Sunday, May 15, 2011

The One That Got Away

Now that we're in serious house hunting mode we've been checking listings with our real estate agent every day to watch for any new houses to come on the market.  On Sunday morning this lovely house popped up in our listings:

Not only was it a good-sized and good looking house,  it was right smack in the middle of Hollywood, our first choice neighborhood!  What's more is it was the first house that we've seen in our price range in Hollywood in the three months we've been watching the listings.  We knew that in order for a house to be priced this low in this area it must need a lot of repairs, so the question was just how much.

We went out with our real estate agent first thing Monday morning to check out the house.  She was very optimistic about the house and the location, so we were excited!  As we expected there were things that we would need to do to the house before we could even move in.  The roof and siding both needed to be completely replaced.  There were some places on the outside of the house where we could see some dry-rot, indicating there could be some structural problems underneath the roof.  There was also some water damage inside the house that would need to be repaired and the kitchen was not in a usable condition - most interestingly, it didn't have an oven (or a place where one should have been)!

Underneath all of that, however, you could see the original beauty of the house.  It just had loads of character with a beautiful fireplace, built-ins, and original trim.  Additionally, some things had been updated including the basement which had had a lot of the asbestos tiles removed and the furnace which had been updated from oil to gas.

This strange awning would have had to come down when we replaced the roof and siding - to be replaced someday by a beautiful wrap-around porch.

Water damage in the kitchen.

Missing cabinets and drawers in the kitchen.  A cook-top but no oven or even so much as a hookup.

Built-ins in the dining room.

Fireplace and very interesting wall choice in the large living room.  That's some sort of wood paneling.

Master bedroom with dressing room.
So what happened, you're wondering?  Well, we spent Monday anxiously waiting for our loan coordinator to work out how exactly we could pay for all of this and how much we could afford to offer.  He worked up a FHA 203K loan, which is a mortgage that includes a construction loan for the rehab of a house.  With the cost of the repairs we would need to make we worked out that the maximum that we could offer on the house was $35,000 under the listing price.  This was by no means a competitive offer but with all the work that the house needed we could only hope that anyone else who wanted it would be offering low as well.  Even this price, with the construction loan on top of it, was maxing out our budget completely.  Construction loans have a higher interest rate, so our monthly payments were higher and on top of that, this house has some of the highest property taxes of any we've seen. 

Regardless, we felt like this house was such a good opportunity both to live in an area we really love and to fix up a classic old home and sell it at what was sure to be a profit, we were very seriously considering stretching our budget to make it happen.  We were confident that this house would be worth the investment.

Unfortunately for us, it turned out that this house was SUCH a good investment that several other people had the same goal in mind.  While we were trying to figure out how we were going to afford to put in even the modest offer that we had come up with, our agent called to let us know that six other offers had been put in and that the highest was a cash offer above the listing price.  Obviously, we couldn't compete.  Investors and contractors had swooped in and picked up this house and will make it beautiful and will, we're sure, put it back on the market for a pretty penny.

So over the course of 48 hours we found and lost this great house, but it has energized us to keep up the search and let us know that there are great houses out there (we just might have to fight for them).

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