We’ve gotten over our house ouch…not getting the ugly-with-potential house that we tried to purchase in September.B All things work out and on to the next!
Last month I shared with you our story and that I think one of the biggest things that separates a Realtor purchase fro a non-Realtor purchase…is perhaps that we/I am a bit more prepared to take a bigger risk than most people.B Below is the paragraph from last month explaining a bit more what I mean by that.
Last month: “Risk:B One of the biggest differences between Realtors and many buyers is how much risk someone is willing to take to have reward down the road. Especially in a very tough sellers market with very little inventory and a lot of ugly.B What is your home buying risk grid? How willing are you to try with the risk of losing out? Or with the risk of winning?”
Here are the questions that I laid out last month with the answers from this month 🙂
- Risk: How willing are you over all to live in a house that might not be up to everyone else’s standards for 2-3 years while you work on it? How driven are you by culture’s exterior white wash that we are what you see of us i.e. the car we drive, the clothes we wear, the house we live in? How willing are you to not worry about that external pressure? OUR ANSWER: We were willing to live in a lot of upheaval over the period of two years. That’s a LOT of disruption. Part of it is because we are committed to doing the big work only we had funds to do it. No crazy loans, 2nd mortgages, big HELOC’s. Nope. Pay-as-you-go is our motto and we were willing to be uncomfortable for a chunk of time in order to not add undue financial pressure to our situation.
- Risk: Are you willing to risk losing it by offering well below list price because of it’s condition? What is your ‘pain point’ as I call it… OUR ANSWER: We knew 97% of most people would not be able to get past the horrible layout and the amazing amounts of deferred maintenance.B The sellers had done a home inspection, which they shared with us, and we knew the roof was a complete rotting disaster–full tear off, new pitch, new insulation, new flue vent pipes, chimney mortar work, new gutters, new rafter tails. There were siding issues, leaks in the ceilings, carpenter ants, water issues in the crawl, no updates whatsoever in kitchen or bathrooms and no regular maintenance. So we had our eyes wide open when we got into contract.We offered $23,000 under list price and got into contract at that price. Why were we excited about this? Because the house was already listed well below market and I knew what we could sell it for in 2 years with the updates needed. So an additional $23k under market was reasonable considering several extra fixes.
- Risk: Are you willing to buy the ugly house in the great neighborhood? OUR ANSWER: Yes. Buy the ugly house! Most homes can be fixed!
- Risk: How patient are you? Are you willing to wait for the right house even if it means living in limbo right now?B And are you living life while you wait or are you putting everything on hold ‘until we get the house’? This is hard for me, I so want to be settled NOW.B Are you willing to risk interest rates rising or are you driven by saving $40/month and pushing it on a house that really isn’t the right one? OUR ANSWER: This one is still tricky for me. Half my kitchen has been in boxes for a while & I would LOVE to have everything unpacked in one place instead of 1/2 here now and the other 1/2 scattered in the garage. But yes, we are willing to wait in limbo until the right house comes up. The threat of rising interest rates or ‘missing out’ just isn’t enough to make me make a quick move to jump on and buy a house just to have some relief that I’ll regret later. And yes, I live my own advice. I tell this to my buyers all the time!
- Risk: If the seller provides a home inspection and multiple items are called out, are you willing to take on those repairs over time? OUR ANSWER: We were willing to do it. My inspector found additional things that the sellers inspector didn’t address. And it was still worth it because we had a good idea from the original report of what to expect.
- Risk: Which of these items scare you or would prevent you from moving forward? Rotted sub-floor in master bathroom. Broken sewer line requiring $7800 to replace. Rotted roof & rafter beams due to an internal gutter that was never maintained to the tune of $22,500. Needs external siding, new windows, gutted bathrooms, gutted kitchen.B Chimney needs repair. And more.B What is your ‘fix it’ line in the sand?B OUR ANSWER: As long as almost ‘gutting’ this house didn’t take us over the neighborhood comps of what similar homes are valued at, we were willing to do all these repairs at our expense considering the contract purchase price.
- Risk:B If the appraiser called out the roof and the sellers are unwilling to budge on fixing it, even they don’t pay a dime and it’s handled out of escrow, how much of your own money would you put down on a roof that is going on a house you don’t own?B OUR ANSWER: Some would say this is not smart and as a rule for my clients, I don’t let them pay for ANY repairs on a home they don’t own. However, these sellers had zero funds to put the required 50% up front payment down for the framers or the roofer. With a $22,500 roofing bill, and an appraisal that came in at the original list price while requiring a new roof, we increased the purchase price and worked with our roofer and framer to put down 30% up front. So yes, we were willing to put out $7500 of our own money so that the framer and roofers could do their part with the balance being paid by sellers (out of the increase in sales price up to the appraised value) at closing.
At the end of the day, the sellers were afraid that we were going to ditch the deal (and lose our $5,000 in earnest money and lose our $7,500 that we put in for the roof??) and walk away.B We were willing to have $12,500 at risk, we weren’t going anywhere. And if for some weird reason we had walked, the sellers would have had a new roof more than 1/2 paid for which would allow a conventional mortgage to close on it. The house is still for sale and it hasn’t budged.B It was a GREAT lesson for us in testing what we were willing to do, risk and try. We did over the top problem solving and meeting the sellers more than half way with extra sugar on top, but it wasn’t supposed to work out and we really are truly okay with that.
So now like many of you, we watch and wait and wait and wait. The right house at the right time at the right price in the right condition. It will happen. My kitchen boxes can wait in the garage another year if needed. Or two.