Purchasing Real Estate Doesn't Always Work in the Buyer's Favor

Have you ever watched those annoying television commercials about making money in real estate with no money down? Have you always thought there must be something more to the picture than meets the eye? Well, like most of us, you know you can't get something for nothing. Even for those who think they know what they're doing; they aren't making the best decisions in the world.

Case in point. With a 23-year-old house in need of extensive repairs, and the newest tax assessment that more than doubled its worth in taxes, we decided it might be time to put the house on the market. Who knows? It might sell. We bought the house for $50,000 in 1982 and still owed $55,000 (due to refinancing). Our tax assessed the house and property (almost three acres) at $267,000 (up from $125,000 for the previous 22 years). Could we get $200,000 for it? We thought. Let's try.

Before we had a Realtor (friend) come over and look at the house, I had the tax evaluators over to verify their assessment, which had only been done from the outside of the house. I showed them the problems with the house, the repairs that needed to be done, the lack of things like a second bathroom, etc., and was assured by the assessors, that there was nothing that some time and money couldn't fix. (The assessment was later readjusted to $248,000)

The time line to this process is crucial to understand the importance of the issue. I received the assessment on a Wednesday, discussed the problem with the assessors on Thursday, and invited them into the home on Friday. Three days, so far, from beginning to end. At the end of the day Friday, I contacted my Realtor friend about the possibility of selling the house for $200,000 based on the tax assessment, repairs needed, local market, etc. She felt that there was a relatively good possibility of getting that much for the house and made an appointment to meet with me on the following Wednesday (one week after receiving the tax assessment).

When she came on Wednesday and we walked through the house, we discussed the need for some of the extensive repairs that needed time and money (of which we didn't have). The bathtub needed to be replaced, as well as the floor joints below it. The kitchen needed to be revamped, sliding doors needed to be replaced, stainless steel piping had failed and needed to be replaced with PVC material, and the electrical wiring in at least one room needed to be repaired, and the roof was going to need repair before the winter. In fact, as if appliances "knew" we were planning to move, even the microwave oven and the dryer started acting up and finally "died" just prior to the sale of the house.

Before the Realtor left (after discussing sale prices, fees, commissions, etc.), she suggested that I let her make a phone call to a person in town who buys real estate without requiring an inspection (which we wouldn't pass) or bringing the house up to "code." He was, in fact, one of these people who buys homes to "flip" them, or refurbish them in order to make a profit. "Let's see what he offers," she said. He was there within the hour. (Again, this is only five days after deciding to sell the house.)

With the speed of someone who had something far better to do than look over the house, he walked in, poked his head in the rooms, mumbled to himself, and said, "Ok, so I don't waste your time and mine, how much are you looking to get for the house?" When I conferred with my Realtor and we reiterated the price of $200,000, he said, ("I won't go over $175,000-and the offer is only good for 24 hours"). He turned and left the house, which he had not been in for more than 15 minutes. He did look at the size of the yard and noticed there was detached garage, but otherwise, he looked at nothing else.

Within 24 hours, we decided to accept his offer (knowing it would cost more than $50,000 to fix repairs). We wrote up a Purchase and Sale Agreement at his home with the assistance of our Realtor who, to her credit, wrote AS IS everywhere on the paperwork. It was clear he was purchasing the home in the AS IS condition, with the agreement that he would pay off the mortgage and allow us to remain in the home until the end of the following month. (Again, this is less than a week since deciding to sell the house).

The closing was to take place in two weeks. During those two weeks, he came by several times; once to ask if we were going to pay $1,000 for a dumpster to remove all the debris around the house and behind the garage that he hadn't noticed in his walk-through. We reminded him that the sale was "As Is," and stated that anything not going could be disposed of when we moved out. He came by again to ask if he could start clearing out the garage before we left-if we told him what things weren't going or were going to be thrown out. He had a dumpster in the yard within the week and started removing things that we had indicated could be removed.

Another day he showed up at the home at 9:00 a.m. and asked if he could have someone come over to pave the driveway. We said, "Sure, go ahead," because we knew he hadn't closed on the house yet; it wouldn't matter to us if he laid down asphalt. He must have had second thoughts, because the pavers never showed until we moved out. By this time, I contacted our Realtor and told her we didn't want him around until after the closing (at the earliest) or when we moved out (at the latest). Later the next week, she called to tell us he had wanted to send people over to fix the roof but she had taken it upon herself to say ,"No," until the closing, as we weren't going to be responsible for any workers compensation injuries if someone got hurt on what was still our property.

Two weeks from the day he saw our house, we closed, and walked away with more than three times the amount of money we paid (and still owed) for the house. When we told people we had sold the house in less than 24 hours, they countered that we obviously hadn't sold it for enough money. Of course, they didn't know how much (or little) we had paid for it when it was new.

We moved to an apartment around the corner, so we have been able to watch it's progress over the past month and a half. So far, we know the following repairs have been done:

Plumbing
Heating (changing from all electric to some other means)
Driveway Paved
Kitchen Appliances Replaced
Side Deck Removed and Replaced
Sliding Glass Doors Replaced
Mold/mildew/Sheetrock repaired and replaced
House Painted
Shutters and Gutters Installed
Debris Removed from Outside the Home
Debris Removed from Inside the Home (In the rush to move, there wasn't time to remove everything that wasn't going).
Roof Re-shingled and Repaired
Septic Tank Removed and Replaced with Larger Unit

There has clearly been more than $50,000 worth of work done to the home (much of the repairs he did not look into prior to buying the house) and he's had it on the market for the past five weeks, "For Sale By Owner."

We sold the house in 24 hours and walked away with $175,000, and had to ask ourselves, "So who's the sucker?" We were above board and honest in everything we said and did, and our Realtor saved herself and us by stating that the house was being sold "As Is." We've learned a lot from this experience.

If we ever plan to purchase a house and "flip it," we will make sure that a walk-through includes the entire property-each room, the land, the buildings. We will be sure to ask if the electrical and plumbing works-not just in the house, but in individual rooms. We will ask to see the entire property and to see any area where trash or debris is being removed and dumped (ours was simply behind the garage-easily seen if someone had looked). There is far more to renovating than meets the eye, and being a homeowner is one way to gain some insight.

The person who bought our house has bought several others in the area-he's spent a great deal of money refurbishing, and has had very little luck actually selling any. It could be the market-it could be his lack of good sense. He comes across like he knows it all-when, in fact, we knew what he doesn't know. Before buying a home as a "fixer upper," consider the amount of work, the expense, and the time it will sit on the market. Sure, he might make a profit at some point, but it's already taken him five times the amount of time (and considerable money being paid out before recuping expenses).