We got another short sale under contract yesterday…this will be House #38…
This one is right near The Ticket House, but in an older, well-established neighborhood. The house was built in 1988, and needs some major exterior work due to water damage, wood rot and termites; on the interior; luckily, the interior is in very good shape. We’ll either be doing very little interior work (and selling it below market), or doing a major interior renovation — including finishing out some extra living area in the basement — and trying to sell it at the top of the market. We’ll make the decision once we purchase the house.
The house is a 3 beds, 2.5 baths and has about 1600 square feet.
Here’s a picture of the front of the house:
We originally put an offer on this one back in June, and the bank rejected it, saying our offer was too low. We weren’t willing to come up to the bank’s price, but after some negotiation (including having to send the bank several bids for the renovation work), we agreed at a price right between ours and theirs.
With all the wood rot and termite damage, there is some risk that we’ll start taking off the siding and find bad framing damage to the structure — I’m hoping this isn’t the case, but we won’t know until we actually get in there and take a look. I’m expecting to close on this one in the next 2-4 weeks.
How did you factor the unknown risk into your purchase price? It sounds like coming up off your price to the mid point (not sure how much of a gap there was?) plus unknown scope is more risk than you normally take on. Are you willing to accept more risk as deals get harder to find in your home market?
Hey Nathan,
The extra risk was factored into my rehab estimate. I put together an estimate that I’m about 90% confident in — if the rehab comes in lower (hopefully), we’ll make more than we expect; in the 10% case where the damage is bad and the rehab comes in higher, we’ll be eating into our profit or will have to make adjustments in other areas.
Even in the worst case rehab situation, we shouldn’t be losing money, so I would expect the absolute worst case situation is that we don’t make much profit and were working for free — though I’m pretty confident that won’t be the case.
That’s a tall and narrow entry on an otherwise decent looking house. Looking forward to seeing the renovation.
Im looking forward to see what you find with thr trrmites.. We’re thinking about buying a house tgat has termite damage.