April 1, 2008

Look How Thin & Sexy This Foreclosure Makes Me Look

Black Mold

Foreclosure Real Estate Isn't Always The Best Deal

Sunday evening I met a buyer to look at a foreclosure home listing just North of Bonita Springs, Florida. The foreclosure real estate market in parts of Bonita Springs, Estero and South Fort Myers moves swiftly so we drove to look at the home right away. What seemed like a great deal ended up maybe not being what this young man really had in mind. The home listed was priced at about $100,000 which for that neighborhood is a great price. We once had an offer in that neighborhood that fell apart so we’re always watch and waiting for the next opportunity.

We weren’t two steps in the door and I looked at the buyer and said, “Mold.” I can smell right away since I’ve smelled it so many times. A little poking around and we actually found it, too. Black mold growing up the wall.

Buyers call me all the time looking for a foreclosure in Bonita Springs. They want a foreclosure home. They have to boy a foreclosure. They have a one track mind. I wonder if they think telling all their friends that they bought a foreclosure home in Florida is sexy. Hey, I can tell buyers right now that there are foreclosure deals, but there are also owners with equity that have to reduce to compete with short sales and foreclosures.

Follow me on this. Buyer John does the math for his beat all to hell, foreclosure home on Sunday in sunny Bonita Springs.

Here’s what he finds on the $100,000 house:

  • Mold. An entire bathroom that needs ripped out. Mold mitigation
  • A side patio that has extensive wood rot because it was a “do it yourselfer” and they didn’t use pressure treated lumber
  • We don’t know what is under that tile on the patio. It’s a wood frame house that didn’t have the right wood used in other places. Hmmm
  • A fuse box with most of the breakers ripped out
  • No appliances
  • No light fixtures
  • The flooring needs work. No electricity is on so the wood floor is buckling. Oh, and the mold is spreading. Conditions are perfect.
  • There is a pile of debris in the back yard that has to be removed. Large debris, spa/hot tub, tanks, barbeque made out of barrel or propane tank.
  • It’s filthy, cockroach ridden and needs scrubbed slab to shingles.
  • We’re ball parking about $20,000-$30,000 depending upon hidden damage to fix it up.
  • Sales are as/is. Inspection period is short, five days on this house.

$100,000 list price + $30,000 for repairs = $130,000

Now this could be one of the Bonita Springs foreclosure homes that people might jump onto too fast just to buy a foreclosure. On top of everything listed above, this fabulous foreclosure featuring three bedrooms and two bathrooms is actually listed in the tax roll as a two bedroom and one bathroom home. That means one whole bedroom and one whole bathroom is not even code. How long until Lee County Code Enforcement comes a knockin’? Fortunately, this buyer had an agent he’d listen to. I told him I didn’t want him buying that house. His house is coming, I can feel it, but it’s not that one.

Now, due to the short sales and foreclosures on the market regular, everyday, serious sellers with equity have to compete to sell their Southwest Florida homes. We also have homes come onto the market that aren’t in distress. The owners may have lived in them 10-20 years and not refinanced, paid off their mortgages, paid down their mortgages, etc. There are homes priced $130,000-$150,000 to compete with prices on the distress sales.

What is this important to a buyer to sometimes look beyond a foreclosure sale? Money, cash, moola.

  • In that same neighborhood there are homes with three bed/two bath that are legitimate and permitted, not code violations.
  • There are homes built with concrete block, instead of wood frame.
  • The homes have an owner. Owners love their homes or at worst, they just like them a bunch.
  • The electric is on, the air conditioner is on and mold isn’t having a field day.
  • The home is usually being cared for.
  • It may be dated and need redecorated, but it’s livable.
  • Washer, Dryer, Refrigerator, Oven, Microwave, Dishwasher, Disposal, Garage Door Opener
  • Window treatments
  • Home inspection contingencies can be used. Repairs will be made to faulty items.

$100,000 list price + $30,000 for repairs = $130,000 *versus* a home listed $130,000-$150,000 that doesn’t need months of work.

It is price vs. cost and it is almost a wash, not including an aggravation factor. Ultimately, the choice is up to the buyer whether they want to take the easy road or the hard road when dealing with a foreclosure home. Buyers looking for homes in Bonita Springs just need to know that distressed properties aren’t always hearts, flowers and rainbows. In this example, studying the market, watching and waiting for quality real estate and carefully buying a home that is of value, suits your lifestyle or family and has better “bones” is worth the wait.

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