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foreclosures

When foreclosure makes things better…maybe

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The former home of Dave’s Used Car Lot, Marina, and Weed Arboretum is looking pretty spiffy in its new coat of paint. Yesterday I spoke with the painter (the man works even cheaper than my guy—who would think it possible?). He gave me the grand tour of the worksite.

As it develops, they are replastering the pool, contrary to my speculation that they were just sanding and painting the interior. The back yard is already looking better with the outhouses dragged off, the dead stumps pulled, a new watering system installed, and the jury-rigged aluminum screening removed.

Ken the Painter (presumably a long-lost brother of Joe the Plumber) said that the owner is a speculator who intends not to rent but to sell, at a price hugely marked down off the going rate in our neighborhood. He said she has been buying and flipping houses steadily and having no problem unloading them.

She’s doing a lot of things right over there—removing the popcorn from the ceilings, replastering the pool, covering all the concrete in back with KoolDeck, getting rid of the hideous work sheds, pulling up all the flooring to replace it with tile. But she’s also cutting some corners: she plans to keep the ugly, worn-out dwarf-sized 1970s kitchen cabinetry, though she’s having the black formica countertops replaced. The house desperately needs new cabinetry, and the kitchen is so teensy it just wouldn’t cost that much to put in some Home Depot cabinets. She’s painting the eaves and other wood trim, but not painting the cinderblock walls on the sides and back—and especially in back, those walls really need to be painted! As long as she has the guy there, how much more could it cost to have him spray three not-very-big block walls?

So, that’s too bad. Of course, she’s not replacing the decrepit roof (which, it must be admitted, is nowhere near as decrepit as the roof next door, where Inez and Carlos the Knife reside), and she’s not replacing the ancient, loudly groaning air conditioner.

This will allow her to sell the house to someone else who likely will park his junk on the lawn and let the place go to pot. Any time a neighbor’s home sells, of course, what you get for a new neighbor is a pig in a poke. But when prices drop into the basement, you often find that people buy an older house without realizing what it costs to maintain it; once the learn that, they just let the place go. Because the have to: they don’t have enough to keep it up. And often you’ll get what around here are affectionately called “cultural problems”: people who don’t understand that in a middle-class neighborhood you don’t celebrate New Year’s by shooting your shotgun up in the air, you don’t let your pit bull run loose, you do put a muffler on your Harley, and you do store your pick-up, your trailer, and your unseaworthy motorboat somewhere other than on the front lawn.

But there’s always a chance that someone who’s thrilled to get their first house will move in, someone who will fix it up and keep it fixed up as long as they live there. That happened with Steve the Contractor’s house. Steve was a sketchy sort of guy who spent most of his time pretending to be a self-employed contractor (what he actually was doing was sitting around a lot while watching his house fall to rack and ruin). He finally was evicted—the previous owner had carried back the mortgage and it took her two years to get him out of the place—and the house was sold to a young couple who did a KILLER job of repair and renovation. To this day, the house is a neighborhood showplace.

Wish I could figure out how to unload the house downtown and install M’hijito in Dave’s house. He could bicycle to work from here. And it has a nice pool with plenty of backyard space for him to entertain his many friends. Plus it has four bedrooms, making it a lot easier for him to conduct his money-making room rental enterprise. Hm. Wonder if the speculator would take a trade….
😉

PAINT!!!!

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Lhudly sing huzzah! Dave’s [Former] Used Car Lot, Marina, and Weed Arboretum [Under New Management] is getting a paint job!

Drove in from the office and what should I see out in front but a guy on a ladder with a paint brush. That’s right: he’s actually brushing the trim, not spraying it.

It’s a miracle.

The new proprietor’s choice of colors is not what I would’ve favored, had she asked: it’s your basic sh** brown. But beggars can’t be choosers. Who cares what color it is, anyway? It’s PAINT!

Yesterday she had a fly-by-nightish crew sandblasting the pool. This means that instead of doing the job right and replastering (which the pool really, really needed), she did a cosmetic job that will last a year or two, maybe. But: hey! Get rid of the mosquito pond and you get rid of any further complaints from moi.

All the workmen she’s had over there have possessed that fly-by-nightish look: nary a company sign magneted to the side of a truck, and most certainly no hint of a contractor’s license number. Suggests she’s doing the fix-up on the cheap, as fast as she can get it done.

And those two things (quickie pool job, sketchy workmen) suggest she intends to rent or sell. If she’ll just get someone in there who’s quiet, not a criminal, not a volcanic madman, and not given to living in squalor, we’ll be good.

Despite the obscenely low price (we learned the bottom-feeder bought it out of bankruptcy for $162,500—this is a neighborhood of formerly $300,000-plus houses), just cleaning that dump up has transformed this whole end of the street. Dave’s mess was dragging all the properties around him down. This afternoon I actually felt GOOD about driving up to the front of my house, for a change. Now we have only two seriously run-down houses in our little tract, and one of those is for sale.

No question we have some dark clouds scudding overhead, boding hard times. But maybe now and again we’ll see the occasional silver lining.

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