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Real estate

Real estate market heats up (?)

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La Maya and her compañera, La Bethulia (you’ll have to really know your Bible to figure out what modern name that one alludes to!), are in the market for an investment house, which they would like to rent to a couple of their nieces. Their money is in hand. Their loan is preapproved. They have made bids on two foreclosed houses, and they’ve lost out on both of them!

How? They’ve been nosed out by other bidders. The latest was a nice little place in a choice middle-class neighborhood of quiet, beautifully kept homes. Price was, astonishingly, under $200,000 in the normally pricey North Central area between Third Street and Third Avenue. Though the bedrooms were tiny, the house had been cherried out, with expanses of very nice tile and a huge, drop-down dead GORGEOUS kitchen (you would not have believed!). It appeared to have a new roof, new double-paned windows, new everything. The front yard was xeriscaped and required only a light clean-up—Gerardo’s crew could have restored it to its pristine glory in under two hours. The back needed some work, but nothing crushing. The pool had been drained, wrecking the plaster, and so it needed to be replastered—probably around $4,000 to $6,000. But if it didn’t need new equipment (given that the previous owners had replaced everything else, chances are the pump and filter were fine), even with that cost you would get a very nice, ever-so-much-more-than-livable house in a sweet neighborhood for tens of thousands of dollars under the normal market price.

Two other buyers swooped down on the house at the time La Maya and Bethulia went after it. They actually bid up the price above the asking price!

Dang! Does this sound familiar?

Maybe our property values will return to something more or less normal during our lifetimes, after all.

w00t! Weed Arboretum is no more!

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Dave’s Foreclosed Used Car Lot, Marina, and Weed Arboretum has been transformed into a house!Suddenly it looks like a structure that normal people might actually live in! From the outside, anyway.

The new owner, the one who plans to give it away at a fire-sale price, has set whole crews of junk dealers and laborers to work over there. It’s taken them four days of hauling, but they’ve worked a small miracle. When I got home from work this evening, a whole new dwelling stood across the street: the weed haystack had disappeared from the driveway, the remaining Field of Weeds filling the front and side yards was gone, the dead plants in front were pulled out and the desert landscaping cleaned up and repaired.

That’s before they’ve even painted the place!

It gets more amazing: La Maya was over there this morning chatting with the proprietor. Turns out she and her partner are thinking about buying the place and renting it to a relative, a very sweet young woman who would make a terrific neighbor. If it has to be a rental, that would be perfect: I know where the landladies live.
🙂

Eight strategies to protect your home’s value when neighbors are foreclosed

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Contemplatingthe Wreck of the Titanic across the street, I decided to see if there are any broadly accepted ways to protect your own property value and preserve something like peace of mind in the face of a nearby foreclosure. Here are a few strategies you can use to cope with a disastrous property devaluation that will degrade your investment in your home.

  1. Remember that you haven’t lost money yet. Loss of value in real estate is not realized until a property is sold.
  2. Stay informed by estimating the value of your home. You can find a valuation calculator at the Office of Federal Housing Enterprise Oversight, along with some other interesting information. Zillow will give you a rough estimate of your home’s worth, if you have an idea of which properties in your neighborhood are comparable to yours in size and quality. OFHEO and Zillow provide only crude guesses; another way to get an idea is to ask a Realtor to run the comparables, view your home, and tell you what he or she thinks the home will sell for, realistically.
  3. Keep an eye on the foreclosed property. Pull weeds, mow the lawn, or have your own lawn service maintain the yard so that it doesn’t turn into a jungle. If you live next door to the house, use your own hose to water the plants enough keep them alive. While it’s true keeping up the house is not your responsibility, this step will help the value of your house by contributing to the value of the vacant house.
  4. Report code violations to your city’s code enforcement or slum abatement office. Most cities have regulations meant to fight illegal signage and unsightly deterioration. A call to your mayor’s office will give you the phone number. Enlist the city and the law to force the lender that now owns the house to keep the property up.
  5. Band together with the neighbors to form a specialized block watch for the purpose of protecting the house from prowlers, vandals, and squatters. Report prowlers to the police immediately. Banks commonly board up foreclosed houses that have been burgled or vandalized, creating eyesores that cause even more damage to neighboring homes. So, it’s in your interest to keep this kind of thing from happening.
  6. Keep up your own home. Tend to your landscaping, keep the paint looking fresh, and refrain from parking your rolling stock on the yard or in the street. If the neighborhood looks well maintained and appealing, the foreclosed property is more likely to attract buyers who will take care of the house and not let it deteriorate further. Such buyers often can afford to pay a little more for the house, which will help your neighborhood’s property values.
  7. On the other hand, put a hold on any elaborate home improvement projects you may have in mind. Limit improvements to maintenance, paint, and unavoidable necessities. This is not the time to add on a room, gut out and replace the bathrooms, or change out the HVAC system just to get a slightly more efficient unit.
  8. Don’t sell unless you have to. Just as selling stocks and mutual funds on the downtick locks in your losses, so selling your house when prices are at a low ebb guarantees that you will lose on your home investment. Stay put. Sooner or later the housing market will recover.

Believe it! And then some…

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It gets better and better. Any doubts about my neighbor’s report that Dave’s Used Car Lot, Marina, and Weed Arboretum sold instantly at auction were resolved by a Saturday morning chat with the new owner, who surfaced with a gang of junk dealers come to cart off the trash Dave left behind. So, we might add, did a horde of neighbors, who showed up asking to take this piece of junk and that piece of junk, requests the proud new owner was happy to accommodate. The more junk the neighbors carted off, the less he’d have to pay his clean-up crew.

It is indeed true that the house has been sold. But the auction price was not $192,500, an amount $32,500 less than I paid for the house across the street before the bubble started to inflate. Oh, no. That $192,500 figure is the new owner’s asking price!

That’s what he wants to get for the house. The For Sale by Owner sign in the front yard is not Dave’s FSBO effort: it’s the new owner’s.

This guy is a bottom feeder who grabs the most desperately distressed properties he can get his grimy hands on, shovels out the debris, does virtually no fix-up, and then flips them at “drastically reduced” prices. (Reduced from what? Please: don’t ask.)

So I said to him, “Are you crazy? A house just as run-down as this, right around the corner, just sold for $265,000. Put the house on the market for an amount that will pay you for buying it!”

Oh, no, said he. “If I did that, I’d have to do a lot of fix-up and improvement…and if I were going to do that, I’d have to sell it for $340,000, the amount that one house over there sold for.”

That one house was dolled up as a freaking palace and has NO, count it NO blight near it.

What this means is, first, the guy paid even less than $192,500 for it, an unheard-of devaluation around here. Second, the jerk is going to sell it to another bottom-feeder who will slap on enough paint to cover up Dave’s purple-and-green ceilings and rent it or resell it to the unsuspecting. It will be sold as a dump and chances are it will remain a dump.

Lhudly sing goddam!

One thing you have to say about properties in this neighborhood: once they’re blighted, they tend to stay blighted. I know of only two badly run-down houses that were turned around to make them into reasonably clean, well-maintained properties. All the rest have stayed in the dumps through several owners. I guess that’s what we’re going to see across the street.

Foreclosed: Postscript

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Rumor has it that Dave’s Used Car Lot, Marina, and Weed Arboretum has already been auctioned off. A neighbor called one of the numbers on his FSBO sign and was told the house just sold for $192,500.

If that’s true, it’s a disaster for me:just before the bubble started to inflate,I bought my home for $232,000. If Dave’s pigsty sold for any such price, it means my house is now worth less than I paid for it.

On the other hand, why do I doubt this story? Let me count the ways:

  • No real For Sale sign ever went up.
  • No “Foreclosed” stickers ever appeared on the doors or windows.
  • No “Auction” sign was posted.
  • Dave has been out of the place for less than a week.
  • Houses in the neighborhood, even deeply discounted for-sale-by-lender houses, have sat on the market for weeks and months without moving; it’s unlikely Dave’s would have sold in less than a week.
  • As anxious as banks are to unload distressed properties, it’s unlikely that they’d let it go for $65,000 less than a similarly trashed house went for just a couple of weeks ago.

No. This story smacks of disinformation.

Well, we’ll find out soon enough. The place is not habitable as it is, so if someone bought it, we’ll soon see workmen swarming around. With any luck, maybe a speculator will clean it up and resell it at the market price (which still exists, after all).

My estimate for clean-up and updating: about $60,000. Thirty thou’ on the lowest end; sixty thou if you wanted to do a decent job of it.

  • Clean garbage and weeds off lot: $800
  • Disassemble and haul junk storage structures, the large, dangerously decrepit wooden children’s climbing set, and other large pieces of junk: $800
  • New air conditioner: $5,600
  • Reroof: $5,000
  • Replaster large pool and replace decrepit, probably broken pool equipment: $10,000
  • Scrape and paint exterior: $1,500
  • Paint interior: $2,000
  • Recarpet: $3,000
  • Stovetop: $800
  • Refrigerator: $1200
  • Dishwasher: $500
  • Cleaning service: $200 (no one in her right mind would clean out the sty for less than that!)

There’s the bare minimum: about $30,900. That would make the place rentable, but not for much. Now let’s make the place saleable for a decent price:

  • Wall oven: $1,200 (viewed through the haze of a filthy window, the oven looks relatively new and might stay if it’s functional and can be cleaned)
  • New cabinetry and countertops: $15,000

Foreclosed!

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Poor old Dave, proprietor of Dave’s Used Car Lot, Marina, and Weed Arboretum, is finally moved out, having spent a week and used the services of three male friends equipped with pickups, a flatbed, and SUVs to haul off his collected junk. He’s posted a do-it-yourself “For Sale” sign in the front yard (“Drastically reduced!”) and ridden off into the sunset, leaving his weed garden behind.

This afternoon some kinda seedy-looking guys climbed over the weed haystack in the driveway to ogle the peeling batten around the eaves. Evidently they were calculating what it would take to revive the decrepit house to its former glory…or at least to rentability. Early in the evening, a father came by in the wake of his toddler’s tricycle. Dad and son broke into the back yard through the side gate and disappeared into the weed jungle. The kid’s trike is gone now, so either they came out and went on their way or the cockroaches carried the hardware off.

Old Dave, as we learned, was foreclosed. My neighbor and I found that out when the notice was mistakenly slapped on her front door instead of Dave’s. He borrowed $320,000 against the place. Zillow values it at around $307,000. Even though it has a pool (soon to be a mosquito pond, no?) and a good-sized corner lot, there’s no chance it’ll fetch that much. Another foreclosure in similar condition around the corner sold for $268,000.

In a way, I’m sorry to see Dave go, despite the mess he lived in. The trashed condition of his property and his habit of parking a used-car-lotful of rolling stock on the front lawn affected the property value of houses all around him, and that was irritating. But at least Dave was quiet. I dread what’s going to end up in that dump next.

O.K. There’s a remote chance someone will buy the house for a song, fix it up, and live in it. More likely, though, some speculator will grab it out of foreclosure, throw a cheap coat of paint on the outside and some apartment-house carpets on the floors, and rent it out. This will add to the already thick population of rentals in the neighborhood. It will join the place that houses Biker Boob, a Hell’s Angel who roars up and down our residential street on his unmuffled Harley and who uses the garage to conduct a shade-tree mechanic’s operation, complete with LOUD heavy-duty shop equipment that he starts up at 7 a.m. every weekend and operates until after 11 at night, and the shack whose out-of-state owner rents to SEVEN unrelated adult men, all of whom park their cars on the front yard and none of whom is interested in hacking back the knee-high weeds on the property.

The other possibility is that the new owner will be yet another of those folks who buys on the cheap, thinking he’s found a bargain, without having a clue to what’s involved in maintaining a forty-year-old tract house. Once they get moved in and discover how much it costs and how much work is involved in taking care of one of these places, they just let it go to pot.

Either way, the result is the same: a run-down house on a run-down lot, dragging down property values in the our little six-square-block development. Add to this recurring phenomenon the City’s kind decision to rip out a whole row of houses to make way for the train tracks, and you can see if you want to move up but stay in town, you’re flat out of luck. There’s no way you can afford a comparable (or even a lesser) house in a better-maintained neighborhood that’s located in the central part of the city. The only way to get back into the middle class is to move way, way out into the sprawl on the outer fringes of the metropolitan area.

You, too, can drive two hours each way to work. You’ll love it. It’s the American way!