Here is an example of how easy it is to entangle yourself in all the many elements of a renovation. These are all changes we’ve made to one of our current properties. No doubt the future buyer will be ecstatic about all of the lovely changes and updates we’ve made…but before you buy a fixer upper, ask yourself whether this is something you can handle on your own. If so, more power to ya! If not, why don’t you give us a call to see what already-renovated properties we might have available.

We added a sliding door at the back of the house where the windows used to be located, because we got rid of the original rear door. We got rid of the original rear door so we could put in a new shower for the new luxurious master bathroom in the new master suite, which we created from a large unusable existing room. The renovation of this room required raising up the floor level to match the rest of the house, which caused us to re-design the structural posts and piers supporting the floor joist system. We had to run the plumbing through this joist system and create an access to it from the crawl space, causing more structural issues to deal with before getting the framing inspection approval. Oh, and to make the master suite nice, we cut through the brick walls to add two windows in the bedroom and one in the bathroom to make the space light and airy for the new buyers.  And I’m not even going to get into the cost of all these changes…

Now do you have an appreciation for renovation cause and effect?

These guys — one working in Virginia, and the other in Maryland — both got excited about the “win-win” of our business model. They both highly recommended that people interested in getting a great deal on a foreclosure look into our service instead of going it alone.

It just works. For the banks, for you the homeowner, and for us. Here’s how:

We take on all of the risks of overhauling these troubled properties, and get them off the bank’s dead-weight foreclosure list. And you still get a great deal, though a realistic one. You still pay less than market value, but you don’t have to take on any of the risks or hassle of making the place liveable.

It’s a tough market out there, but there are still great deals to be had if you’ve got your priorities straight and can ignore the hype.

She then said the words that will stick with me for the rest of my life: “Thanks for selling me your property. I looked at a lot of houses before finding yours. Every one I saw had too much wrong with it for me to handle with my situation of available cash, approved mortgage amount, and housing need. You gave me the chance to put the housing part of my life back on track with no major worries.”

Wow.

All I did was buy a property right from the bank, fix it up like I would have if my family would be living there (within reason), and sell it for a reasonable market price. Since that experience I’ve continued to march on, looking for rough bank-owned properties to fix and sell to good folks like Jan. With my skills and experience and good crews, we can make a living and make a difference in the lives of home buyers. I guess that is a good thing.

This blog isn’t really about me though. From my 35 years in the trades and the real estate renovation, repair, and investing  business, I’ve picked up a few bits of knowledge. The previous story was my wake-up call to reach out and help those who don’t have the resources I do — to help them determine if a property is really a good deal and how to make it a nice home. Even for those folks who do have the skills and resources, if I can give them one tidbit of info that saves them a few bucks or a lot of aggravation, that’s cool with me.

So until the next time we converse, be an educated, savvy, fully-aware home buyer. Realize that the banks are trying to clean up the mess they made and don’t really care much about your situation. And remember, most agents are motivated by commission and will not be there for the almost-certain problems you will run into with buying a run-down property.

Don’t get so caught up in the hype of getting a “deal” that you get the shaft. Know what you are really buying. Remember that the banks and their agents don’t put all of that “as-is” language, etc. in the listing and contracts because they love you. BUYER BEWARE!!!

If you are looking for a home to live in, there are still deals to be had out there. But, that tiger on steroids is still lurking for unsuspecting buyers who get all pumped up emotionally about buying a foreclosure. Buying a house often turns into an emotional transaction. And many people who make money on these transactions bank on just that. DON’T, DON’T, DON’T make this an emotional transaction!

Responsibility

For most people in America, buying a home is the single biggest transaction of their life. It is up to you to get it right! Your name is on the paperwork with the bank saying you are responsible for the payments, condition, upkeep, and so on of the property. Screw it up, and they will hammer you. You won’t find the real estate agent’s name or the mortgage broker’s name there to help with any of that. They’ll be long gone with their commission checks, and have no responsibility to help you after the deal is done. So know what you are doing before plunging in blindly. With the rush to get a foreclosure deal in this down real estate market, people may be getting in over their heads again.

There were many, many parties responsible for the sub-prime mortgage mess and the collapse of the housing market. The big shot crooks on Wall Street, mortgage brokers, real estate agents, builders, etc. filled people’s heads with trash, convincing them they could afford these overpriced homes. And they said, “Real estate prices will keep rising. You can sell it at a profit if you find it too hard to make the payments.” But regardless of who says what, the person truly responsible for dealing with the whole mess is you, the buyer.

Now the big pitch for selling homes (particularly foreclosed, bank-owned homes) is that you’ve gotta get in before it’s too late. Yes, there is some truth to that. Eventually this mess will get cleared up and whatever constitutes a “normal” market will be here again. But, don’t get sucked in to “get a deal” that you get “dealt.” Do your homework, check out every person you choose to do business with, and really be honest with yourself about what you can afford — both financially, and as far as the time you are willing and able to spend on fixing up a distressed property.

Here is what I see from being out there every day looking at properties. The banks lent on all kinds of houses, both new and old. Many of the newer properties that are now bank-owned are in need of minor repairs: paint, carpet, a door here, a window there. You should always remember the saying “buyer beware,” as things like appliances, heating and air conditioning systems, roofs, gutters, garage door openers, and water heaters can go bad even in a newer house. But if you are handy, or have a brother-in-law like the guys on This Old House, you are probably good to go.

Unfortunately, most foreclosure homes are fixer uppers. If a homeowner was unable to make their mortgage payments, they probably weren’t able to pay for all of the necessary repairs or upgrades to their properties either. Sometimes when people realize they’ll be losing their home, they just give up and stop putting any more money into it, letting the problems with the property’s condition just compound. In the worse case scenario, they may even trash the house on purpose out of anger or frustration.

So here you are, all excited about getting a deal on a foreclosure. It is an old house and kind of had a rough life, maybe even some abuse by the previous occupants. Yeah, it is a little dated and the layout is a little obsolete, but your real estate agent told you it will only cost about $20,000 to make it a place of your own. Since you paid such a low price for the house, the extra money isn’t a problem. Piece of cake!

Ever had sheetrock or plaster dust with your morning cereal?

Ever cranked up the hot water for your morning shower before your long commute to work and got a blast of cold water? Come home exhausted from your day in the trenches, faced with ripping out the rest of that wall you thought was going to be a breeze? How about hauling the plastic bags of construction debris to the landfill in your Prius? But remember, it is only $20,000 to fix the place up, no big deal.

The fact is, choosing a fixer upper foreclosure means investing not only money but a lot of time and effort into a home that is not move-in ready. The renovations will take nearly all of your free time, and you’ll be living in chaos in the meantime.

If you’re willing to put up with all of these things, buying a foreclosure directly from the homeowner or at a bank auction may be the perfect choice for you. If money is the most important factor, you will certainly pay the lowest price going this route. If the value of your time and your quality of life are also factors — like they are for the many people we work with — consider purchasing a foreclosure home from a responsible investor. You will still pay much less than the market price for the house, but all of the repairs and renovations will be completed so all you have to do is move in to your new home.

All real estate investors are not created equal, and you should be careful when evaluating the quality of their work and selecting who to do business with. But that is another whole article…