The property was for sale for $82K. It came down to $62K. I have it under contract for $38K “subject to inspection.” The comps are showing $70K - $80K. I had an inspection done today. Found out it has mold and termite, and gas is leaking. Other than that there are other repairs around the house. The property is not in that bad a shape otherwise. I can get out of the deal because of termite and my escape clause “subject to inspection.
My realtor tells me to get out of the deal. I’m thinking to make an offer of 17K “subject to mold test” (mold problem can cost from few hundred dollars to severe thousand dollars.)
What should I do: get out or make an offer for $17K? The property has been in the market for about six months. It’s 105 years old. The owner lives 1500 miles away and wants to get rid of the property real bad. The neighborhood is of lower-to-middle class of mixed ethnicities and is relatively clean. The property is a duplex with one unit available. It’s a nice little place (850 sq ft) and will probably rent for $600/mo.
Could you buy it and demolish it for a new construction? What is the value of the land as a vacant lot? The city will often have a program to assist in the demo on old homes. If I can reclaim the money spent on the lot alone then it is a win-win in my book. It is the only way I will buy.
Can’t demolish and rebuild. If I can buy for $17K and spend another $20K to get it in good shape, I think I can fetch about $72K for it. I think repair exceeding $20K is not worth it, and that mold worries me.
I wasn’t saying you had to rebuild.You could clear the lot and sell it if it was worth enough. Mold remedation can be costly. Where is the mold at in the house? If there is mold than there is moister. Have you had an inspection done to estimate repair cost? Rental rehab is not costly unless you have underlining major repairs.
Rent that sucker for at least 2 years then advertise it on the local college bulletin boards for any “start up investors” and also at the Local REI Clubs. Someone will bite, they always do. Not only will you get you’re money, but you make make some contacts that will be profitable and eye opening for the future.
Local authority was called. Gas was shut off. The agent signed the acknowledgement. I found the receipt in the basement. And get this…seller’s disclosure did not mention it! Now the seller wants my inspection report as to why I want to get out of the deal (this inspection report cost me $395). Can I get out of the deal by just pointing out the fact that gas leak was not mentioned in the seller’s disclosure while the agent knew about it all along?
We are investing fellows not buying a beautiful new home for grandma to live in.Buy the house for $38k,Call the gas co.to come fix the leak $free ,Call the local bug guy to give it a shot of bug juice $1100 ,buy a 5 gallon jug of clorox bleech and clean it up throw tenants in it refi it ,get all your money back plus a little ,and rock and roll on to the next.Your wasting time and money piddle paddling around.
I got out of the deal, with a $395 “loss” for the inspection. I am a newbie. I was very scared of the mold situation because it was buy, fix, rent. My bid of $38K, which was accpeted, was before I knew about the mold (heck, I had no clue what “mold” is–I live in a very nice suburb and had seen only upper-middle-class houses and therefore still learning about run-down properties.) This was my first attempt at “fixer-upper.” What I got of this was experience. Before I bid on the next property, I know what to look for before I work the numbers to bid.
How can you all tell this guy to walk away from a home that a (no offense Syd) beginner anaylized, You havent even seen the property.This could have been his deal of a lifetime.
Not to come down too hard on Syd, but mold knows no socio-economic boundaries. I live in an area with some pretty pricey properties (average 400k) and mold can show up here just as easily as it could in lesser valued houses if water gets in a leak in the roof or you’ve got condensation build up (think improperly vented shower area).
This deal may or may not have been the right one, and I don’t know what it takes to get rid of the different types of mold, but I don’t think mold showing up in a property would necessarily kill a deal for me. I would try to use it to my advantage with seller. Something along these lines–
Buyer—“You’ve got MOLD!!! Ahhhhhhhhh. I can’t buy this house. For that matter I’m going to the doctor to make sure I’m going to live to see another day. And, if my kids get sick from me tracking these spores into my house you’ll be hearing from my lawyer. I can’t believe you didn’t tell me you had MOLD before I even parked my car. What kind of a seller are you? You should be ashamed of your…Tell you what, take off $10,000 from your asking price and you’ve got a deal.”
Of course, my tongue is firmly planted in my cheek, but I hope you see what I’m saying.
Syd, I am sorry that you had to walk from this deal. I’ve read that mold is in every home to some degree but since we don’t go around peeling back walls everyday, we just don’t see it. I had a radiator go crazy on me in my last apartment and a little colony of black spores magically appeared on the wall. A squirt of Tilex and those little guys were gone for good. Of course you can’t squirt Tilex inside the walls, but anything that can be defeated with shower spray is nothing to run away from.
If you find that you are in this situation again, maybe consider asking (as naperbill suggested) the seller to knock the price down by the cost of any major repairs (mold removal, termite extermination, etc). I would also add a little cushion in case termites eat the mold and morph into uber-mites or something.
You can chalk this all up as a newbie-lesson (some of us newbies have can share some more painful lessons than that), and move on to the next great deal!
Syd,
If YOU aren’t comfortable with the deal, then you should get out. However, you might have wanted to wholesale the deal to another investor that may have been confortable with the situation. Get some contacts that if you find a deal like this again that you are not comfortable doing you can sell the contract to another investor.
Can I get out of the deal by just pointing out the fact that gas leak was not mentioned in the seller's disclosure
Not sure about other states, but in California, you have 3 days to cancel after a TDS (Transfer Disclosure Statement) is provided. A TDS is required for ALL sellers to fill out (represented by an agent or not). If an initial TDS is provided and then it becomes necessary down the process to provide another TDS due to new issues or “forgotten” issues you again have a 3 day window. Just something to keep in mind.