Deal or No Deal?

Question

I have a lead on a 3 bedroom, 1 bath single family house in a nice suburban area.  ARV is $135,000 - $160,000.  The house was built in the 50's.  The biggest problem is a previous owner added an addition that expands the kitchen and the master bedroom without a proper foundation and it's now separating from the rest of the house!!

The current owner bought the house without an inspection (the seller's agent told her she didn't need one).  She now just wants out because she no longer lives in the house and doesn't want to continue paying taxes and utilities on the place.

The property is now free and clear and market values are pretty good in this area, but I wonder if that's enough to make this a worthwhile deal.

Advice please!

Thanks,

Gary

Account Closed · Answer

It all depends on how much you are able to purchase the property for. I just purchased a property in Houston, TX that was built in 1955, It has major foundation problems, and major plumbing problems. From my estimates they were 20k in fixes with warranty's and permits from the city. I in turn negotiated 30k off the asking price and gained 10k in equity because of the problems the house had.

I would say it just depends on how much you can get the house for, and how much the repairs would be to be repaired. Then add in all your expenses and if you are making the return you are ok with, go for it.

I personally LOVE houses with problems that other investors stay away from. I see ton of opportunity in them.

Good luck!

Micheal Waldrup · Answer

I'm familiar with stories like this.

Sounds like the previous seller's agent was awful motivated to get out of the picture. Probably knowing that if an inspection was done the string would be pulled on how 'legal' the addition was.

EDIT: In addition, I would assume if a permit were actually pulled that an inspection would've pointed out the unsat foundation issue.

Gary Shaw · Answer

Bill,

You're spot on about other issues in the house.  Based on what I've found out so far, there are wiring and plumbing issues, as well as a large dead tree on the property that the city wants cut down.  As far as the house being livable, nobody has lived in it for the past 3 years except the owner's cats.  The owner has kept the utilities on (including central ac) just for them.  Probably could use a good cleaning, but may be livable otherwise.

I suppose if the owner gets desperate enough an owner carry may be workable.  Not sure she's there yet though.

Thanks for the input.

Gary

Bill S. · Answer

@Gary Shaw to solve the issue you mentioned only takes money. How much is what you need to figure out. Seems simple enough. Hold the addition up while a proper foundation is constructed under it. Attach the addition to the new foundation. Find a couple of contractors to get you a ball park bid to do that and you have your answer.

That said, if the previous owners didn't do the foundation right what else is wrong with the addition. It's my first hand experience that people who don't know what they are doing mess up everything about the house. Was the framing done right, was the wiring done right, was the plumbing done right, and was the drywall properly attached? Many times if you can't/don't do the foundation right then the rest is a mess too. Find out what the City would require to get it properly permitted after the fact. One of the Cities I own in requires the drywall to be pulled so that the rough inspections can be completed.

Cheapest solution might be to tear down the addition and restore the original floor plan.

Is the house livable? Would the seller do an owner carry to you or your eventual buyer. That would save some big costs for the end buyers.

Gary Shaw · Answer

I checked the public records and it doesn't appear that a permit was ever pulled for this addition.  I'll definitely earn my profit if I can solved this problem.

Thank for all the info.

Gary

Tim Leslie · Answer

Assuming there wasn't a permit pulled if the foundation isn't correct. Either way the incorrect foundation wouldn't pass inspection anyway so it would need to be torn down or fixed like James said.

James Enright · Answer

If this was done w/o a permit. Chances are it will have to be torn down or removed, subject to city inspection.