What would you do from here? - Posted by Jim

Posted by Sean on June 16, 2005 at 09:01:16:

What would I do? Buy the house for 200ish(or less), fix it and sell it for retail… but that’s just me.

100k to fix a house? I don’t know how big this house is, but drywall is cheap as snot… its one of the cheapest building supplies on the planet… take it down to the studs… and ducts are cheap too… rip out the ducts, then just coat everything in bleach… let it dry out… check for any additional mold you might have missed and then put it back together…

Unless it is a 10,000 ft house it shouldn’t cost you anywhere near 100k to gut and reduct and dryawall a house… But hey, let the seller think that.

That’s what I would do.

What would you do from here? - Posted by Jim

Posted by Jim on June 16, 2005 at 08:49:08:

Here’s the deal…

Have a house under contract… Appraises for $500k (Feb appraisal). Got house under contract under seller financing terms @ $405k @5% interest with a 5 year balloon on May 25th with a 45day close.

Have the home inspection contingency in the REPC.

Anyway, got the home inspector out to the property yesterday, and apparently, the house has flooded and is full of mold. The mold has destroyed the drywall and has gotten into the ductwork.

The inspectors ‘guesstamite’ would be $100k to erradicate the problem.

Obviously, I’m going to back out of my contract, but the seller is still very motivated.

The seller wants me to just get an estimate from a local contractor, and put the house up for sale, using an auction, and have the inspection report and the estimate sitting on the table and market to rehabbers and DIYs who want a good deal.

Then, once the sale happens, then get with me and figure out the financing to that it works for everyone.

What would you do?

Re: What would you do from here? - Posted by Phil

Posted by Phil on June 16, 2005 at 10:52:35:

Sean is right, 100K to fix this house, seems like a lot. I’d find out from a few estimites. If it is 100K to fix it than my numbers are like this. Oh, make sure its ARV is 500K. You got it for 95K, off of FMV or 405K, so its simple: 405K - 100K to fix = 305K, I would not pay a penny more. If its less than 100K, still try for 305k, or 95K off. Good Luck, this is a tricy one, the numbers have to be up to snuff, or you gonna get burned.

Re: What would you do from here? - Posted by Don

Posted by Don on June 16, 2005 at 09:16:38:

First, get a real estimate from a company that specializes in flood and water clean-up. On the one hand, it’s a specialized field and involves lots more than just replacing drywall and carpeting. On the other, $100k may be too high. Point is, you don’t really know for sure. Get an expert in there (not just “a local contractor”) before you make any further decisions.

Along the same lines, there can be liability issues, as well…not just with the house. Someone moves in, the house wasn’t properly cleaned with all mold removed, develops a breathing problem, is hospitalized, and sues. Lawyers look for deep pockets and they’ll go after everyone in sight. And let’s see, you’re getting the inspection report and estimate…your name is sitting on some documents that even show you are aware of the mold problem. Watch out.

In short, don’t guess about what needs to be done or who needs to do it. Either do it right or back away.