patrick.net

Have you pulled the appropriate comps? Is your repair estimate acurate? What is the foreclosure rate in that area? What is the unemployment rate in that area? These are the questions that I would ask myself before deciding to purchase the house.

In any event, DO NOT increase your offer. There will be other homes and it is tempting to become emotionally attached to just one. As someone who defaulted on his "dream home", trust me I know.

Indymac is in no hurry to sell because they are reimbursed nearly all the value of their foreclosures. Take care and caution.

Try to use the listing agent as your buyer agent. They might be able to pull some strings by rebating you some of their commission for you and make it work.

Or you can wait till IndyMac lowers their price some more and then offer even lower.

Long time poster here.

Yes, I have advice, flip your thinking away from "investment first". You call this house 'a real dump', why are you chasing it? A house is first and foremost a pleasant, but reasonably priced place for your family to reside. The "housing is an investment" mentality is what created the bubble. It makes you take risks that paid off for some during the bubble years, but more often that don't pay off, because you are chasing a payday (and now it's over). It sounds like you might be chasing a property with problems because you are trying to get a perfect deal.

That said if you think it's a good property you should do that final bid. At $80k-ish you can't lose that awful much. FWIW I bought a house in the early 90's and bid back and forth like you have (strangely, at a similar price) and I don't think you are chum by making another bid at $83k. Just make it clear that is your last offer, and be prepared to walk. From my perspective there are many houses and it's a buyer's market. I am somewhat familiar with Orlando but not enough to give expert local advice.

Above all, if this deal doesn't work just move on to the next one. There are plenty of houses out there and again - you need a place to live, right? Focus on that.

By the way, you say it needs work: are you familiar and comfortable with getting the fixes done? You need some contractor management expertise if not your own skills to fix it up.

Great advice everyone. First, I have none of the questions answered on the local market conditions. I'll do that research tonight. When I say investment, I mean that it has to make good financial sense first. I do find that I'm somewhat stuck on this house and I think it's because the bulk of what I've seen has been pretty bad. I was happy to see anything that I liked. I did fall in love with the first house I bid on but I offered far too low, and it sold beyond what I could afford anyway so there's no lament on that one.

This house is located at 1586 Starfish in Kissimmee, FL. It's a nice area when you compare it to the rest of our town, which sadly has gone downhill each year.

I've been to the house about four times, I had Lowes out there to give me bids on the repairs, which they won't really do until I actually win the bid. I haven't had a contractor out yet but I got a ballpark figure on the work I know it needs.

new roof
septic has infiltrators (not sure if that's a problem)
drywall repair
facade repair in front
tree removal
pool cleaning (hopefully not new masonite)
demo back porch (falling down)
new well pump
kitchen needs updating (can be done later)

As you know, the 203K streamline won't cover the bigger ticket items, except the roof. I could be forced to give up an additonal 10K if the pool and septic need work. So, this is so close (price vs. market) that the decision is really hard.

Can you recommend some good sites for research?

I did some research, not sure if the sources are the best: ugly picture for our market in Osceola County. I can't find the average rental rates because city-data is down. What's the nuts and bolts of this as far the safe zone for a home purchase ?

The U.S. Census Bureau released new information on September 21st revealing that Central Florida incomes are dwindling and the poverty rate is rising. Metro Orlando, comprised of Lake, Orange, Osceola and Seminole counties, has the highest unemployment rate in the state at 13.4%. The median family income dropped from 58,044 in 2008 to 54,681 in 2009. Osceola County ranked the highest poverty rate in the Central Florida region at 15.9%.

Not surprisingly, the area’s high unemployment is the root cause of the bad news coming from the U.S. Census. Osceola County currently has an unemployment rate of 11.9%, an improvement after briefly touching 14% last year.

OSCEOLA COUNTY: Kissimmee, FL Real Estate Trends
6,035 Foreclosure Homes | $91,827 Average Foreclosure Sales Price

34741 Real Estate Trends
759 Foreclosure Homes | $60,702 Average Foreclosure Sales Price

soure: realty trac (questionable)

In Florida, the county with the highest foreclosures rate in 2008 is Lee County, with around 12 percent of its residential properties receiving a foreclosure filing. The second and third counties with the highest foreclosure rates are Osceola County and Saint Lucie County, with 9.58 and 8.57 percent of their housing units receiving a foreclosure filing, respectively.

source: Real Estate Pro Articles, 2009

SOURCE: HOTPADS. THIS INFO SEEMS TO CONFLICT WITH THE INFO OFF REALTYTRAC. HOW DO YOU KNOW WHAT'S REAL?

Osceola County, FL Rental Pricing Statistics
Median Osceola County, FL Rental Price: $900
Studio Rental Median Price: $799
1 Bedroom Rental Median Price: $650
2 Bedroom Rental Median Price: $799
3 Bedroom Rental Median Price: $975
4 Bedroom Rental Median Price: $1,150

Osceola County, FL Housing Prices
Median Corporate Housing: $1,800
Median Room: $500
Median Foreclosure: $165,600
Median For Sale: $129,900
Median Vacation Rental: $128
Median Land: $102,000
Median Auction: $84,900
Median Rental: $900
Median New Home: $194,990

There you go, exactly, the unknowns are huge for me. I priced the septic at 4-6K because the new standards here come into play in Jaunary, staggering all septic owners out over 5 years, pump and certify each year. Moreover, you can open them up and fix them anymore, they have to be redone to today's standards. Those infiltrators may be good, they may not be.

For me, we're talking a big investment in inspections and about 1000 out of pocket on inspections, at which point I might find out it's not worth it and then I'm out the money.

I was going to let Lowes quote all the jobs, then bring in repair team of my own and get the same quotes, picking and chosing what I can afford to wait on. I can't finance ceiling fans. LOL.

But, that big question is still there on the big ticket items: pool, septic, well. We do have the option to hook to city water for about 3600, about the same as the well equipment and tests, less stink too but a bill each month. And those trees, I love them, but there are three very old, very big trees on this property, one is 5 feet from the front window, and I know those are expensive and reoccurring costs. In fact, during Hurricane Charlie, that big one by the front window shifted, pushing up the entryway facde and cracking it off the house. The house is fine, the facade needs a mason. The guy from Lowes said, "I'd be worried about these trees if it was me, this one is far too close to the house. During a hurricane, you might want to think about leaving."

Basically, those are the things I wanted covered by the loan, forget the cosmetics, but the streamline doesn't cover that and the traditional 203K are a pain in the rump, an expensive pain.

It's a lot of headaches, very true. I think the bank should have taken my offer at 75.

Now I'm shocked that those contractors made that type of investment. They forgot the cardinal rule about remodeling, it all costs twice as much as you expected and takes three times longer.

I know that the home I'm looking at is a lot of work, the fact that we really don't know who much makes me very concerned about offering a penny more. I'm guessing the bank won't get another bid and will call me back, probably after the lisitng agent needs his November bonus.

I agree with pkowen, you need to reverse your thinking. For 80% of people a house is a place to live. Period. End of story. Also, you say that you have a disabled child. Certainly your love and support for them exceeds any dollar value, but at the end of the day, you need money to provide them with an appropriate level of care. If it gets wrapped up in a house that may need major work.... Don't fall so far in love with a house that you loose balance in your life.

General rule of thumb is repairs cost 2x initial estimates, and take 2x as long. As you correctly mention the streamline 203k only gets you so far. AND HUD may force you to make some of the other, bigger repairs if they are deemed necessary. (Not sure on this, its been a while since I looked at a 203k, and things have changed somewhat)

One closing thought. If a new septic is needed, cost may be in excess of your estimates. Keep in mind that if the failure is major (eg your tank has leaked, the leech field is blocked, etc) you need sufficient space on the lot to install a new system, plus it needs to be within certain setbacks, in an area that perks, etc. In short, I have seen instances where there is physically no room to install a new septic system, given the zoning & health department requirements.

Good point. This may be over my head now, or rather my ability to manage the cost. I can see it going either direction, which is why I've been holding off on a third bid. I've had a terrible time finding a place that I like, a good area, a decent size house, etc., I've heard that this is the new norm, a lot of stock but not a lot of great stock. I talked to a woman in Houston the other day, she finally gave up looking and figures she'll wait a few years before she starts again, she said there's plenty of homes but not plenty of decent homes. Don't you think that the delay on foreclosures will make this any better, there'll be a big stock of the type of homes that I bid one, major work ahead. This house I've been discussing went through the courts for three years with the former owners. In the time, the work I've mentioned here occurred. I'm afraid that might be the norm by the time we level out.

I have to add that this is really the first time I've had to barter and horse trade for a house. My last home was in Los Angeles, Echo Park, and I purchased it right from my neighbor, it never hit the market, which was great for me because it was in 2001 when the bubble started. This is a whole new world to me and I'm adjusting to playing hardball, it's unnatural for me so I'm finding I'm pretty timid about showing a tough exterior. I've had not choice but to buck up and be demanding, especially with my realtor. I have to say I've felt like saying screw this more times than not lately. At day's end, yes, we need a place very much.

EastCoast: There's room to redo the septic but the cost....I know it can range from 4K to 20K depending on the problems. Of all the potential issues that house has, that one, to me, is the scariest. I can live without the pool but you must be able to flush your toilet and run water. Moreover, that system is old and already has those infiltrators bypassig the drainfield. It's legal now but with the new state standards coming....I don't know, there was even talk at the state level about making septic owners test for soil too, can you imagine?

Traci,

Did you get in the home and check things thoroughly or, that's the list of problems they told you?

When they say new roof needed, it is good chance of water demage. That could mean rotten timbers inside the wall, mold and bug problem too. Septic system fix can be extremely costly and time consuming depending on the nature of the fix. Deck falling down means another chunk of money, and do you know what caused it? It supposed to be one of the sturddiest part of the house, isn't it? Make sure it's not a structure/base problem. And the pool, you want to avoid it especially when you have disabled or very young child for it can be very dangerous to them.

The worst case scenario is that, it is total gut job that looks ok outside. You may ends up paying another 80K or even more for the fix on top of 80K home and that still is 80K home. If I sense a possibility of something like that, I wouldn't waste a cent, and go look for another one with less problem. So, don't just fall for the look. Go check yourself and figure things out before you decide anything.

PPete says

You are talking about small amounts here 80K vs 83K = $3,000, amoratized over 30 years at a very low interest rate. Why don’t you just buy the house an get on with your life.
Japanese saying: No matter how strong the bridge, to assure it’s safety before crossing, the idiot keeps striking the mores eventually causing the bridge to fall in the river. He walks away satisfied that he did not cross the bridge.

Moral: Drop your hammer, and get on your way. The damn house is cheap!

My thoughts exactly. First problem, viewing the house only as an investment. Second problem, if you are quibbling over 3k at interest rates around 4% (or less at 15 years) you are not in the financial position to buy a serious fixer.

Just buy it, stop being so cheap. Generally 10% less than the asking REO price is acceptable.

Also, OneWest Bank owns the property, Indymac died in Marrch of 2009:

http://www.fdic.gov/bank/individual/failed/IndyMac.html

I'm not being folks, I'm being careful. The problems with this place are significant and could easily put this home far over market, pushing me underwater like so many other owners are now. I've saved for a decent down, I worked my ass off to have the credit to get a nice loan, but I'm very careful in taking on something with so many unknowns. We're talking about a very small margin between what it may cost to fix this and what it's worth, and having contingency fund, be it my own cash or the ability to tap a small amount of equity for an emergency is important to me. I went ahead and rebid on it at 83, splitting the difference with the bank (the 86K they asked). They should have taken the 80 as a very fair offer but I gave it one more shot. Every penny I concede erases either a much-needed repair or just a repair I'd like to see happen. None of these issues are small: old cement pool, tree removal, septic questions, new roof (perhaps rafter repair and God forbid not mold), drywall falling in two bedrooms that may indicate potential mold due to the breech, a questionable well, facade repair, a weird master bedroom that needs to be totally redone at some point to include a real master bath, a crappy galley kitchen, a backporch needing to be demolished, a lot of landscaping. That pool can't have a screen enclosure without getting a variance and I don't have 15K for that. I'll put up a safety gate instead. There are three megalithic trees that make me wonder, including one 5 feet from the front bay window. Don't forget I'm into this for 1000K for FHA's overpriced appraisers and other work. And this is just what I can see with my own eyes ! I've not had the well tested or the electricty checked yet. I hear the AC is somewhat new, though. To put this house back into attractive position, I'm guessing 40K. The square footage isn't 1839 but 1535 because we all know you can't count a screen porch, which he county has done and naturally the bank is going with those figures. Why am I interested ? The location is great and the neighbors are even better, it's an isolated pocket in our town that hasn't been overrun by dirtbags and that's valuable for a family. If the bank says no on the 83, I'll let it go and find something else. In fact, I'm looking out of town at this point. In Florida, we have many foreclosures but the quality of people is pretty poor. Once nice areas were devoured by flippers either renting or selling so low that the caliber of neighbors lacks luster. Who I live next to is important to me. I saw a house I liked but there was a sex offender directly behind it, the under 12 sex offender, not at all suitable for me with a 5-year-old girl. What did the former agent say..."Can't you put up a fence?" To which I replied, "you're fired jerk." I'm not looking for the perfect place, just a place that makes sense. I wouldn't even stay in this town in not for the fact that my father is going quite frail and I'm afaid to go too far from him, my mother is here and she's really close to my daughter. If I had my way, I'd be in Virginia now. :) I'm just fustrated because while I don't expect perfection, I need to know I'm making a wise financial call for my family, something that I'm going to be overmy head in and wondering what the heck I can do to recover. I have decided that if the bank offers us the house, I will do very little in the way of FHA rennovations. I might be far better to save that monthly difference to do cash repairs. I can't fix the house anymore than it's really worth without feeling foolish. I hope all this makes sense.

Traci says

I went ahead and rebid on it at 83, splitting the difference with the bank (the 86K they asked).

This place is priced so low that if it were a good deal most buyers/investors could pay cash for it. This makes me think that there are some real problems with this home that they are seeing and you are not. Maybe the neighborhood is bad or a real money pit with too many needed repairs. For something so cheap there has to be a reason that someone else hasn't picked it up on a cash deal. With the collapse of Florida real estate there has to be better options out there other than a foreclosure/REO. There are numerous good buys in Florida just looking through the public part of the MLS. Find a real estate person that knows that area well so all of the responsibility lies with them and their E & O insurance if something goes wrong.

No mater what you buy (be it this home or a different one) make your offer contingent on a property inspection. If you have specific concerns, spell them out if you can.

For example this one house I was interested in, I suspected had questionable water quality, so I made the offer contingent on a "water quality analysis to the buyers satisfaction".

Nothing wrong with being diligent, even if it means the deal doesn't go through.

lurking says

Find a real estate person that knows that area well so all of the responsibility lies with them and their E & O insurance if something goes wrong.

Real estate agents' E & O insurance does not cover buyers or sellers. It only covers the agent and the agent's brokerage.

Can you tell what the price history was for the home... look up the price history on Redfin

Find the price pre bubble say 2000 and factor in 30-35% as todays value less repairs.

If you are going to treat this as an investment, they (seller and banks) and everyone else will treat it as investment and will nickle and dime to you to death.

Better to get your head straight! Unlike a stock investment where you can take a loss and claim a deduction, your not gonna get that luxuary of a loss deduction when it comes to home purchase.

Be carefull.

Traci, it looks like you already made up your mind, and still asking us what's up. That's fine. But do you mind telling us what got you sold on that house? I am wondering why you're sticking with that home knowing the home has lots of serious problems. It must be a reason, isn't it?

To me, money spent on junk is money wasted, unless I know I can fix it at no or very low cost or I am sure it will be a good investment. So, I would make sure what it is before I take it. 80K or 800K doesn't matter. It's your money, and are you sure your money will not be wasted?

Just give yourself more thought before it sticks up your nose.

RayAmerica says

lurking says

Find a real estate person that knows that area well so all of the responsibility lies with them and their E & O insurance if something goes wrong.

Real estate agents’ E & O insurance does not cover buyers or sellers. It only covers the agent and the agent’s brokerage.

I should have been more clear on the E and O insurance. If she has to sue the agent because of negligence or failure to perform due diligence or some other reason the agents insurance would pay off for his or her screw up with the deal. I thought maybe she was against working with a realtor or broker and this is one reason to do so rather than go off on her own since she's new at this. If there is a screw up by the agent and the ensuing court or jury awards her $$$ the E and O will pay off on the agent/brokers behalf.

We have a few smaller pockets in my town that are nice, this is one of them. If I drive the 10 feet over the border into Orlando, the prices go up and the quality goes down. It's really competitive here, very competitive, and anything good is gone fast. That's why this is still here, it's more work than anyone else wants. I don't mind the work if doesn't exceded the value. I can't seem to find anything else that I like right now. I look and look and look....nada.

All I can say is when you start thinking of a home as an investment you've already fucked up. It may be a more reasonable expense than renting but its still an expense. Its kinda like the $200 we spend every year on a garden that produces $40 worth of vegetables. My grandparents used to do these things to make/save money, but we're just going through the motions. Don't get me wrong, I bought a house in 2007 and knew (hence, the name) things were going to hit the fan, but I've got elderly parents I'm responsible for and for them to retire (and not be a burden on ME in 10 years!) I bought our current house. There's no way housing is going to hold it's value unless the dollar falls apart, in which case I'll own the rock dragging me under instead of just renting it. Big Friggin' Difference!

If you know the area then you're the one who's most qualified to make the decision. My family lives in the Orlando area and I don't see a rebound coming 'till we sell that state to Mexico. The growth engine for that state is dead. Disney world won't survive $4.00+ gasoline and $1,000+ plane tickets anymore than Vegas will. Also, older people aren't able to sell their homes to retire in an "affordable" snowbird zone like Fl. The taxes there used to be cheap and are now outrageous. Florida is dead.

However, you have to live your life so if it makes more sense to buy than rent so be it.

Walk away. Indymac knows where you stand. If they really want or need to sell the home, they will call you. Right now, the rep on the file is waiting to if you'll give in and do the sale on their terms. Stand firm by walking away and demonstrating your resolve. In the meantime, keep looking for other options. You never know what you will find.

If you're looking at ~$85k and 30k in repairs, and if you don't know enough to price out repairs and projects yourself, that 30k number is suspect and your time has value as well. Can you find something that doesn't need repairs for $120,000? Same thing only different in a good way!

Avoid the drama and inconvenience of a fixer if possible unless it's your hobby or profession.

And I agree w/those who have advised against thinking of your primary residence as an investment first and a home second; although I don't think one should turn a blind eye to managing it as such.

PPete says

You are talking about small amounts here 80K vs 83K = $3,000, amoratized over 30 years at a very low interest rate. Why don’t you just buy the house an get on with your life.

I think her point was if she offered 83k and they rejected that, is it worth it for her to keep chasing it. Banks often reject bids that are the priced they listed it for. They sit on houses for years but when they have an interested buyer they try to pump them for as much as they can get. It makes me wonder the legality of it. Usually when you have a Realtor sell your house, you agree to sell it for a set price, if they can get a buyer for the full list price, your obligated to sell it at the price. if they bid less you can counter bid, but is counter-bidding at a higher price then the list price legal? I would think you would be liable for the Realtor commission if you cause a deal to fall apart. What Realtor would take a listing from a bank when they know the bank is going to screw around with the price for any offers they get?

As for the house, if I was me, I'd be concerned with the Septic, Well and drywall, everything else can wait. So long as the roof doesn't leak, you can wait on it. Drain the pool and refill it, so long as it's not an obvious health hazard, it shouldn't affect you getting a CO. So long as the trees are not dead, I wouldn't to overly concerned about them. Get them removed later when you have extra $. I have lots of trees on my property that will cause considerable amount of damage if they ever fell on it, but all but two of them are healthy far as I can tell. The one tree, its obviously dead, it could be years before its weakened enough to fall, I know it's 55 feet from the house, but it's difficult to estimate the trees size from the ground, I'm guessing it will just miss the house if it fell over. The other is much smaller, it's definitively within striking distance, but it small enough I'm confident I can cut it down myself with ropes and a come along.

knewbetter says

Its kinda like the $200 we spend every year on a garden that produces $40 worth of vegetables.

May I ask why it's expensive to garden every year? I can understand that preparing the initial garden cost money, you have to buy good soil, put a fence up to keep out rodents, buy gardening tools, the seed, perhaps pesticides, but once you have everything set, it shouldn't cost very much except seed and perhaps some pesticides.

Just like a house, every year a garden needs something. Its not cost competitve to grow your own veggies, just like its often not cost competitive to own your own home. But I like having a garden, I'm just not fooling myself into thinking a handfull of cucumbers and some tomatoes are an investment.

This year it was a new hose, spray wand, plants in lieu of seed (short growing season), fertilizer, book, composted manure, strawberry pot, and a couple apple trees. $80 for apple trees will buy a hell of a lot of apples, just like a $40,000 for a down payment will buy a hell of lot of rent.

That's why I gave one day offers only. I didn't ask for concessions.
And before I submited my offers I told the sellers, that if I was going to go through the emotional process of mentally masterbating over this house and go home actually draw up a contract offer. Then I expect a Yes or No the next day. I don't want to hear, we got an other offer, "Then take it... next!" or a counter offer. "I wrote clearly what my offer was." and more importantly, I would get a verbal agreement before I did go home and write up a contract.

If I liked the place, I would offer what they are asking no concessions, and use your own lender. But with a 14 day cold feet clause to cover your ass.
And let the Appraiser come out and determine what it is worth. When the appraisal comes in lower than the 89K. They will kind of be forced to go with the appraised price, as you didn't ask for closing points and all that stuff. You could end up getting the place for 69K. If the appraisal comes back 89 or more, and you really don't want to pay that. Then invoke the coldfeet clause.

They have their Games, Play your Own. You can wear the Visor or the Mark, it's up to you.