Has Anyone Ever Gutted a Burned Down Townhouse

Question

Hey BP Gurus. There are about 4 townhouses that were burned down in 2011 in my neighborhood. The current list price on those burned shells is ~$165k. Get the heck outta here on that but does anyone have any advice on this type of rehab? Recent sales on comparable are in the high 160s. Considering the property(ies) need a full gut job what kind of offer should I put in?

John Rooster · Answer

Based upon what you say, it seems to me the high and best use would be tear them down to the foundation and rebuild

Steven Del Prete · Answer

if your telling us that they burned down 2 years ago and have been sitting I'm going to assume the houses are garbage. Besides the crazy amount of water the fire departments need to use to put out a fire soaking everything they have been left to crumble for years.

My guess would be that these need to be town down to the foundation and completely rebuilt. With that being said you need to figure out demo cost plus rebuild cost. All soft and hard cost and resale value at the "new home" level and no rehabbed level. Then you will know what you can offer

Jassem A. · Answer

Sometimes all these supposedly burned down properties need is the walls cleaned off and painted and a couple sheets of drywall where the fire department tore into the house so it could be a good deal

Bill Gulley · Answer

Run away!

Reminds me of a burned home I had as collateral, a Dr's home with an indoor pool. The water was shut off from the pool, the heater malfunctioned and kept burning. The place burned down but the front brick wall and part of other walls remained. The insurance company, State Farm, refused to total it saying it could be rebuilt from those exterior walls. My borrower called trying to see if he had to continue to make payment, the answer was yes. He gave me the story. I called claims and they refused.

I then called the county and had them condemned the property requiring it to be torn down.

I called the insurance folks an informed them of the status and that it couldn't be rehabbed. I also told them if they didn't get a check to me in 7 days that I would go through every loan file and required that our borrowers seek insurance elsewhere. They went nuts saying I couldn't do that. I then directed their attention to the terms of the standard deed of trust, "borrower shall provide proof of sufficient insurance, with an insurer acceptable to the lender"....I told them if they didn't get that check to me, after all the time they had stalled on the issue, that they would no longer be an "acceptable insurer" on my loans. I think I got the check in 4 days or so. David won that battle! :)

Brandon Huggins · Answer

@Bill Gulley and @David  T. thanks for your reply. I don't have much more info on the houses beyond they are SEVERELY BURNED. I am too surprised that the insurance company(ies) haven't taken care of things. Maybe the mortgage holder is looking to make the sale before repairs are solidified.

No doubt at least two of the houses need full restoration or new build. Maybe I should try this bringing the homes to the attention of building regs. I'm interested in looking into it further. I'll keep you posted with any new info.

Bill Gulley · Answer

Looks to me like the property is being offered with the right to receive insurance proceeds as the owner wants to walk away, but that's rater odd as it should be listed at a salvage value or you're waaaay off on the ARV.

I probably wouldn't touch that with a ten foot pole attached to a 40' boom!

You need  structural engineer to clear that building as to foundation and exterior walls or anything left.

Fire restoration is a specialization, not just due to the smell and impossible cleaning of clothing, protective gear and the mess having possible environmental issues but you need to know what has to be cut out and what can be salvaged.

If it were in my neighborhood it wouldn't be sitting there at a price like that. What I have done is having burned out buildings brought to the attention of building regs. They tag the place and require repairs by a certain date or it becomes a tear down. The owner either gets real serious on price or they get it fixed. I'd be just as happy buying the lot from the city after they tear it down. Building new would be better than trying to piece in improvements to a major fire damaged building.

I am assuming there is major damage.

A property like that should have been insured, so the owner and any mortgage holder should have been covered, if it wasn't they deserve to lose it IMO. :)

David T. · Answer

Brandon, you really need to post more info on the deal, but in my experience, the cost of rehabbing a burnout is minimum $50k per unit. After that it really depends on how severely the property has been burned, i.e. new roofs, etc.

So go do your homework and let us know what you need to do to make these liveable again!

Has Anyone Ever Gutted a Burned Down Townhouse

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