Real Estate Bubble Question

[Rubia Warren]

Okay, let's say, to use right now as an example, that we are in a real estate bubble, or it's beginning to deflate. That means that what people bought a home for a year ago might not necessarily be what they can sell it for a year from now right? Cuz the prices have climbed so high during the period of low interest rates?

So anyway, what about places like where I live in Indiana, where prices have climbed due to low interest rates, but not like in areas of California, New York, etc. where it's gotten crazy high? WHat will it do to home prices in areas like these when interest rates begin climbing? How much lower will homes be worth?

I am asking this because I am looking for a house to buy, I'm buyin really low (hopefully a foreclosure that needs gutted, so yeah I'm goin bottom of the barrel here). I'm not hoping to quickly sell high, like a house-flipper, I'm planning on living there a few years, paying it off quickly within 1-2 years after I graduate college (every single dime I make from my new job will go towards paying off the house- I'm not stopping til it's paid for), then either letting my grandma live in it rent-free til she dies and I'll go buy another one, or I'll stay there the rest of my life with no house payment, OR! I will pay it off superquick, rent it out, buy another house (or two if I can buy two more cheap houses that need gutted- one for me, one for her), and let the rental income on the first property pay my house payment(s). So long as I've got that first house paid for, anyway. I'm lookin in the 20-60 grand range. :nsm: That's pretty low.

Something tells me though, I may be buying too early. Like, maybe I should wait for interest rates to climb a little higher and buy when it's DEFINITELY a buyer's market. Then I may be able to save up even more money and buy a cheap home with cash, no financing. How does that work? How do I know when it is a buyer's market and the right time? I really want to have the advantage here. I do live in a state which has one of the highest (if not THE highest) foreclosure rates in the country- I'm thinkin it can only stay the same or get worse but maybe I'm wrong on that.
So let's talk real estate, people! I wanna know the BIG SCHEME of things. We haven't begun discussing real estate-related things in my macroecon class yet, or I'd be askin' about it there.
How will these interest raises affect areas like mine where the "bubble" hasn't relaly gotten so exaggerated? Will they affect my areas much at all when they are raised? Let's talk! You got info I need to know!

[Jimmy Higgins]

Well, the real estate bubble isn't some uniform thing that affects the entire nation equally. In fact, there will certainly be places where housing hasn't been affected by the low interest rates.

If you want to pay cash, the interest rates will be irrelevent and if the home is a clunker, I don't know how much bargaining room the seller would have on price. Depending on how much fluid you have right now, it may make sense to sit on the money, gaining a specific amount of interest. If you had $20,000, you could sink that into an I-bond, get 6+% interest for a couple of years and then have $22,400. That extra $2400 could be put to fixing the house you eventually purchase, such as an efficient furnace.

A clunker of a house is a clunker regardless of a housing bubble. If there was a housing bubble on that property, it would literally be over the land, not the house.

Ultimately, it comes down to a few things.

1) How much capital do you have?

2) How much can you afford to put into the clunker annually?

3) How much have properties soared in the area you are looking to purchase?

And this is just financial. Then you need to ask yourself how much effort can you put into this place while going to school, etc...

Just some things to think about.

[Ryokan]

Okay, let's say, to use right now as an example, that we are in a real estate bubble, or it's beginning to deflate. That means that what people bought a home for a year ago might not necessarily be what they can sell it for a year from now right? Cuz the prices have climbed so high during the period of low interest rates? Basically. If the bubble bursts, that means rather than a slow price decline, the prices crash. FYI.

So anyway, what about places like where I live in Indiana, where prices have climbed due to low interest rates, but not like in areas of California, New York, etc. where it's gotten crazy high? WHat will it do to home prices in areas like these when interest rates begin climbing? How much lower will homes be worth?[/QUOTE} Indiana's, and my area, Ohio's, prices are likely to remain more or less level, as they have been, growing at a slow and steady pace.
[QUOTE]
I am asking this because I am looking for a house to buy, I'm buyin really low (hopefully a foreclosure that needs gutted, so yeah I'm goin bottom of the barrel here). I'm not hoping to quickly sell high, like a house-flipper, I'm planning on living there a few years, paying it off quickly within 1-2 years after I graduate college (every single dime I make from my new job will go towards paying off the house- I'm not stopping til it's paid for), then either letting my grandma live in it rent-free til she dies and I'll go buy another one, or I'll stay there the rest of my life with no house payment, OR! I will pay it off superquick, rent it out, buy another house (or two if I can buy two more cheap houses that need gutted- one for me, one for her), and let the rental income on the first property pay my house payment(s). So long as I've got that first house paid for, anyway. I'm lookin in the 20-60 grand range. :nsm: That's pretty low.

Something tells me though, I may be buying too early. Like, maybe I should wait for interest rates to climb a little higher and buy when it's DEFINITELY a buyer's market. Then I may be able to save up even more money and buy a cheap home with cash, no financing. How does that work? How do I know when it is a buyer's market and the right time? I really want to have the advantage here. I do live in a state which has one of the highest (if not THE highest) foreclosure rates in the country- I'm thinkin it can only stay the same or get worse but maybe I'm wrong on that.
So let's talk real estate, people! I wanna know the BIG SCHEME of things. We haven't begun discussing real estate-related things in my macroecon class yet, or I'd be askin' about it there.
How will these interest raises affect areas like mine where the "bubble" hasn't relaly gotten so exaggerated? Will they affect my areas much at all when they are raised? Let's talk! You got info I need to know!Big scheme, Roobz, I don't think the bubble effects you wither way in Indiana. Ask a real estate agent you knwo, not you search with. or a financial advisor, for sure. Then, listen to Jimmy. I am gonna get a house soon too. Its exciting and scary.

[Jimmy Higgins]

I'm surprised. In Poli-Sci, there are so many experts on economics, from taxation to tariffs. Yet, Rubia asks a question and you can't find them anywhere.

[Rubia Warren]

Well, the real estate bubble isn't some uniform thing that affects the entire nation equally. In fact, there will certainly be places where housing hasn't been affected by the low interest rates.

If you want to pay cash, the interest rates will be irrelevent and if the home is a clunker, I don't know how much bargaining room the seller would have on price. Depending on how much fluid you have right now, it may make sense to sit on the money, gaining a specific amount of interest. If you had $20,000, you could sink that into an I-bond, get 6+% interest for a couple of years and then have $22,400. That extra $2400 could be put to fixing the house you eventually purchase, such as an efficient furnace.

A clunker of a house is a clunker regardless of a housing bubble. If there was a housing bubble on that property, it would literally be over the land, not the house.

Ultimately, it comes down to a few things.

1) How much capital do you have?

2) How much can you afford to put into the clunker annually?

3) How much have properties soared in the area you are looking to purchase?

And this is just financial. Then you need to ask yourself how much effort can you put into this place while going to school, etc...

Just some things to think about.
I agree with you both- my area has not seen the kind of effect like various others across the country.

Only counting husband's official weekly paycheck, not any tax refund checks, nor extra money that we make on the side, we will have as much as 10 grand a year to sink into a house after payments, assuming our lifestyle doesn't change, and we don't do anything else with our emergency fund til I get out of school (meaning, if we just keep it the same and not try to build it any higher). That is due, I think, to the fact that we have no other debt- we just have internet/phone, cable, and utility bills, no car payments or credit cards or loans, I shop only clearance racks, classified ads, and freecycle daily.
Mostly, unless we had to call out a company for something major like a big foundation or basement problem, we can do most other things ourselves which saves a lot on costs of labor. PLus, my stepfather is a union plumber/pipefitter, and also is licensed for heating/air conditioning. We know quite a few people who are close that we can trade mechanic stuff with if we need something like a professional electrician or a carpenter.
Materials are what would be the biggest cost, but I've got some alternative resources and hookups to take the edge off. Most of the time that will work, unless an emergency happens with something that is necessary. In that case I couldn't be patient and wait til I find a great deal. :nsm:
We've been looking for a house in a good area that is either thru HUD or foreclosed, but the other day I found a home in the ghetto for 12 grand in a Sheriff's sale. I couldn't go through it to really check it out I had to look through windows, and it has stayed on my mind. I considered maybe checking out houses in the 'hood because a house like that we could pay cash for and not finance at all. I guess it would all have to depend on what a good home inspection's results were- in many cases it'd be a bunk deal if it has too many serious issues. I shudder at the thought of living on that street cuz I'd like to be somewhere where it is quiet. But I began to think: if we got a house we paid cash for, and only made it decently livable and stay in it for 2 years. We'd have no payment, and projects would get done in order of importance and as dictated by our budget (in which case, we'd have a lot more than 10 grand in a year to spend if we had no monthly payment) and we could be aggressive. Then, we could buy a better house somewhere to live permanently and rent the ghetto house which would have a $700 a month income potential. Renting seems a risky headache, but if we became involved in renting only to those in the section 8 program through the government, or the housing transition program, it would take away some of the risk. People who are in those programs get inspected frequently, and if they are found busting up the place will lose their aid, giving them incentive to be a bit more gentle with the place. It's no guarantee, but certainly is better than chasing someone down for their rent payment and having people disappear in the middle of the night leaving the place a wreck. The ghetto house idea is a good one only if we rent it out- it's a bad idea to buy it and try to sell it. The 12 grand house is located on a street where the highest selling price of a house last year was only $65,000, and it was a VERY nice house that took forever to sell. And it'd only be a good idea to rent it if we didn't owe payments on it, that way it could generate extra income instead of depending on the rent check to make the house payment. I honestly don't think I'd want to sink more than 20 grand into a ghetto house, though for repairs- and even that may be too high-- like I said it all depends on what an inspector says about the home. :uhoh: It would generate $600-800 monthly (depending on how many bedrooms), and while we live in it, we'd be sinking our money into a property we actually own instead of wasting money every month on rent. I dunno, the ghetto house is just an idea I got the other day. I'll have to seriously keep tossing that one around- I'm not sure I'd wanna live there again even if it's temporarily, nor have I thoroughly checked out all the hassle of being a landlord (as in paperwork, taxes, and city government junk).

What my plan has been is to buy a home in a good area that is foreclosed for like, no more than 60 grand. Gut it, and straight hook it up (with very nice materials) and live in it permanently. One thing I have to keep in mind though, is when I graduate in 4 years, I HAVE to buy something for my grandma to live in. She did not plan for retirement and is trying to make it on a limited income and is talking about going to live in public housing for seniors, which is my worst nightmare. I cannot ever forgive myself if I let her do that, and her kids don't seem to care, they are still trying to bum off of her even though she is now poor. So I thought about, when I get out of school, paying off the mortgage on the house by using every dime I make on my job for a year or two and buying another home either for her, or for me (that way I'd still have only one house payment), aggressively paying down that mortgage til it's clear, then kickin' back with 2 paid-for homes. So either the house we buy now, she will live in when I am out of school and I will get something bigger or nicer for myself, or we will remain in this house, and get her a small 2 bedroom house somewhere. I dunno yet, but that's what I had in mind, so the grandmother factor further complicates things.

I'm just trying to figure out the best way to make my money work for me, instead of me slaving for a payment as I get a house. I wanna buy considerably low for the area.

Even though my area hasn't seen a huge rise in prices of homes, I thought maybe if I waited a while, as interest rates climb, less people will be buying homes, right? So that means people will go lower on the prices of their homes if they want to sell them, I would think. But what would complicate that is if many people's asking prices are not considerably more than what they actually owe for the homes. They may owe too much.

[Ryokan]

I'm surprised. In Poli-Sci, there are so many experts on economics, from taxation to tariffs. Yet, Rubia asks a question and you can't find them anywhere.
Hey, I put in my two cents, for what their worth. though, I don't THINk so and ask an expert, and oh, listen to that other smart guy, isn't a huge recommendation, I guess.

[Meh_Gerbil]

Rubia:

I recently purchased a house and immediately spent $100,000.00 fixing it up. It is amazing how fast you can burn through a huge amount of money - a kitchen will cost you $10,000.00 on the low end. Windows $12,000.00 - plumbing $10,000.00

We spent more on the house than what it is worth (by about $40,000.00) and if real estate prices drop (which they may) then we'll be looking at more like a $50,000.00 deficit.

However, my wife and I are comfortable with that because it is our dream house and we aren't going anywhere until they carry us out on stretchers. You see, the price of the house isn't terribly important if you are gonna live there for the rest of your life. After 10 years the house will be worth what we got in it (and some) even if the current bubble pops.

Questions you need to ask yourself is do you really have the money to buy a fixxer? I've seen more than one family getting into a fixxer only to begin an endless cycle of getting additional loans to fix the next problem. Sure, the 30 year old furnace works today but will it work 6 months after you move in and you've spent your money on all other improvements? Does the fixxer have insulation? Good windows? All these hidden things that look fine may be adding huge $$$$ to your winter heat bill.

What I'm saying is that a more expensive modern home (with insulation and everything in excellent working order) may actually be a less expensive option in the long run. If you have a tight budget, a fixed monthly mortgage with 10K in the bank for emergency fixes on a recent home might be a more comfortable option.

Fixing old houses does NOT save you money unless you've got tons of time and expertise to do it yourself. I hired it all out and paid dearly to do it.

[Jimmy Higgins]

Rubia:

I recently purchased a house and immediately spent $100,000.00 fixing it up. It is amazing how fast you can burn through a huge amount of money - a kitchen will cost you $10,000.00 on the low end. Windows $12,000.00 - plumbing $10,000.00

We spent more on the house than what it is worth (by about $40,000.00) and if real estate prices drop (which they may) then we'll be looking at more like a $50,000.00 deficit.:eek:

Wow! Just wow! It better be your dream home, with a five minute commute to work to boot. I know there are things I want to do to my house, but I probably would be putting a decent chunk into the basement, making it a nice entertainment area. The work was half-done when I moved in. I made some changes and now all I need is some nice flooring. I also need to replace the windows, they are old. I just replaced the furnace this past summer. Now that was an investment! But I'd never imagine putting in 150% of the house's value into the house. That just seems insane (when I say "seems" I mean "is"). Of course, if it came with the location you were willing to kill your mother for, then that is a value that can't be realized monetarily.

However, my wife and I are comfortable with that because it is our dream house and we aren't going anywhere until they carry us out on stretchers. You see, the price of the house isn't terribly important if you are gonna live there for the rest of your life. After 10 years the house will be worth what we got in it (and some) even if the current bubble pops. Well, it's not quite that simple. You see, if you only put in half of what you did, you could have taken the other half and put it into the stock market or bonds and made interest off of it. If you put 150% of the houses value into the house, you'll never see it back, unless the house's value skyrockets in a bubble.

Questions you need to ask yourself is do you really have the money to buy a fixxer? I've seen more than one family getting into a fixxer only to begin an endless cycle of getting additional loans to fix the next problem. Sure, the 30 year old furnace works today but will it work 6 months after you move in and you've spent your money on all other improvements? Does the fixxer have insulation? Good windows? All these hidden things that look fine may be adding huge $$$$ to your winter heat bill.These are very good points. Redoing a house isn't simple. If it were, everyone could do it. And renting a house out isn't as simple either.

[Rubia Warren]

You are right and make some good points.

I couldn't afford much more than a house for 100,000- and that would make me uncomfortable while I am in school and not working. But the main thing that is a turnoff to me is that the homes I see that are in good shape, I'd end up ripping stuff out of them anyway.
Take, for example, carpet. If I were to buy a newer home, chances are I'd have cheap generic fixtures, cheap carpet, and the thing had been slapped together. I'd have to change out all that stuff to get what I really wanted in the first place-- or spend ALOT more money on the price of a house. Even then, I'd still be getting stuff that someone else picked out which might not be my exact vision.
Those things are a bit different than a waterlogged basement, bad foundations, and heating systems, but do you understand kinda what I mean?
I actually think you guys did a good thing. At least you guys have exactly what you want in your home.
I just kinda think that, okay if I would move in to a home and change out a bunch of stuff anyways, then why not buy a home that doesn't have these things in the first place at a lower price? I'd rather just do it myself how I want it the first time. It may not save me money, but I think at worst it will get me exactly what I want for the same amount of money I'd have spent for the selling price of a "better" house. I think I could at least get more bang for my buck that way. I like doing that sort of thing, too, so it'd be fun.

Just out of curiosity, how much of a difference would it have made if you'd have not had to pay for labor?

[Meh_Gerbil]

:eek:
Wow! Just wow! It better be your dream home, with a five minute commute to work to boot. I know there are things I want to do to my house, but I probably would be putting a decent chunk into the basement, making it a nice entertainment area.

The house was built in 1910.

When we compared what the cost of the house + improvements would get us with the cost of going out and buying a brand new home it made the cost of the fix up worthwhile to us - for the things we couldn't get in a new house.

For example, the house is a brick 2 story with hardwood flooring. It has columns in the living room and a beautiful mantle (none of them have been painted so they have a spendid aged look). We also had the original steam heat radiators sandblasted and painted - so we go do sleep with the raditors hissing and whistling - which we like. The house is also 4 blocks from my parents. =) Toss in the original crystal/lead windows (3 of them we kept) and you've got my dream house.

To fix it up we:
1: Replaced all plumbing from where it enters teh house and throughout to the drain.
2: Replaced/Added all electrical (all grounded outlets - totally modern electrical system)
3: Replaced 25 windows. (placed new storms over the 3 art glass windows)
4: Blew in insulation.
5: Added an air conditioning unit in the attic which services the whole house.
6: Added a new bathroom, remodeled the existing bathroom. (gutted, rebuilt)
7: All flooring has either been refinished (if wood) or replaced with new carpet/tile.
8: Gutted Kitchen - put in handmade oak cabinets, granite countertops, new appliances, new Knight Tile flooring.
9: New roof.
10: Professionally painted the interior in bold colors (red, yellow, coffee)
11: Two new storm doors.
12: Refurbished steam heat system.
13: New electrical fixtures throughout. New receptacles and switches throughout.
14: Addition of braces to basement to support flooring. As it turns out, a load bearing wall had been removed by the previous owner.

Basically, the house got a complete overhaul of all systems - all that is left for us to do is the easy, inexpensive surface stuff. We did this because we saw many couples get into a fixer upper with just enough money to paint the thing when what really needed to happen was the pouring of big $$$ into the hidden things like insulation or a decent electrical system.

I don't know if I'd do it again - it's a huge headache.

[Meh_Gerbil]

Just out of curiosity, how much of a difference would it have made if you'd have not had to pay for labor?

I dunno - I'd guess 70% of the cost was labor (or more).
The problem is, even with a professional contractor and a team of builders the process took 6 months - with the house being unlivable for most of that time. We rented while waiting for them to fix it.

I guess if you are going to school in 2 years you may be looking for a job? A half completed project doesn't sell very well - can you afford to get half done and then graduate and move only to try and sell an imcompleted poject?

YIKES!

Now, if you could buy a house that has solid systems but just as aesthetic problems then you might be in business! Nasty carpet and paint can be fixed inexpensively -- while the electrical and plumbing remains untouched. Before you buy, get some rough estimates on what it would cost to fix stuff that you want to address.

Don't rush into anything - there is always a new opportunity in housing coming up. Good luck! =)

[Rubia Warren]

I have a question for you guys.

We looked at a house last night that was in a good area. Was an old foursquare style home w/ 5 bedrooms 1 bath. Comes with 3 lots! Asking price was $64,900. It was very dated inside, needed new everything (well technically one could live there after fixing the machanical with the cosmetics like they were but even that would have to go.... :thumbd:) It had a heating system like the old school days- that big octopus-lookin thing in the basement! I was like DANG! Needed new wiring, and prolly plumbing too. Wouldn't surprise me. Just a house that should be totally gutted. Oh and the roof was so bad that it had 2 layers of shingles, with MOSS growing on top of them all over the place and even in between the layers. Upstairs in 2 of the bedrooms, the ceilings were damaged from it leaking. That caused my husband to immediately say, "pfffft. :thumbd: I ain't dealin' with a roof like that. If the ceiling is this bad, imagine the damage done to the structure. This is a lot more than re-shingling" (that was the first thing we looked at before the wiring and stuff)and with all the other things wrong, just the whole thing was a turnoff.

BUT! When we first walked into the house, I was already turned off. It stunk like musty mold- I mean, it was STRONG- even on the main level. I have a musty basement where I live but it only stinks in SUMMER, and only if I don't run a de-humidifier. This was worse and really weird.

So I started looking around, and in the dining room, going up 2 walls starting at the baseboards, there was some dingy black stuff. It wasn't DARK like soot from a chimney, but was just making the wall dingy-looking and was more subtle. It did not look like dust or dirt. It was black. And it wasn't in spots like mildew. It was really weird.

I ran my finger across it to see if anything would come off onto my hand, and nothing did. :huh: I asked a housing inspector one time about mold because of my basement, and I couldn't remember if he told me that when you run your finger across it, if it would or would not rub off on your finger. I can't remember!

There was an upstairs bedroom that was sort of the same way on one wall. Is this what black mold looks like?
The stench in that home was almost nauseating. But that may be psychosomatic, because I am ultra-paranoid of mold. Seriously. If I even suspected that you might have it in your home, I wouldn't ever visit you- not even for 5 minutes to say hi. So my mind prolly exaggerated it but it was still there.

Then the REALLY weird thing: the realtor started out by telling us the seller was motivated to sell. He inherited the house from his MIL who died like a year ago, no one lives in the house, and he wants to sell it quick. Then later as we were talking he mentioned that we should make him an offer of $40,000 for it- that it wouldn't be unreasonable. I've never seen a realtor do that. :huh: Realtors are out to make money, too. That said to me that there is something way worse about the house that he either knows about or suspects and wasn't telling me. You don't just run across a home that has 3 extra lots in the city limits in a good neighborhood where someone is willing to go down that low if there isn't some sort of really bad problem. I don't see that anywhere (yards are small in-town; all of that land is a huge plus even for a house that needs a lot of updates, so it must need something major or it's uninhabitable).

So what does it sound like that I saw on the walls? Does that sound like mold? I am not interested in that house. I am asking out of curiosity, cuz that was so weird. :huh:

[Meh_Gerbil]

I have a question for you guys.

We looked at a house last night that was in a good area. Was an old foursquare style home w/ 5 bedrooms 1 bath. Comes with 3 lots! Asking price was $64,900. It was very dated inside, needed new everything (well technically one could live there after fixing the machanical with the cosmetics like they were but even that would have to go.... :thumbd:) It had a heating system like the old school days- that big octopus-lookin thing in the basement! I was like DANG! Needed new wiring, and prolly plumbing too. Wouldn't surprise me. Just a house that should be totally gutted. Oh and the roof was so bad that it had 2 layers of shingles, with MOSS growing on top of them all over the place and even in between the layers. Upstairs in 2 of the bedrooms, the ceilings were damaged from it leaking. That caused my husband to immediately say, "pfffft. :thumbd: I ain't dealin' with a roof like that. If the ceiling is this bad, imagine the damage done to the structure. This is a lot more than re-shingling" (that was the first thing we looked at before the wiring and stuff)and with all the other things wrong, just the whole thing was a turnoff.

BUT! When we first walked into the house, I was already turned off. It stunk like musty mold- I mean, it was STRONG- even on the main level. I have a musty basement where I live but it only stinks in SUMMER, and only if I don't run a de-humidifier. This was worse and really weird.

So I started looking around, and in the dining room, going up 2 walls starting at the baseboards, there was some dingy black stuff. It wasn't DARK like soot from a chimney, but was just making the wall dingy-looking and was more subtle. It did not look like dust or dirt. It was black. And it wasn't in spots like mildew. It was really weird.

I ran my finger across it to see if anything would come off onto my hand, and nothing did. :huh: I asked a housing inspector one time about mold because of my basement, and I couldn't remember if he told me that when you run your finger across it, if it would or would not rub off on your finger. I can't remember!

There was an upstairs bedroom that was sort of the same way on one wall. Is this what black mold looks like?
The stench in that home was almost nauseating. But that may be psychosomatic, because I am ultra-paranoid of mold. Seriously. If I even suspected that you might have it in your home, I wouldn't ever visit you- not even for 5 minutes to say hi. So my mind prolly exaggerated it but it was still there.

Then the REALLY weird thing: the realtor started out by telling us the seller was motivated to sell. He inherited the house from his MIL who died like a year ago, no one lives in the house, and he wants to sell it quick. Then later as we were talking he mentioned that we should make him an offer of $40,000 for it- that it wouldn't be unreasonable. I've never seen a realtor do that. :huh: Realtors are out to make money, too. That said to me that there is something way worse about the house that he either knows about or suspects and wasn't telling me. You don't just run across a home that has 3 extra lots in the city limits in a good neighborhood where someone is willing to go down that low if there isn't some sort of really bad problem. I don't see that anywhere (yards are small in-town; all of that land is a huge plus even for a house that needs a lot of updates, so it must need something major or it's uninhabitable).

So what does it sound like that I saw on the walls? Does that sound like mold? I am not interested in that house. I am asking out of curiosity, cuz that was so weird. :huh:

Okay, here is what you need to do.

You need to hire a good house inspector - it might cost ya a couple of hundred bucks but it is worth EVERY penny. Ask around and find an inspector that will provide you with a written analysis of the property - preferreably an old crusty guy that likes to walk around and show you stuff as well. Do this with houses that you are serious about buying.

A housing inspector will point out stuff that you or your real estate agent won't see - he'll find the 'fatal' things that will convince you to walk away or he'll let you know the property is sound and worth pursuing. (You should also get a written report of problems that should be addressed)

Additonally, you can put an offer in on a house - with the sale contingent on the housing inspectors report. That means you can make the offer but have an excuse to back out if the inspector finds some real problems. You want to get a pro in there that doesn't care if you buy the house or not, and get his honest opinion.

We've used an inspector twice - and it's a real eye opener.

Also, the real estate agent wants you to make the $40,000 bid because he figures you'll get talked up to $50,000. Don't be afraid to walk away from a deal - this is war and there are other opportunities out there. You have to figure out why these people are having a hard time moving this property.

Other considerations:
If you put $60-80K into the house could you get $120K for a house in that neighborhood? You do NOT want to be the most expensive property in teh hood.

Anyways, do yourself a favor and get an inspector on your payroll.
Ask around and get a really good one.
He'll open yer eyes - or do what ours did - assure us that the 95 year old house we were buying was solid. That feels good too.

[nomad]

Then the REALLY weird thing: the realtor started out by telling us the seller was motivated to sell. He inherited the house from his MIL who died like a year ago, no one lives in the house, and he wants to sell it quick. Then later as we were talking he mentioned that we should make him an offer of $40,000 for it- that it wouldn't be unreasonable. I've never seen a realtor do that. :huh: Realtors are out to make money, too.

Is this the seller's realtor or your realtor? If the seller's, I believe it's unethical but not as surprising as it seems. If the house sells for $60k, the realtor gets 3% of that, or about $2400. If the house sells for $40k, the owner loses $20k but the realtor only loses about $800. And he gets it a lot quicker and can start working on his next house. The realtor's only vested interest really is to close the deal, and as quickly as possible.

[Cliodna Emerges]

BUT! When we first walked into the house, I was already turned off. It stunk like musty mold- I mean, it was STRONG- even on the main level. I have a musty basement where I live but it only stinks in SUMMER, and only if I don't run a de-humidifier. This was worse and really weird.

So I started looking around, and in the dining room, going up 2 walls starting at the baseboards, there was some dingy black stuff. It wasn't DARK like soot from a chimney, but was just making the wall dingy-looking and was more subtle. It did not look like dust or dirt. It was black. And it wasn't in spots like mildew. It was really weird.

I ran my finger across it to see if anything would come off onto my hand, and nothing did. :huh: I asked a housing inspector one time about mold because of my basement, and I couldn't remember if he told me that when you run your finger across it, if it would or would not rub off on your finger. I can't remember!

There was an upstairs bedroom that was sort of the same way on one wall. Is this what black mold looks like?
The stench in that home was almost nauseating. But that may be psychosomatic, because I am ultra-paranoid of mold. Seriously. If I even suspected that you might have it in your home, I wouldn't ever visit you- not even for 5 minutes to say hi. So my mind prolly exaggerated it but it was still there.

Then the REALLY weird thing: the realtor started out by telling us the seller was motivated to sell. He inherited the house from his MIL who died like a year ago, no one lives in the house, and he wants to sell it quick. Then later as we were talking he mentioned that we should make him an offer of $40,000 for it- that it wouldn't be unreasonable. I've never seen a realtor do that. :huh: Realtors are out to make money, too. That said to me that there is something way worse about the house that he either knows about or suspects and wasn't telling me. You don't just run across a home that has 3 extra lots in the city limits in a good neighborhood where someone is willing to go down that low if there isn't some sort of really bad problem. I don't see that anywhere (yards are small in-town; all of that land is a huge plus even for a house that needs a lot of updates, so it must need something major or it's uninhabitable).

So what does it sound like that I saw on the walls? Does that sound like mold? I am not interested in that house. I am asking out of curiosity, cuz that was so weird. :huh:

Hey, Roobz~ is this the seller's agent? If so, you need to get your own buyer's agent, a good one will even come pick you and the fam up and drive you around so you don't have to waste your gas.

I wouldn't necessarily suspect that just because the Realtor suggested you bid low that there are additional problems, but it was unethical for them to suggest that. If they are the seller's agent, they are to have the seller's interests as their primary concern. Many times when this happens, the seller's agent is tired of paying the monthly advertising costs, and just wants to unload it quickly. Advertising is very costly, and selling quickly more than makes up for the small loss they would take on a lower bid. They also want to hurry up and get paid, because generally it's a month to 6 weeks between the contract and closing.

As to this particular house, personally, if I smell mold, I run for the hills. Mold tests are generally expensive, even more expensive to treat, and can be very hazardous, (bleeding lungs, etc.) Not all home inspectors are even certified to check for mold, so ask around. In my area, there are some pest control places that do the mold test. Black mold generally will brush off on your clothes, perhaps this house was just in the beginning stages?

I don't know the market in your area, but generally, foreclosures are more trouble than they are worth. If you could find one in a good neighborhood with a good roof and energy-efficient windows, you would be doing well. I think you are smart to stay away from new construction as well.

There is a real estate forum you can visit and ask all the questions you need: http://www.agentsonline.net/
There are quite a few seasoned agents on there, maybe you could find one in your area who could answer locally oriented questions regarding the bubble, etc.

Good luck, I am so excited for you to be buying your first house! :hug:

[Rubia Warren]

Thanks for the links, Cliodna! And the great info!

Well this particular house stuck in our minds, and to lay things to rest, I got my stepdad to go through it with me today. He is the most negative, critical, (and knowledgable) person I know and if there's a fault, he is certainly the person to quickly pick it out and rag on it to death. I figured he'd nitpick it to death and I could forget about this house and move on, knowing it was a waste of time. We also brought flashlights this time. :teeth:

He went up and down, all through the house for about an hour, and finally said, "Ya know, r00bz..... this isn't as bad as I expected, actually. And certainly not half as bad as some places I've worked on. Ya got major mechanicals that need replaced- furnace, roof, windows, and insulation- possibly even blown into the walls. PLumbing looks fine to me, electrical is iffy. I mean, you could get by with it for right now, but somewhere down the road, ya might wanna completely redo it all, but technically it's okay how it is. You'd have to call an electrician out here. But for the price, if you can get the seller down some more, and you do some stuff yourself, call your friends who are roofers and electrician guys who are outta work and needing a job, this would be a decent investment. All this property that comes with it is what makes it worthwhile, and then ya got those businesses across the street--- if you stay here long enough you might in the future be able to sell it zoned commercial. Even if that doesn't happen, you still got a nice chunk of property here to go along with the house that makes it attractive and worth more. The house is still gonna nickel and dime you even after the major stuff is taken care of- it's old. But I am surprised to say, it's pretty darn solid. I expected, by the way you described it, for the roof to be cavin' in and stuff. You're prolly just gonna need a re-shingle- worst-case scenario is the part above the one bedroom MIGHT need replaced, but not the whole roof. The windows and insulation bug me though- I'd do that with part of the money from that loan right away along with the furnace. I wouldn't buy this house, myself..... but I'm 52 and would rather buy a nice house all ready to move in. But if I was 20 years younger? Yeah..... I'd go for it. It's got potential."

So we counted and measured the windows, took note of some other stuff, and my job before Monday is to find the cost of all of these things. I found one guy with whom I used to work at Selmer who does construction now who is gonna check out the roof and give me a price-- he did my dad's roof a few years ago and did a good job, and we've known him for years.
Monday I gotta talk to the lady at the bank, then get an inspector and go from there. But Phase 1 is passed, surprisingly. Phase 1 being my stepdad-- he rarely approves anything, he's a tough one. :yes:

BTW: It wasn't black mold on the wall that I saw. It was some sort of dingy grime. :blush: So I'm paranoid okay? But it does have a musty smell. My stepdad said, "Well, what do you want a house built in 1900 that has been completely closed up for a year to smell like?" Regardless, I am going to try to get an inspector who knows about mold. :yes:

We'll see what happens during Phase 2! Still don't know if we're gonna buy this one or not.

[Rubia Warren]

Hey, Gerbz-
Does your old house have windows facing outside in the bedroom closets?

[Zeluvia]

Hey, Gerbz-
Does your old house have windows facing outside in the bedroom closets?
When I watch TV in the wee hours of the morning, and see things like Carlton Sheets, and other get rich in real estate programs, I have to wonder how much of the bubble is directly related to this kind of activity?

[Ryokan]

When I watch TV in the wee hours of the morning, and see things like Carlton Sheets, and other get rich in real estate programs, I have to wonder how much of the bubble is directly related to this kind of activity?
Some of it. Its a flaw in the market system.