Advice Needed: Higher Priced Property (very, very long) - Posted by Stacy (AZ)
Posted by Stacy (AZ) on December 16, 1999 at 14:51:12:
Sorry in advance for the length, but this is a fairly involved story.
I’ve come across a property that’s definately outside my comfort zone, and would appreciate some advice. The house is in an area of Phoenix that’s known for it’s high dollar homes. I’ve dealt with homes in the middle-class range, which is about $100K to $150K here in Phoenix, but none in this range.
The House:
4004 sqft, 2-story, 5 Br, 3.5 ba, 2 car-gar, built in 1979, on 1.5 acres.
Unique “features”:
Groovy '70s spiral staircase, the only way to get downstairs (very small and very ugly painted wrought iron).
Built on the side of a hill with a wonderful desert view.
Living room and dining area have wall-to-ceiling and wall-to-wall windows looking out over the desert and the other houses.
Pool area (side of hill) is superb…fountains, tile, jacuzzi, and that view.
Inside of the house is outdated and in need of multiple repairs and refurbishments, and the floor plan is pretty wierd. For example, the upstairs dining area shows a definite “tilt” to the floor. However, homeowner had a structural engineer bless the structural integrity of the house.
The house has not been maintained for several years. It has been rented for the last two years at about $3000/mo, but the tenants didn’t treat it well.
It’s been on the market and empty for 6 months, and was under contract with a rehabber, but the deal fell through. Owner is out of state (Michigan), and trying to sell. Her husband found a job there, after not working for years. They owe multiple debts to family, and need as much cash as possible. His new job offered a corporate buy-out of the house, and the bank’s appraisal came in at $370K (according to her). I find that hard to believe. She owes $255K on a first mortgage, no other liens.
Comps in the area are just about no help because of the age and condition of this property. The neighboring homes are immaculate. Here are the comps:
Built Size Sales $ Price/sqft
1986 3542 sq ft $393,000 $111/sqft
1987 3936 sq ft $525,000 $133/sqft
1984 3195 sq ft $315,000 $99/sqft
1989 3147 sq ft $560,000 $178/sqft
1996 3444 sq ft $605,000 $176/sqft
This home (if appraisal to be believed)
1979 4004 sq ft $370,000 $92/sqft
I believe this house would be worth over $450K to $500K with major rehab. These houses are in very high demand, more becasue the large amount of land and the view…these kind of lots are getting rare.
I was thinking of trying to offer a wrap to her, structured such that I would pay the underlying loan of $2400/mo PITI while rehab is underway, and pay her off when resold, but with a corporate offer of $370K in the background, I can see no way to offer her anything close to that.
I’m leaning towards letting this one go without an offer, since it would take me so much time and effort to get a correct estimate of repair/remodel expense on this house, plus the threat of many months of $2400 payments scares the daylights out of me. I don’t have enough funds for the entire rehab, and do not have a private money contact to get the major fixup funds I know this will take. I would think about a wholesale flip, but the seller has already marketed to rehabbers and had no takers.
This property has potential written all over it, with a motivated seller, but I can’t get my arms around what to do with it.
Any ideas?
Stacy
A side note: the husband is a retired pro football player who bought the place for the views, and never lifted a hammer or a checkbook to maintain it.