HUD Activity...?

When the bank foreclosed on the property, I knew the eventual outcome would be that it would be auctioned off by HUD to the highest bidder.  It would be my last opportunity to acquire the property.  I sat back and patiently waited for the property to resurface in their inventory. 

For 8 weeks or so I scoured the net and HUD's inventory website waiting for the property to resurface.  I conducted extensive research on the bidding process so I would know what to expect and what I had to do to be the successful bidder.  I also made several trips out to the lake which included an equal number of drive-by's on the house.  

On one such trip, I noted considerable changes around the house.  Someone had cleaned up in and around the house, cut down various underbrush, trimmed back some of the trees that were in contact with the building, tore down and removed the dilapidated storage shed, removed the abandoned and half sunk boat still in the creek, replaced broken window panes, drained the water lines, etc.  I took it as definite signs of progress.  I was also very glad I wouldn't have to it all myself later.

Right at Thanksgiving weekend  I got my first clue that something additional might be happening.

It wasn't via the HUD web site.  It was via a really nebulous posting on Yahoo's real estate pages.  It was so innocuous that unless you were really tuned in on anything remotely suggesting it was related to the property it would have been really easy to miss it.  The posting contained some misleading information making it a stretch to make the connection that it was the same house but when I encountered the post, my gut told me it was....and I was right.

Grateful for his earlier assistance and since I was required to bid through a qualified real estate agent, I kept in touch with Steve the Realtor.  I figured he deserved a second bite at the apple.  I sent him an inquiry.  He confirmed that it was the same property but that it was not yet formally available for bid.

Now a HUD home.....

When HUD pays off an insurance claim, they assume interim ownership and responsibility for each property in their care.  They become responsible for the condition and maintenance of the property and thus set about "securing" it.

Selling HUD owned homes is an involved process.  It includes contracting with a real estate broker to handle overall transactions.  The broker assigns a qualified real estate entity to be the listing agent.  Sometimes that listing agent can be near or far from the actual property.  HUD also contracts with various property management companies to undertakes the actual cleanup and ongoing maintenance activities.

In an nutshell, they monitor the health and condition of the property while it is in HUD's possession pending it's eventual sale.

Foreclosure!

When a bank repossess a house during the foreclosure process, the only legal way they can reassume full ownership is to put the property for auction on the county courthouse steps and then be the winning bidder.  From there the ownership papers get scrubbed and reassigned to the bank usually via a law firm acting as trustee for the bank.

The trustee stands on the courthouse steps and auctions the property off to any interested parties.  While anyone can bid and potentially be the winner, given the bank, by law, can only bid the full amount of the previous mortgage, the starting bid is always that of the original mortgage note, whatever it was.  That insures almost every time that the bank will be the only bidder.  No one in their right mind would submit a bid exceeding the amount of the full original mortgage note so the bank wins nearly every time.....which is ultimately the intended goal.

The house went up for auction on the courthouse steps on October 5, 2011.  I was there for the auction just to see if anyone bid on it.  It went for the starting bid of $50,200.  Since I think I'm in my right mind, I didn't place any competing bids though I will admit to having $40,000 in cashiers checks in my pocket on the off chance the bid might start lower but no such luck

Banks are in the business of lending money, not owning real estate so their goal is to dump the property.

And so they did.  

Their next step....make an insurance claim with HUD to recoup their losses.

The deal goes SOUTH....

In any real estate transactions, there are usually several offers and counter offers.  Mine was no different.  The first contract included the house and the two empty lots next door with an offer of $37k.  The homeowners countered by amending the contract to separate the two side lots from the house and then wanted $3k alone for the lots.  It might not sound like much, but it was over market value for the lots on their own.  I countered by canceling the contract on the two lots and rebid on the house alone at $37,500.

We went back and forth several times until I discovered that because they were technically in mortgage default and in the early pre-foreclosure stage, they did not have the authority to consummate any deals.  Rather, they had to get final approval from their lending institution, the main lien holder....and they weren't going for it.

We decided from that point forward to leave the homeowners out of the equation and start dealing directly with the bank.  That proved to be a challenge in and of itself.  They were hard to get a hold of and they kept jacking around on the price.  I was starting to get a bit annoyed at their apparent pettiness over small details.  Here I was offering CASH and they were dicking around and risking a sure sale over a measly $200.  As annoyed as I was I recognized even at the latest price of $40,500, it was still a good deal and I wanted the house so I was willing to pay the price.  

A couple of days later I received the formalized inspection report and sent it forth to be submitted for the record as a point of leverage.  I was going to see if the bank would reconsider their position based upon the now documented and in print problems with the house.  Unfortunately, I never got the chance.  Behind the scenes while I was negotiating in good faith, the bank had been actively pursuing foreclosure to it's foregone conclusion. Several days after I submitted the report, I got word from my agent via the sellers agent that the deal was "dead in the water". 

Well now, that just really sucked!  Really sucked.  Grrrr......

A word about Inspections and reports.....

Ever had a house inspected?  It's highly recommended so you know exactly what you are getting and can purchase with the full awareness of what you're getting.  It's money well spent....sort of.

Inspectors are an odd lot.  Their profession is fraught with problems, not the least of which is tip-toeing around one HUGE conflict of interest.

On one hand, YOU are the client.  YOU are the person who pays for their service.  YOU are their bread and butter so they should be committed 100% to YOU by giving YOU a wholly unbiased warts and all inspection in order that YOU can make an informed decision on a pretty major life time purchase.

They usually tout themselves as just the guy you are looking for and that they will tell you EXACTLY what you are buying so that you can indeed make the informed decision you so desperately seek to do.....and, if what the tell you somehow improves your negotiating position and strength, so much the better.

On the other hand, the inspector community is nearly 100% reliant on the real estate agent community to continually refer paying clients to them.  Therein lies their inherent conflict of interest.

If, as claimed, they give you a wholly unbiased warts and all inspection report so that you can make an informed decision....and your informed decision is to NOT buy the property (which usually happens when buyers don't like what they hear), that costs both the seller and buyers Realtor lost revenue in the form of wasted time, energy, and commissions that just went down the crapper because the inspector issued a bad (oops!) wholly unbiased warts and all inspection report which caused the buyer to walk.  It's not rocket science to figure out that those Realtors are seriously going to reconsider referring business to that inspector in the future.

Soooo....the inspector suddenly comes face to face with reality, a major moral dilemma; If he's too honest and his honesty causes lost sales, while he might be doing you a good service, he's doing himself a greater disservice by becoming what is called a Deal Killer within the real estate community.  Realtors understandably don't like Deal Killers taking commissions and thus food from their mouths.  Realtors will simply stop referring customers to a Deal Killer.

No referrals, no customers.  No customers, no business.  No business, no money.  No money, no food, cars, or friends.  Carry that to it's logical and predictable conclusion;  No more wholly unbiased warts and all inspection reports.  It's a vicious circle with you the buyer usually on the losing end.

I encountered the same problem with my inspector.  I wanted a wholly unbiased warts and all inspection report because I wanted a good deal.  What I got was a pretty vanilla report filled with careful, deliberately worded vagueness guaranteed not to offend, not to compromise the bread line.   It didn't tell me anything new, anything I didn't already know and more importantly, it did tell anyone else anything either.  I had to go back to the inspector and insist he rework his report to clearly and explicitly outline some of the concerns he and I both observed AND DISCUSSED.

In my case, I have some experienced at renovating and was well aware of various problems with the house as seen with my own eyes.  What I wanted in this inspection was a second opinion confirming what I already knew to be problematic.  I wanted a second set of eyes to raise issues that perhaps I might have missed.  While I got most of that, I have to acknowledge my disappointment in his lack of integrity towards me, his paying customer. I can't honestly say that I would ever refer another buyer to him.

The Conclusion.....

Jens, Steve the Realtor, and I spent a fair amount of time going through the house.  We uncovered some areas of concern which did not surprise me given the totally neglected condition of the outside storage shed.  It could barely hold itself together and would have to be torn down.  Things like that are a good barometer of how a homeowner maintains their property.  I was not disappointed.

The ceiling showed clear signs of water damage in the Great Room as well as the three bedrooms.  There was no way to determine if the leaks were from the current roof or from an old one that had since been replaced.  In any case, the entire ceiling would all have to come down to effect repairs and eliminate potential mold issues.  Given the lower list price, I don't expect any concessions from the owners on the price so I'm not too worried about it.  It is what it is.

The center beam in the living room above the fireplace looked to be sagging, actually cracked.  I couldn't tell if it the problem lie in the beam itself (or if there was even a beam there at all) or if it solely involved the decorative panel sheathing the beam. It didn't look very good but really that problem did not intimidate me or diminish my interest in the place. 

I don't recall how we came to know this but it had been a suggested there might be plumbing problems involving some kind of leakage behind one of the shower walls.  Who knows what THAT means!!  The house has a slab foundation so encased plumbing work could be expensive....or....you can just cut the plumbing off at the floor and reroute it through the attic space.  Another non-issue for me.  I've sweated pipes before so no biggee.

I commented to Steve the Realtor that this was looking more like a $25k house, not the $39.9k listing price.

All in all, I still liked it.  It was just unique enough to make it interesting to me and there seemed to be excellent potential for a good return on my dollar if I were to sell after renovating.  I told Steve the Realtor several days later to draw up a contract offering $37k contingent upon the results of an inspection report.

I contacted an inspector and made arrangements to meet him at the house.

The Kitchen....

Last but not least is the kitchen, usually the center of all activity.  It's a bit small and I can't help think the layout could have been better but I think in the late 1960's when someone came up with the floor plan, practical use of overall kitchen space was not necessarily in the forefront of everyone's thinking like it is today.  I'll admit, it is compact and usable.  But it's certainly not helped by the ongoing ugly purple paint scheme.  

You'd think if they were trying to sell, they'd have done a "Sell This House" makeover.

When the owners moved out, the took all of the appliances....not usual to take the refrigerator but is a bit unusual to take the stove. 

Suppose they ran out of paint or just didn't want to bend down that far??

There's a LOT of potential with this space.  I see empty wall space that's begging to be utilized by something kitchen related!

Main Bath....

The main bath is in the center of the house.  Similar to the Master Bath there is no source of natural light.

If there ever was a candidate for a Sun Tunnel or full skylight, this room is it!!

The tub and toilet share the same wall as the master bath with both facilities exactly flip opposite of the master.  The kitchen is behind the side wall of both bathtubs. 

This is pretty much the view if you are standing in the hallway looking into the batch.  Not sure I'd want to be standing there drying off with the door open.

 

It's twin 1969 vintage sink is in the Master Bath!

This used to be a clothes hamper of some type with the door flap laying on the ground.  It's accessible from the Master Bedroom closet but if you look at the back side of that wall (next pic), it used to be a narrow door sized opening that was fully trimmed out.

I don't see any signs of shelving so it might have been a smaller step in linen closet with no door and the shelves were there where the non-paneled wall is.  I think they took down the wall between the two closets to increase the size of the Master Bedroom closet.

 The way to freedom and light!

Master Bath....

GAG ME!!  Lavender this time.  Not so purple but still puky!!  Will never understand how the Mister Man of the house put up with it. 

The Master Bath is accessed to the left of the closet in the Master Bedroom and is on the outside wall.  Surprisingly, given the inviting amount of free wall space and close proximity to the lower outside roof line, there is no source of natural light; no windows, no skylight, just pitch blackness if the door is closed.  Not very energy efficient! 

 The sink screams late 60's early 70's! 

 

Looking back towards the PURPLE Master Bedroom.

  

Onward to the shower tub and toilet

 

Do you think it works....?

Master Bedroom....

Purple, Purple everywhere!  You can't escape it!!

Naturally the Master Bedroom is the largest of the three bedrooms and has it's own bath.

In case you didn't notice in some of the other pics, the previous owners had to have been HEAVY smokers.  The discoloration on these walls and in some of the hallway pics reflect years of nicotine build up.  You call also see the cigarette burns in the carpet. YUCK!!

 There's a view of the other side of the one car garage enclosure.  The "front" entry door is just to the left out of view.

 The door on the left is to the closet.  Access to the master bath is to the left of that and is against the outside wall.

Second Bedroom....

This rooms a shade larger than the first bedroom and has the original unpainted panelling.

 

 Here's a view of that porch/odd shaped carport brought about by the one car garage enclosure mentioned earlier.

First Bedroom...

This room has peach colored walls with two closets, one one each wall.  Doesn't do much for usable wall space.  For some reason, I don't have a pic of the window wall.  Oh well, you'll figure it out from the other rooms.   Check out the lovely high-low sculptured carpet.  Yummmmm!

 

 This closet contains the electrical service panel.

 

The Bedrooms.....

Given the house is round, and all three bedrooms are on the outside walls, they're all pie shaped with the entry door to each being on the smallest part of the wedge.  Not everyone's cup of tea but I found it interesting.  It could represent a challenge for the less creative folks.

As mentioned earlier, the central hall warps around the center core providing access to and from either side of the Great Room.  

Access to the first and second bedrooms;

Access to the Master Bedroom and second bath on the right;

The Great Room....

The Great Room consists of the kitchen area to the left, in the center the main living room area with fireplace, and to the right a corner alcove area that looks like it might have been a closet at one time with the wall and door removed to increase floor space.  It's possible it was always open like that but at this point it's hard to know for sure.

The carpeting in this room and throughout the entire house is just plain FILTHY and would have to be removed in favor of something....anything....better!

It's got a great view out the back windows towards the canal leading to the lake.

In spite of the view, there are problems.  

The ceiling here and in some of the bedrooms show significant water damage bringing into question the condition of the exterior roof.  There's no telling if the roof was replaced and the water damaged sheetrock was never repaired or if the current roof is the culprit.  That also raises the specter of a mold problem as well.   Ain't nothing a cake walk!

 

There also appears to be a problem with the ceiling joist over the fireplace.  Looks cracked to me.  Not a pretty situation at all.  

With all the problems I was noting I told the Steve the Realtor there was no way this was going to be a $39.9k house. 

The Entry Hall....

The first thing you see upon entering is a dark, low ceiling hallway and what appears to have been the original laundry area....  Not sure why anyone would place it there but hey, it designed and built in the late '60s.  It wouldn't be done today.

The current owners relocated the washer and dryer to the garage...and plumbed the washer with garden hoses through the attic space out to the garage.  Jeesh!  Behind that wall is the backside of the Fireplace with the AC system to the left and the water heater to the right and from the looks of that pipe across the wall I don't think the water heater is original to the closet....which might explain why the washer and dryer were moved elsewhere.

 Which then makes me wonder about the placement of the AC system also not original to the house.  Two good closets gone!

 The hallway splits in either direction and exits into the great room.