#235 in a series of true experiences in real estate
March 1998, Hills Newspapers
Richard wanted a bargain. He wanted a house he could work on and make worth more — fast. He thought he and his wife and kids could move in, he could do remodeling, and make some money. Houses that had been foreclosed on seemed his best bet. At least that’s what a friend had told Richard and so, he had acquired a list of such properties from a secret source and now he was frantically working through the list.
There was very little time. Ten days to be precise. Richard’s old house had already sold and they needed to be out. They were on the moving company schedule but they didn’t know yet where their belongings should be delivered.
The original idea had been to sell their house, then rent and think about the next move. They’d looked at lots of rentals but with two kids, two cars and a grand piano, renting was going to be expensive and, Richard explained, he’d been feeling lately that it just didn’t make sense to pound any rent money down a rat hole.
He had looked at only one house on the foreclosure list so far he said and he was excited about it. “Wonderful neighborhood,” he declared, “and it’s cheap! I can finish the work and make money on this one.”
We went to see and got there in the rain. We parked on the shoulder of the road, bent our heads back to see the house at the top of the steep slope, then climbed the flights of stairs. Everything going to or coming from the house had to get there by way of the front steps. As we went up we mused about how long the plywood sheets and posts placed on the hill would hold back the dirt.
The house wasn’t locked; the roof was leaking dribbles here and there making the floors wet. There were no finished floors, only subfloors with holes cut through to the crawl space. Wiring was stubbed in but unconnected. The bathrooms had walls but otherwise were empty. The kitchen cabinets were topless, without sink, faucets or counters, but an old refrigerator stood in the dining area. The floor plan was screwy.
It appeared that someone had already gone broke on this project, had torn out a lot of the house but hadn’t put much back together again. Whoever it was hadn’t improved the layout, nor apparently had he the money to purchase necessary materials. Or maybe he’d returned some to the store when he went bust.
We stood there looking around, watched the rain drip in, and wondered how a family of four, people used to a certain amount of luxury, could camp there beginning in 10 days. There wasn’t even any working plumbing or electricity. What made Richard think that this might work? Had his wife seen it?
In fact, Richard’s wife hadn’t seen the house. It was going to be Richard’s surprise but we didn’t learn that until later. We settled down to figure how good the deal was.
The house was cheap, the cheapest in the area. How much would it cost to make it a real house? What would it be worth then? If this family could somehow live in the house while they worked on it, would it make them money?
We looked at sales in the area and roughly estimated what it would cost to finish the house. We discussed the major flaws in construction and site: no off-street parking, steep slope, many stairs, little or no architectural interest or quality.
What we were doing is not an exact science; it’s guesswork. But there was enough evidence to easily convince ourselves that there simply wasn’t “enough room” in the deal.
We got together with Richard who started by telling us what kind of counters he’d like to put in the kitchen, what a great idea he had for refacing the fireplace. He was having fun. No, he hadn’t noticed the plywood dirt barriers in the front yard; did we think that might be a problem? He knew he could make this house look good, put his touches on it, make it pay off.
But he was able to listen. We compared fix-up numbers; his were higher than ours. Still plowing ahead, he questioned the bottom line: “How much could it sell for all done?”
The answer: “Not enough.” He looked crestfallen. We were glad that he was the one to say, “It doesn’t make sense.”
Richard turned back to his list of bank foreclosures. He thought he had inside information but we quickly found that every house on the list was on multiple listing and every one had been listed for several months or longer. None of them was selling.
Richard and his family rented and moved on schedule. Richard is still looking for the right situation — a real deal.
