Tuesday, November 18, 2014
The perfect house
It was in an "edge" neighborhood of Winston-Salem, just above a moderately sketchy area (where the bomb shelter that we rented for me the first year I was in NC was located), and starting to move out towards the city limits where lots got bigger and houses were nicer. It was a HUD home, meaning it had been foreclosed on and the government now owned it.It was also (allegedly) eligible for a special type of FHA loan that allowed purchase and renovation funds to be borrowed together with just 3.5% down. Well, on a very modestly priced property even with $25-$30K in renovation funds that was something I could probably swing - and this property just spoke to me, even more so after we did a drive by.
I started things backwards, in looking for a lender that did that type of loan. Quicken Loans advertised that they did FHA loans so I contacted them, but soon found out they didn't do the special programs. They did, however, pre-approve me for a reasonable loan amount if we wanted to go that route. Tucking that in the back of my mind, I found a local lender that did do the special programs, and asked her for a referral to a real estate agent where I was introduced to Karen Lawson at RE/MAX. We set up an appointment to view that home, and I also found two others in the area that were well within our pre-approved amount from Quicken, and we went and took a look.
I did fall in love with the HUD house, it had amazing hardwood floors on a split-level plan, the yard was already fenced in, but it did have it's issues - it was missing copper piping, and would need some renovation work.
We looked at a second home which we ruled out in about the first five minutes. The front yard was a big hill, so very unusable and would be very hard to mow it was so steep. There was some sort of infrared light/camera setup in the front window looking down the driveway to the street that in all seriousness looked like a sniper's perch. The back sunroom was almost certainly not permitted, which would cause all kinds of loan complications.
So we moved on to house number three. This one Michael said no to at first based on the listing photograph, because it's an older brick home with an addition off the side that was done in what looked like stark white vinyl siding.
As the loan broker said, "What's with the double wide off the side of it?" But, it was sitting on 3.3 acres of land, so he was willing to go look, and I'm glad we did. The main house is a gorgeous 1949 brick bungalow, originally 2 bedroom 1 bath with a basement. At some point in the late 70s or 80s someone added on a "den" or "family room" and a 2-car garage, which is what looked like the ugly addition. They also bumped upstairs to a half story, adding a "head and shoulders" space that has one bedroom, and what they can loosely claim as a second bedroom by virtue of the space having a closet, and a door at the bottom of the staircase. It's really a sitting area.
We fell in love. The kitchen is done in 70s-tastic avocado appliances, laminate counter tops and backsplash, and dark wood cabinets. It reminds Michael of his childhood home. There's a fireplace, the rounded front door has character, there's all sorts of treasures in the basement and large out-building workshop, plus it's on LAND. About 1.3 acres of it is clear, with very large mature trees, and the rest is wooded, running all the way down to a creek.
We knew that night we had to have it. We couldn't find out a whole lot about previous owners, only that it had belonged to an estate, who sold it to an "investor" very cheaply, possibly as a short sale. That investor had done nothing to improve the property, if he styles himself as a flipper, he wasn't doing it on this one, but he was asking about 175% of his purchase price. We put in an offer contingent on loan approval and inspections, a must on something this old, and dove right in. He met us halfway on the offer, so we went ahead and ordered up all the inspections.
To me, as a real estate newbie, this is where it got scary. I was spending not insignificant amounts of money to just decide if I wanted to buy the place or not. $595 for the inspection, $225 for the septic inspection, $40 for a guy to come check the well, $80 for well water testing, it all adds up to real money. The inspection found some issues, which didn't surprise us, but nothing that we felt we couldn't overcome after move-in, nothing was critical in his opinion to be necessary before that.
We did also order up an inspection of the underground heating oil tank. For one, they don't do that anymore, tanks are above ground or in the basement. We needed to know if it was functional, because someone had also installed electric baseboard heaters, which are just money guzzlers.
The environmental specialist came out and checked the contents of the tank - said we had 5 inches of oil and no water, which was good, but he found petroleum in the soil starting at about 7 feet underground, or about 2 feet below the tank. Given that there was no water in the tank, it's likely there's a pinhole leak in there somewhere, we just don't know how long it's been leaking, and how far spread the contamination is. Quote to dig up the tank and dig out 56 tons of earth to clean it up? $13K - ACK! The state of North Carolina does have a ground fuel storage tank trust fund, so about $9.500 of that would be reimbursable to whomever paid for the cleanup - something we wanted the seller to handle. He's an investor, he can carry the float on that, since the trust fund is taking about 8 months to turn claims around these days.
The septic guy opened it up, took one look at the old octagonal tank and said it needed to be replaced. $2,000 and a runaround on a permit from the county for $170.
The well thankfully was operational, and the water samples came back clean, so no leaching down to the water table from the oil tank at least.
Oh, and the furnace needed about $500 worth of work to clean out one of the pipes to the flue, and replace the limiter which wasn't doing it's job.
This is all adding up to real cash money. So we asked for the seller to fix it all, knowing that rare would be the case that you'd get that. He offered $2500 at closing for repairs, which made me laugh out loud, and so we countered with having him take care of the environmental issue and replace the oil tank with a new above ground tank. We would handle the septic and furnace. He's the "investor" he can float it. He balked and hemmed and hawed, and seriously dude.
We finally agreed to go back up in purchase price and he paid for the septic/furnace at close, we get to float the environmental. I'm annoyed, but I had access to funds to do it, and we will get all but about $3500 of it back by the end of summer, so whatever, the cash outlays plus what we paid are still well under what this house's potential value is.
We finally got it all arranged, after a last minute instance by the FHA to have external paint surfaces scraped and repainted, and we closed on Friday, November 14. It's mine! Mine! all mine!
Now, to clean it out and fix it up.