Another Money Pit [Tales from the Trenches]

by Osman Parvez
Want to know a secret? Sometimes I talk people out of buying houses. 

Helping buyers and sellers make smarter real estate decisions is not just our tag line. It's how I've built this business. Here's a story.     

Pro tip: remove rat poison boxes before allowing showings
I was out of town this weekend, enjoying a tour of the Fall Colors with some friends (pics), when I received a text message from one of my clients. Sophie (my assistant) had taken them to see a fresh listing in Boulder and they were seriously considering an offer. Luckily my trip was nearly over, so I shaved off a half day from the itinerary and we hightailed it home so I could see the house in person.    

Although it looked OK from the photos (and the street), on closer examination it was clear that this house was a classic money pit. My clients excitement faded as I walked them through the problems I found.  

  • The foundation settled badly caused by negative sloped grading.
  • The decks were rotten and unsafe. 
  • The basement showed signs of flood damage and although the listing agent believed the damage was professionally mitigated, the cracked and peeling floor tiles (also possibly containing asbestos) told a different story. 
  • The flooring was toast throughout the house.
  • All interior walls needed paint.
  • Many drywall repairs would be needed.
  • All windows needed replacement.
  • The roof showed signs of leaking.
  • The tropical master bath wallpaper
  • Lastly, all of the fixtures and finishes were dated from when the home was constructed 50+ years ago. 

Some list, huh?

The Right Buyer
My clients wisely decided to let this one go and see what happens to it. So who is the right buyer?

If you're seeking a large family friendly house with a good layout, the asking price of just under $200/SF might work if you are willing to gut the interior and redo the exterior. To do it right you will need a $150K to $200K budget, in my opinion. Given the price point and location, it's probably priced too high for a flipper to make an attractive profit - although that is certainly possible if you're good at controlling costs. 

By the way, the rat poison boxes are real and the photo was taken inside the house. I'm not a fan of rat poison because it ends up killing far more than mice and rats as it moves up the food chain. It can sicken or even kill neighborhood cats and dogs, squirrels, chipmunks, and arguably even children. It's shocking that a seller wouldn't pick these up but I suppose it's just another sign of an overheated market with very little inventory.   

The house is actively marketed, so I won't disclose the address as a courtesy to the homeowner (and the listing agent). If you really want to know, call me.  

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Please Note

This document contains forward-looking statements. You are strongly cautioned that investment results are subject to business, economic and other uncertainties. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time. Always consult your financial advisor before making an investment decision.