540 each month. Added to the fee, the new owner is paying $1257 per month, excluding utility costs, even if his taxes never go up! Is a parking spot, a pool, or a mini-gym important to you? If so, this might be a great deal, depending on what you would pay for these services elsewhere.
In a building without such amenities, Unit #604, a one bedroom with den, one bath, 1283 square foot condo at 1015 33rd Street NW, sold recently for $800,000, without parking. The condo fee was $644 per month and the taxes added a monthly charge of $369 for a total of $1013 before utilities.
Some cooperative fees also include montly payments toward an underlying mortgage held by the corporation, which you assume as part of your purchase. This reduces the amount you must finance through an institutional lender. Also keep in mind that mortgage interest and property tax portions of co-op fees are tax deductible; you get no such benefit from a condo fee. Check with your accountant to see what this means to you.
Yes, there are complexities involved and each co-op building is different, but then again, so is every condo building. Before you remove a cooperative apartment from consideration as a potential home purchase based solely on the fee, be sure to add up your total living expenses to ensure you are really making a fair comparison. You might be pleasantly surprised.
Thursday, June 14, 2007
A Loaf of Bread, a Quart of Milk and a New Listing Lead, Please...
Ok, so it’s not your standard answer when your honeybun asks, "What do you need at the store, dear?" Nevertheless, that’s what my husband, Kelley, came home with the other day.
Our new home has an enclosed side porch that, when added on years ago, was not connected to our central air conditioning unit. While conducting our home inspection last March, my inspector turned on the existing through-the-wall AC unit, which emitted a disgusting smell reminiscent of burning rubber. (And you were wondering what the term "as is" means?)
So, in anticipation of another hot, muggy DC summer, Kelley headed out to Sears to find a replacement unit. While standing in line waiting to pay for his purchase, he overheard a conversation between the two gentlemen in line behind him. They were disappointed at not being able to find the right real estate agent to represent them in the sale of a DC property.
Now, Kelley is well-trained and knows that if he finds a new client for me, there’s a steak dinner and a bottle of wine in it for him, so he turned and volunteered that his wife was in the business, adding that we even lived near the property they were discussing. Delighted, one of the gentlemen asked if he had my business card. Alas, he did not.
An unhappy ending, you think? Well, think again! When Kelley came home with his Sears receipt and handed it to me, on it was scribbled the name and phone number of the property owner. I called him and made an appointment for later in the week - and gave Kelley a handful of my business cards.
Now, I can’t say that this is going to happen often, or even that it will translate into a listing and a sale, but I do know that it’s nice to have an advocate in the checkout line at Sears. Maybe tomorrow I should send him to Home Depot...
Our new home has an enclosed side porch that, when added on years ago, was not connected to our central air conditioning unit. While conducting our home inspection last March, my inspector turned on the existing through-the-wall AC unit, which emitted a disgusting smell reminiscent of burning rubber. (And you were wondering what the term "as is" means?)
So, in anticipation of another hot, muggy DC summer, Kelley headed out to Sears to find a replacement unit. While standing in line waiting to pay for his purchase, he overheard a conversation between the two gentlemen in line behind him. They were disappointed at not being able to find the right real estate agent to represent them in the sale of a DC property.
Now, Kelley is well-trained and knows that if he finds a new client for me, there’s a steak dinner and a bottle of wine in it for him, so he turned and volunteered that his wife was in the business, adding that we even lived near the property they were discussing. Delighted, one of the gentlemen asked if he had my business card. Alas, he did not.
An unhappy ending, you think? Well, think again! When Kelley came home with his Sears receipt and handed it to me, on it was scribbled the name and phone number of the property owner. I called him and made an appointment for later in the week - and gave Kelley a handful of my business cards.
Now, I can’t say that this is going to happen often, or even that it will translate into a listing and a sale, but I do know that it’s nice to have an advocate in the checkout line at Sears. Maybe tomorrow I should send him to Home Depot...
Saturday, April 28, 2007
Moving and Other Pastimes
People’s jaws drop when I tell them I have moved 40 times.
In the beginning, I followed the family. My father was in city management and promotions meant moving from a smaller city to a bigger one over and over. It wasn’t until I went to college that I finally memorized my address: the Kappa Kappa Gamma sorority house at Florida State University.
(FSU was a self-proclaimed “party school” known for its Seminoles football team, its Flying High Circus alumnus Burt Reynolds and the 70’s streaking craze. Being a college kid in the early 70’s, it’s a wonder I can remember anything at all, but Tallahassee, Florida was south of the Mason-Dixon Line; it couldn’t compete with Ann Arbor or Berkeley when it came to recreational drugs and radical politics. That part of the 70’s just passed me by.)
After graduation, I began relocating in earnest with most moves being job-related. I greeted airline passengers in Florida, inspected cargo vessels in Michigan, checked passports in The Bahamas, wrote national policy in Virginia, hosted diplomatic parties in Germany, started a home improvement company in Maryland, trained law enforcement officers in New Mexico, administered benefits programs in Minnesota, developed property in California and ran a bed and breakfast in Washington. Until 1997, my average length of stay in a given area was 30 months.
I used to be at a loss for words when someone would ask, “Where are you from?” After all, I was homeless, a nomad, a will-of-the-wisp. To some, that sounded romantic; to others, absurd; to me, perfectly normal. But then I began to notice a pattern.
In 1981, I bought a little townhouse in Alexandria where I stayed until 1982. Then I bought a tract colonial in Silver Spring where I resided until 1986. In 1988, I returned to the area and bought a detached contemporary in Upper Marlboro and lived there until 1990. I came back to DC again in 1997, first to a Victorian rowhouse on Capitol Hill, then to another contemporary in 16th Street Heights, then to a duplex condo in McLean Gardens.
Wait a minute - it was now 2005! What was happening here? Despite all the house shuffling, was I starting to put down roots?!
Well, last month, after a short detour along the west coast, I made my latest move – the 40th – to a stone-front colonial in the NE DC suburb of Brookland. It’s a great house on a one-block, tree-lined street in a friendly, well cared for neighborhood. I love it here.
If you see me on the street, please say hello. Just don’t ask me if this is my last move…unless you want to see me grin like the Cheshire cat.
In the beginning, I followed the family. My father was in city management and promotions meant moving from a smaller city to a bigger one over and over. It wasn’t until I went to college that I finally memorized my address: the Kappa Kappa Gamma sorority house at Florida State University.
(FSU was a self-proclaimed “party school” known for its Seminoles football team, its Flying High Circus alumnus Burt Reynolds and the 70’s streaking craze. Being a college kid in the early 70’s, it’s a wonder I can remember anything at all, but Tallahassee, Florida was south of the Mason-Dixon Line; it couldn’t compete with Ann Arbor or Berkeley when it came to recreational drugs and radical politics. That part of the 70’s just passed me by.)
After graduation, I began relocating in earnest with most moves being job-related. I greeted airline passengers in Florida, inspected cargo vessels in Michigan, checked passports in The Bahamas, wrote national policy in Virginia, hosted diplomatic parties in Germany, started a home improvement company in Maryland, trained law enforcement officers in New Mexico, administered benefits programs in Minnesota, developed property in California and ran a bed and breakfast in Washington. Until 1997, my average length of stay in a given area was 30 months.
I used to be at a loss for words when someone would ask, “Where are you from?” After all, I was homeless, a nomad, a will-of-the-wisp. To some, that sounded romantic; to others, absurd; to me, perfectly normal. But then I began to notice a pattern.
In 1981, I bought a little townhouse in Alexandria where I stayed until 1982. Then I bought a tract colonial in Silver Spring where I resided until 1986. In 1988, I returned to the area and bought a detached contemporary in Upper Marlboro and lived there until 1990. I came back to DC again in 1997, first to a Victorian rowhouse on Capitol Hill, then to another contemporary in 16th Street Heights, then to a duplex condo in McLean Gardens.
Wait a minute - it was now 2005! What was happening here? Despite all the house shuffling, was I starting to put down roots?!
Well, last month, after a short detour along the west coast, I made my latest move – the 40th – to a stone-front colonial in the NE DC suburb of Brookland. It’s a great house on a one-block, tree-lined street in a friendly, well cared for neighborhood. I love it here.
If you see me on the street, please say hello. Just don’t ask me if this is my last move…unless you want to see me grin like the Cheshire cat.
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