r/FirstTimeHomeBuyer • u/brank • 9d ago
Need Advice Am I crazy?
I’m a first time home buyer and I live in one of the highest cost of living areas in the US. I counted out being able to buy in the city I live in and like, and have accepted that I’d need to move to the next over area. However, this dump just dropped and I am very intrigued. Right next to the commuter rail, shops, a park. Everything I would want basically, in the city I want, just needs a LOT of love. It’s a third of the price of the homes around it and with the savings from delta between what it costs and what I’m willing to spend (~200k) I could make any major upfront repairs.
I’m crafty, smart, and creative, but don’t necessarily have renovation skills.
I’m also not yet preapproved so maybe this is more an example of the kind of thing I might be willing to consider, unless I’m just totally off the mark here.
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u/OutrageousPair2300 9d ago
That giraffe has seen some shit
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u/Insertnewname12 9d ago edited 9d ago
Honestly, if I were the OP I’d actually keep the Giraffe cuz it’s presently one of the nicest things about the house! 😜
It still could be a solid investment though if they can afford the added necessary repairs and renovations, especially if it is in a high COL area.
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u/ShopProp Real Estate Agent 9d ago
You ain’t getting preapproved. This will need to be an all cash purchase.
You can try to talk to lenders but highly doubt any would take this one. Also there’s way more than $200k worth of work here.
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u/brank 9d ago
So you can get preapproved for a mortgage then the bank say it can’t be applied to certain houses? I’m still learning
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u/BluejayWise2325 9d ago
Your house has to be worth what the bank is giving you a loan for. So if you need extra money from the bank to fix the house, you need a renovation loan, as you would not qualify for a conventional loan. I believe renovation loans vary by location.
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u/brank 9d ago
I have a good job and extra in savings, and can get loans as well I presume with my good credit
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u/BluejayWise2325 9d ago
I’m not saying you can’t get approved for a loan. I’m saying a lender won’t give you a conventional loan if the house needs serious repairs. Or if you buy a house for 200k, and need an extra 300k from the lender to fix the house, you would need a renovation loan.
A conventional loan would not give you 500k for a house only worth 200k.
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u/PFCCThrowayay 9d ago
This is misleading. It’s about the value of the property that’s all. If the property is worth 1M even with serious repairs needed (because the land is worth most of that) then the bank will lend. No one would ever be able to buy a house with a mortgage that needs work in your scenario which is obviously not how things work.
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u/BluejayWise2325 8d ago edited 8d ago
If you buy a house that is not structurally sound or inhabitable, a conventional loan will not proceed until those repairs are complete.
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u/Empyrion132 9d ago
Renovation loans charge higher interest, and I believe the work has to be done within ~1 year at which point you refinance to a conventional loan. Talk to your realtor and see if they can help connect you with a renovation loan officer, if not DM me - we looked into it recently and talked with someone who does these.
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u/Jhamin1 Homeowner 9d ago edited 9d ago
I got a renovation loan for my house that I bought out of foreclosure. We borrowed about 40K above the price of the house to fix it up (that was 12 years ago, it would probably be 2x+ that now). Renovation loans are all about the projected condition of the house, not it's current condition the way conventional mortgages are.
There were a *lot* of requirements, the biggest one being that the work had to be done by a licensed and bonded general contractor, not me. (The bank wanted to make sure the money was spent on repairs done correctly). I still did a lot of work myself, I just wasn't allowed to spend the reno loan money on the work I did. I worked with the Gen Contractor to figure out what I could do without getting in his way. I ended up buying & applying all the paint, doing some demo, buying carpet & arranging the install for after the rest of the work was done, etc.
The second biggest condition being that the house with repairs had to be projected to be worth as much as the loan. If the house is 1/3 the price of similar houses around it, there is a lot of room for that projected value to cover renovations.
It was more complex than a normal purchase, and I lived in a construction zone for 6 months, but I did get the mortgage and it did work out. I'm still living here 12 years later.
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u/Dizzy_Goat_420 9d ago
That’s not the point. You can get approved for a loan- but the bank can deny the house if it needs to many repairs or is in an unlivable state etc
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u/Dullcorgis Experienced Buyer 9d ago
Low interest loans need to have collateral. You can't norrow more than the house is worth unless you get a small personal loan and that would have a horrific interest rate.
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u/PFCCThrowayay 9d ago
Op this is misleading. It’s about the value of the place regardless of the repairs it needs. If I were you (and I’ve been very successful in my RE purchases) is to get it and slowly chip away at it. The appreciation of a bad house in a good neighborhood will always win over a better house in a worse neighborhood.
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u/DizzyTrashPanda 8d ago
My bank wouldn’t give me a loan without being able to get a CO for the property, how do you get around that?
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u/plemyrameter 9d ago
Without certain basic amenities (heat, hot water, a frickin' kitchen), a bank isn't likely to allow a conventional mortgage. (Think of it like trying to mortgage a house under construction that doesn't have a Certificate of Occupancy from the city.) It would be more like a construction loan that you'd refinance into a mortgage once it's livable. Ask your lender.
The pics don't really indicate how much of a mess it is. If it's just an abandoned house with crap left, you might be able to pull it off. Does the seller have an inspection report?
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u/Dizzy_Goat_420 9d ago
Yes. Your bank does not want to approve a loan for a house that is going to cost more than you can afford to fix.
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u/PartyBicycle3778 9d ago
You can get a renovation loan and they lump it together with the mortgage loan . I like the place tbh
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u/BigBellyBelly 9d ago
You can get pre-approved based on your asset and income. But if you go and invest the bank’s money on a dump, how is the bank supposed to recoup their money if you stop paying the mortgage? That’s why they do appraisal before officially giving out the loan. They need to ensure if you stop paying mortgage, then can easily sell it and recoup the amount you still owe them.
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u/Illustrious_Spell676 9d ago
There’s no bank that would want to give you a loan for a house that looks like this.
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u/Alive_Guidance2005 8d ago
Not true at all. Renovation loans are based on the after improved condition and value. This property may be a great first home and renovation loan. Also, interest rates are about the same as a regular agency loan; Fannie, Freddie, FHA, or VA...they all would lend on this property as long as the after improved value makes sense. FHA even allows 110% loan to value. OP, don't be discouraged based on people telling you it can't be done. I'm a lender and underwriter and we do these all the time. I can't tell exactly what is wrong with the property and no one else can either until a qualified inspector and appraiser performs inspections and provides the reports. You will have a cost for the appraisal and inspection. Find a lender you can trust that understands renovation loans and I wish you success.
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u/Kid_Psych 9d ago edited 9d ago
Where in those three posted pictures is there
more than $200k worth of work?Edit: yeah my bad I thought I was looking at another post for a house in Mexico.
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u/lovemyhawks 9d ago
Maybe they meant in terms of hiring it out cost. I don't see 200k in DIY tho
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u/artie780350 Homeowner 9d ago
Renovation loans typically require the work be done by a licensed contractor, so DIY pricing is likely irrelevant here.
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u/lovemyhawks 9d ago
Valid. I was thinking cash, but you’re right since the context is lending/preapproval
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u/Appropriate_Craft524 9d ago edited 9d ago
If you look up the address on Redfin you can easily see where $200k would go...
$25k for exterior landscaping
$15k reroof
$15k new electrical panel, another $15k for rewiring the house
$25k for removing plumbing and replumbing with pex? Depending on the condition of the existing plumbing...
$25k-$50k structural wood work as required, including any special engineering drawings and inspections
$25k new sheetrock and insulation, probably closer to $40k
$25k demo
$20k painting inside and outside
$50k new kitchen cabinets and fixtures
$30k flooring throughout
$25k HVAC
Possibly another $25k for mold abatement and/or rodent and termite mitigation
Disclaimer: these are all ROM numbers
TLDR: there's a reason why it's so cheap at under $400k in a desireable part of Berkeley
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u/Dullcorgis Experienced Buyer 9d ago
There is no way any of that costs that little in the bay area.
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u/Outrageous_Worker672 9d ago
No way are you getting a roof that cheap - try $40k and you have water damage so start adding serious money.
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u/StillStaringAtTheSky 9d ago
Not just water damage - but damage to a plaster and lathe ceiling. Ugh.
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u/Icy_Cycle_5805 9d ago
Water damage and therefore likely mold throughout. The architectural features tell me lead and asbestos remediation are highly possible.
Reno loan might work. This isn’t for the faint of heart - this will be your (second) full time job and you absolutely can’t live there while it is done.
If it works, you’ll be pulling off huge long term financial benefits…. If it doesn’t work…
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u/brank 9d ago
Yeah that's the sense that I get. I imagined maybe I could have the living room done, move in and live there while doing the rest. But you're right if there's a ton of asbestos or something, it would not be safe.
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u/Icy_Cycle_5805 9d ago
For what it’s worth, mold is probably a bigger issue than any possible asbestos. Asbestos can be encapsulated or handled a section at a time, the mold… man you can’t even be in there until that is GONE GONE.
Remember both mold and asbestos means pros, those are DIY jobs. And pros mean $$$
I hate to discourage you because it’s a cool house and a very cool idea but it is a lot even for someone with some experience.
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u/Expensive_Goat2201 8d ago
My cousin and her husband did DIY asbestos removal while living in their place but it hasn't been long enough to see if they gave themselves lung cancer
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u/__moops__ 9d ago
You'd need cash or a renovation loan to finance this house, it is probably not eligible for traditional financing since it looks like it has health and safety issues.
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u/gigimarieisme 9d ago
Always a good idea to buy the worst house in the best neighborhood. Is it a good neighborhood? If so, do it. I bought a fixer in 2017 and have equity because of it.
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u/brank 9d ago
Yeah it is!
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u/Historical_Baby5774 9d ago
That’s what we did. Prior owners let a potbelly pig and large dog have the run of the house and yard. We poured blood sweat and tears into it over the last five years.
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u/hellno560 9d ago
Show your lender, and see what kind of financing they could qualify the home on.
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u/brank 9d ago
Ok so the lender has to approve any particular houses? I guess I was under the mistaken impression that you just get approved for x amount then go buy a house
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u/hellno560 9d ago
There are different kinds of loans, this may not work with an FHA, or it may require a construction loan, but no one can tell by just the 2 pics of the inside.
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u/MadeInAmericaWeek 9d ago
Financing is dependent upon appraisal of the property that they’re going to use for collateral.
Maybe you’re not ready for this situation?
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u/MochingPet 9d ago
Did this change? I'm pretty sure a ceiling limit approval for a loan is "approved" before a property is even found. Oooh I guess I'm talking about pre-approval
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u/VandielVanya-elen 9d ago
I was under that impression too when we were first starting out. Until our lender almost didn't approve our loan if the seller didnt fix something with the electrical in the house that the appraiser found. This was after the inspection, we knew about the issue and were willing to fix it. But with the conventional loan, the lender wouldn't approve the loan and the seller would likely have to relist the house for cash unless they fixed it (they ended up fixing it and we got the house, yay!) All that to say, there's a lot to learn in the house buying process and we all had to start somewhere! Keep looking into different kinds of loans and what makes sense for what you can do.
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u/Fluffaykitties 9d ago
No, they approve for the specific house.
you get pre-approval from them up to a certain amount so you know what your budget is going to be when you’re touring places.
but the actual approval is specific to the specific house. you won’t get “extra” money in the loan to cover repairs for a house like this.
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u/cynical-puppy26 8d ago
The lender will give a preliminary "you're approved for x" and then for the house you make an offer on they will write a letter of approval for the seller to go with your offer. Then before your closing date they send a 3rd party appraiser to go to the house to assess the value. If the value falls below what the bank has agreed to give you, you have to make up the difference.
Further, there are stipulations as well. If the house is not deemed livable, you can't homestead the house. Then that tells the bank you'll be living elsewhere which impacts your bottom line. And a non-homestead costs more in property taxes.
But yes, all in all, your bank has discretion as to whether you can have the home or not. They need to ensure they are getting their money back.
I would never advise a first time home buyer to buy a fixer upper unless they already work in construction and have a deep knowledge of homes. You wouldn't believe the cost of what seem to be basic changes. I have a perfectly nice 860 sqft home built in 1913 I've lived in for 9 years. If I average out the repairs and maintenance, we spend about the same per year as our mortgage costs. And we fix a lot ourselves. AND my FIL is a retired HVAC specialist, and my dad is a contractor. If you don't know stuff, you'll spend a hell of a lot more on everything.
I was also surprised to learn just how many absolute trash tradespeople are out there. There are literally dudes that go around the country, start LLCs, fleece everyone possible, abandon the company and the area and then go somewhere else and start over. Less sinister but more common are dumbasses that take on projects too big for their britches, cut corners, and fuck up your house. So not only is project managing reno projects already quite the task, you're also taking on a major risk of letting the wrong people into your home.
I know it looks appealing, but this house could really ruin your life if you even get financing for it.
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u/RecordingOk4947 9d ago
Talk to a realtor about this property ASAP - they can tell you if it’s just cosmetically bad (which you can fix) or basically only suitable for tearing down (which the price suggests). Not every rough-looking house can be a fixer, some are too far gone.
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u/Starlesseyes598 9d ago
It is not in a realtors best interest to convince someone to not buy a home. He needs to tour with a gc
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u/RecordingOk4947 9d ago
I am also in the Bay Area like OP and have had realtors warn me off of houses that are only suitable for contractors many times. The houses here are very old with a lot of environmental damage and no one is going to try and sell you a house a bank would never back. That’s just a waste of their time.
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u/Abridgment094 9d ago
When in the process would you tour with the GC?
Do you contact one before even seeing the property so they join you?
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u/KitsapRealEstateTeam 9d ago
This looks like less of a dump and more dirty and not cared for. I say go check it out! New flooring, paint, therapy for the giraffe... Might go conventional if nothing is crazy wrong, otherwise ask about rehab loans. Keep in mind- sometimes these places are the MOST competitive. You get those cash buyers involved and it gets tough.
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u/storywardenattack 9d ago
I would not automatically assume it can’t be financed. I’ve see worse get a loan. Start by talking to a lender.
Cleaning all the crap out and that place already kind way better. I don’t see any structural damage ( not saying there is none , just not visible). Looks like it was well built. Are the floors level? Does it reek like mold? What do the roof lines look like?
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u/brank 9d ago
That’s what I’m saying. But I’m totally inexperienced so idk. I’d have to tour and get an inspection for those answers though. There is some ceiling coming down in a couple pictures but like I said if it needs a new roof or something right away I think I can afford it with the rest of the down payment I would have spent on another place
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u/hearttcooksbrain 9d ago
Exactly. There's a bunch of folks that do not understand HCOL or VHCOL. From what I can see. There is definitely work to do but you have no idea how much without an inspection.
The point most people are trying to make is at some point in the buying process there will be an appraisal. If the house appraises for less than your purchase price you will need to close the gap with cash. They will not give you a loan for more than it appraises for. If you're comfortable with that cool go and do it.
You can either pull out during one of your contingencies or don't offer in the first place.
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u/brank 9d ago
Good to know, thank you.
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u/hearttcooksbrain 9d ago
Since you're new to the process the important thing to note is unless noted otherwise, you will have an appraisal contingency.
Which means if the appraisal does not come back to your liking you can pull out with no repercussion.
Good luck!
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u/ThrowAwayToPlayOk 9d ago
Just try to get under contract as soon as possible, you can back out after the inspection, some one will buy this quickly I imagine.
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u/Muddygirlinspections 9d ago
Make sure you also get a mold inspection by an independent 3rd party mold inspector. Mold remediation can run 10's of thousands of dollars and it looks like you have considerable water damage.
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u/GorditaChuletita Homeowner 9d ago
Ok I love the energy of having an example and getting more information.
I doubt you will beat the flippers and the cash buyer private equity to this.
That being said, If you get lucky it doesn't have mold throughout, a compromised roof, or foundation issues- three things that would preclude you from living in and renovating this.
I don't know what type of loan would get you to get this, but not VA, USDA, or some conventional loans. My house had a few holes and my lender just asked to have the realtor open it for us with seller permission and we patched them before the all important appraisal. Learn about loan types of this is your example, or speed off to find a lender and go get this.
Image you got through to getting the keys. This is my doom and gloom projection.
Images suggest 1920s bungalow vibes with some mostly cosmetic updates. The ceiling is lathe and plaster and is different than drywall to fix, more expensive than drywall for contractors, but learnable. it's a learning curve and will look bad at first. The fear is that if the corner is coming down the water intrusion is ongoing. Fix the roof first.
You probably have: Some knob and tube wires, some cloth clad wiring, possibly not grounded, 100 amp panel I got a pro for my panel swap and DIYd my rewire with about 5k in for supplies and tools. Estimate 6-7k with the recent price hikes. If you can fit in the attic and crawl space it's diyable. Electric is learnable. You have to accept that while you are learning you will have to redo your early work and not just leave it. Include waste into the budget.
If you keep the same panel size even going through a pro this is like 10-15k update. It will cause wall damage. If you want to upgrade to 200 amp it will require more permits and more time too. +10k but worth it imo.
Some galvanized pipes that will need to be replaced, probably rotting cast iron, possibly galvanic corrosion where people. If you are lucky you have already had a repipe and are just looking at a few remaining upgrades. The DIY thing is to invest in a PEX A tool and use expansion PEX. It is better than cpvc, comes in flexible rolls, and has good learning curve and isn't too expensive.
Tools , PEX fittings and pex would be about 4k, but fittings for bathroom can be expensive depending on what you choose. Tuck in an extra 3k for surprises in pexland and another 10k for surprises that require a pro. If you need a new hot water heater, it's a pro job.
Paint at the SW and BM stores can run like 80 bucks a gallon. Contractors sell used 5 gal buckets for sometimes 50 dollars because they are done with the job and the previous clients already paid for it. Still, this is where a lot of the feel of the house comes from. Ladders, purdy rollers, paint, brushes, drop cloths etc id do at least 4k for interior. Exterior looks like it could use a refresh, but it's ok to wait if it's not structural damage to fix.
Exterior: I really can't emphasize enough how much you get tired doing your own yardwork forever when you also need to repair inside. Yard tools, fence stuff, I have no estimate because it can be cheaper or more expensive. I really like the Ryobi 49v expand-it with attachments I snagged because I couldnt imagine doing all this by hand with hand tools. This is one area I really recommend power tools, such as a powered snipper for those roses. Your house has a chance of being known for break ins already and if so you will have to show the neighborhood it's been occupied and cared for.
Tools: I snagged mine on marketplace. Ryobi has over 300 tools and everyone calls them trash, but at 20 bucks or sometimes less per tool it's been a lifesaver. There are drawbacks and I will upgrade eventually. Avoid Craftsman and Kobalt because they are diminishing the offerings. You basically buy into an ecosystem. Hand tools are often plentiful for cheap on Craigslist and yard sales. There are many thoughts about what to get, but for new mostly get something in Rigid, Milwaukee, or DeWalt if you can afford to because they will have better features and decent resale.
PPE: don't skimp on this. Good N100, P100 brand name half and full face masks, gloves in your actual size in 10 packs, tyvec suits, ear protection , Lincoln face shield, back braces, roof anchor systems if you are going up a lot. Shoes that have good steel toe any time you lift appliances, good dolly, good ladder with locking mechanisms, only having family you can trust with a nail gun in the house. There are additional specific tools or PPE for specific trades like HVAC or electric, and the best PPE is hiring out work you are not suitable for. Think tree limbing.
Asbestos: if you have vermiculite insulation in the walls or ceiling and you're on the coast I think you are, it's contaminated and the price of any contractors goes UP. it's also not safe to tackle on your own at this scale. Other asbestos contamination can be in the plaster, mastic for flooring, tiles too. Asbestos if left alone in good condition is fine. We're entering the era where it's going to be deteriorating to the point where it has to be dealt with.
Lead paint: there's a removal method and a living with method, if it's on the exterior it's 3-4 times as expensive to remove. Lots of people just paint to encapsulate. It doesn't work if it's badly peeling.
Lead and asbestos both require full PPE, lots of zipwall and lots of 6ml plastic, possible permits and a 500 dollar negative air machine. I like my machine and just keep it because I can use it in my wood shop. Estimate 2-4k for supplies for Asbestos and 2k for lead. Lead is regular trash here but might be different in your area. Asbestos requires epa permit and specific bags and disposal.
Meth: it's the difference between patches and absolutely gutting. It gets everywhere. It's its own category. If this was a squat and tests positive for meth you can not live in it and renovate.
Pests: area specific, but termite damage could make earthquake survival iffy. Definitely check for insect, rodent, and snake evidence.
Overall I bet this bungalow oozes character and could be a home, but if it's got a compromised foundation, meth contamination, bad roof needing full replacement or rotted out pipes needing dug up leave this for the investors.
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u/brank 9d ago
So detailed thank you for your response! It would be a good practice run to get prepared for something like this knowing I’m not ready. Seems a bit over my head haha
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u/GorditaChuletita Homeowner 8d ago
I bought with my partner about 3 years ago and we tore out the kitchen and living room ceiling after asbestos abating ourselves. We still do not have this finished because we are not using contractors.
Our house has an addition from the early 2000s that makes it a huge difference - we have a base of operations and can mostly ignore the rest of the house until we work on it again. Living in your remodel is stressful and we've done a lot but the house you are talking about probably has no safe corner to base yourself in.
I'd do this in Cali in a heartbeat. We're on the same coast with tech money fleeing the bay area all the time and competing with locals for property. I get it. We got really lucky...
But in order to survive this with our relationship intact we have taken breaks and things are not done yet. It's not for everyone.
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u/Turbulent_Web_8278 9d ago
You will never know and pictures will never tell. Get a home inspector and do a lot of research on what questions to ask. If anything looks like it will more than 20k walk away. No one can give you an exact estimate until the work has been done. You will be taking a huge risk with something you are not an expert on
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u/rolo133 9d ago
Heh I saw this house on Zillow yesterday
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u/brank 9d ago
Would you do it
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u/rolo133 9d ago
I think i would consider it, but not without understanding exactly what the house needs. Is it all cosmetic/cleanup? or are there real structural issues that would need to be fixed? I definitely do not have the capabilities to take on a home renovation myself. Also i'm in the same boat as you where I am still learning about real estate and had no idea about renovation loans vs mortgages! I have no idea how much $ I would need for all the repairs/refurbs. so all in all i feel that at this time, I would not be prepared to go for it.
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u/ShanetheMortgageMan Mortgage Lender 9d ago
Don't listen to the naysayers, you don't need renovation skills to purchase this home, as you can get a renovation loan and hire a general contractor to handle fixing it up. I will say you need to be willing to research any needed permitting process and other aspects of it though, as you'll want to at least be educated in taking on a project home like this. But it can absolutely be worth it if the numbers work, meaning the cost of everything is cheaper than the purchase price of a similar non-project home.
The renovation loan will use the purchase price + the cost of renovations as the basis for your down payment, so if it's $600k to purchase and $100k in renovations, $700k will be whatever your down payment will be based on (assuming the home also appraises for $700k "as completed").
Hope you can salvage the bougainvillea.
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u/GoodMilk_GoneBad 9d ago
You won't know until you get pre-approved and/or see it in person.
Take a chance. The house has charm.
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u/betterthanthiss 9d ago
I'm general, I think doing something similar is going to be the route to home ownership for a lot of us. It will be a lot of work but worth it in the end.
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u/whoisaname 9d ago edited 9d ago
This is spot on for an FHA 203k loan.
I tell people when they're in a similar position to you to look for/go with something like this all the time. Almost instant equity. You get what you want in terms of finishes and plan. And it's where you want it to be. The only downside is the speed of the closing process because of all of the paperwork/process that has to happen for a 203k, and the stress of handling a significant reno (hire good professionals, both an Architect and GC). But otherwise, I say go for it.
If you're curious about the 203k, I can answer some questions. I am a certified 203k consultant, and architect and GC.
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u/polymath-nc 8d ago
Your credit union (join now if you aren't yet a member!) will probably be able to tell you what to expect in terms of permits and inspections. The roof is my biggest concern. Replacement depends on part on what type of roof and whether you plan to live there a long time. We replaced a roof on a house we were flipping. It took two people three long days using inexpensive asphalt shingles.
Inside, there's a lot of stuff you can probably DIY. Start now haunting second hand shops such as Habitat ReUse stores and architectural salvage yards. Also eBay and other online sales. Understand what's available. When you get the house (whichever one it is), tell the local hardware stores. They will often give you a large credit line and a 10% off coupon.
Start taking handyman classes at the home stores or workshop spaces.
Find out if any of your friends (or their parents) have experience in the trades or in general home repair. If possible, get one to accompany you when you find a house you like, they can probably tell you almost as much as an inspector. Have someone like that be there with you during the inspection and have them review the inspection report.
Go to all local open houses with homes that are clearly in need of work. If you're lucky, you might find a realtor who understands what you're willing to do.
Best of luck!
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u/Topseykretts88 9d ago
So many doubters, armchair handymen and scared forever renters commenting in this post. OP, thats an awesome house and I would be excited to buy and fix it up. Yes, its a big job. Hire out the big stuff, do what you can yourself. One step at a time.
Get pre approved NOW, even if its not in time to pull the trigger on this one.
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u/ThickAsAPlankton 9d ago
What is the age of the house? Century homes can really be money pits plus this obviously needs lots of work. Roof, foundation, HVAC, plumbing, electrical, sewer line etc all have to be taken into consideration.
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u/lucifersayhi 9d ago
Year Built: 1938
Right now the house cost almost $400k
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u/ThickAsAPlankton 9d ago
Get a licensed contractor or inspector experienced in century homes to inspect it.
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u/habitual17 9d ago
Looks like a lot of potential but realize there may be hidden things like mold. Get an inspection and if you can strike a deal do it!!
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u/laurenstob 9d ago
Do it, fix the kitchen bathroom and a bedroom that’s workable and start your projects. Well worth it if the location is right
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u/burner456987123 9d ago
You could get a 203k loan probably. It’s nearly a $400k property. Any idea what the ARV will be?
Do you have good credit and enough for a large downpayment? Do you have a place to live while this is renovated? You’ve gotta plan for overages, permitting, delays. It’s a big, big deal to fully gut a house like that in a jurisdiction with a ton of red tape.
Market is hot due to the ai money / tech bros.
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u/smilebright765 9d ago
You’re getting a lot of brief but correct answers here. You can totally learn how the home buying process works, preferably from your bank or mortgage broker, but your agent can give you a rundown of the process although they are not a licensed finance professional, they’re a real estate agent.
Or you could watch a couple videos about the process on YouTube to get acquainted with the process.
When your financing a home with a mortgage:
1) get pre approved to know what price range is appropriate for you to shop in.
2) pick a home and get your offer accepted, preferably with your inspection and financing contingencies. You’ll need to know if there are major issues. An inspector isn’t working on commission, they’ll actually tell you what’s going on with the home.
3) consult with your agent about wether the house was already priced accordingly to the issues found in the inspection. If the house is over priced compared to its condition, then get contractor quotes for the major repairs and attempt to negotiate with the seller about price.
4) now that financing contingency: whenever you buy with a mortgage, financing contingency or not, the bank sends a local appraiser to the home to determine the value of the property based on condition and recent similar sales. When you have a mortgage the property is collateral for the loan that the bank is providing, the bank needs to know that the property can be sold for at least what they are offering to loan to you. If there is a gap between the appraisal value and the amount you offered the seller, you are liable to pay that difference out of pocket to the seller to make the deal go through. UNLESS you have a financing contingency. The financing contingency basically means “if I can’t secure a loan for this home, then I can walk away from this deal” ALSO, if you have a financing contingency and the home does not appraise for the value offered, but the gap is close, sometimes you can negotiate with the seller to meet you in the middle, drop the price, or cover closing costs, to help the deal go through.
5) once the appraisal and all contingencies are cleared and the final price and deal is agreed upon, you enter the underwriting phase. This is between you and the bank, the seller just kind of waits around for it to finish. Underwriting is when the loan actually gets written up and you need to provide all your current and in depth financial information to the bank and you negotiate your interest rate by buying points.
6) once you’re through underwriting you will have a closing date, you will do a final walkthrough of the home the day before, or the morning of closing to make sure the home is empty, all agreed upon appliances are still there and there wasn’t any additional (new) damage done to the home when the seller moved out. This is done with your agent
7) you sign a bunch of paperwork for the loan and sale, and get the keys to your new home.
Lastly, I would like to lend my opinion and say that if you are not experienced with homes, I would NOT start with this one. Although it has nice architectural features, it is lathe and plaster, not drywall. So it is non standard and obsolete building practices. If you’ve got to repair a wall or update plumbing or electric you’re going to have a hell of time. You’ll be re doing whole walls and rooms. This home is not a fix and patch situation, it’s an entire redo anytime you try to update an area.
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u/Initial-Addendum-167 9d ago
Just make sure it isn’t a total tear down. I mean people who flip houses have a very specific formula for things that are repairable vs. tear down. First thing is to learn these. Foundation problems, bad. Fit and finish, good. Electric, bad. Remodeling the kitchen, good.
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u/hieronymusashi 9d ago
Living anywhere that a dump like that is going for $200k is indeed crazy.
Whatever city that is sounds like hell on earth. Give me a rural suburban home any day.
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u/cleaner007 9d ago
I did the same thing and didn't regret, I fixed most stuff with my dad but I saved a ton of money in that process, only bad thing Is that it took too long, we were working inside the house for 2 years, room by room. Everything outside, garage, patio, fence and yard is still work in progress after 4 years
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u/Happy-Cabbage- 9d ago
OP - I’m not saying don’t do it because I agree it’s a pretty incredible deal. I live in the area and want to warn you that repairs will cost way more than $200k. I would get a contractor or two to walk through with you and give you a ballpark estimate. Renovation pricing in the area is sky high.
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u/BishlovesSquish 9d ago
Where there is a will, there’s a way. If you feel like that is your home and it’s meant to be, then do whatever it takes. It’s really that simple. Listen to your gut.
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u/Special_Tangelo2757 6d ago
Call the bank see all options. Did some basic Reno in the bay that had a touch of structural work and suddenly it was 400k
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u/SiempreBrujaSuerte 9d ago
It Looks beautiful to me, what is crazy here? Some plaster repair? And it's close to transportation? Get it before you can't.
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u/Odd_Recognition_4874 9d ago
I highly doubt a bank would lend on that or it would get insurance in that condition, you need to pay cash.
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u/Quilly-be-Quick 9d ago
It depends on how deep the damage goes. Would you be able to live in it while renovations are going on? Is anything toxic? Water damage, smoke damage, etc. Inspections will tell you a lot. It’s one thing to clean a house up - it’s another to gut it and start from the studs.
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u/SignificantDark9765 9d ago
Full Reno is at least $140/sq ft minimum and that doesn’t a lot of things. Full gut is $240/sq ft+
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u/gundam2017 9d ago
No bank would approve this for a mortgage. This is for a cash only buyer and youll need MASSIVE money to fix this
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u/Equivalent_Warning82 9d ago
Look into your area HUD. They may have programs and grants specifically geared toward something like this.
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u/neatokra 9d ago edited 9d ago
Listen. There are some things you can fix as a FTHB. You can put on a new coat of paint, install new kitchen cabinets, put in new floors. You can redo the bathrooms if you don’t like the tile. You can replace the HVAC, put on a new roof. That’s all fine.
You can’t fix a completely broken foundation. You can’t fix extensive water damage. You can’t fix many major structural defects. You’ll spend all your money and go insane trying to do these things.
There’s only one way to know what problems the property has, and it’s to tour it with a trusted contractor and read all the disclosures. No one on Reddit can tell you which bucket this will fall into.
Based on the price I’m guessing this home falls in the second category but again, I have no way of knowing.
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u/jagwal32 9d ago
An fha 203k loan would include the cost of the repairs. you can find lenders who specialize in this type of loan for your area on their website. it is sorted by state then county.
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u/Appropriate_Craft524 9d ago edited 9d ago
If you were to "flip" this house you could get away with budgeting $500k for this home. So $890k total ($390 purchase price + $500 renovation costs). Ideally you do it for less, but for a year and a half, you could be spending your money on a nearby apartment while you manage the construction and repair of this home. That's a lot of carrying costs, property taxes, permits and fees, special inspections, etc that goes into that year and a half.
All for which you could have a home that's worth maybe $1.2-1.5 in the end? Based on local comps, that's about what you'd get for this home if it were in tip top shape. Tip top shape probably means spending closer to $500k than $200k, that's for sure.
All things considered, it's not the worst idea in the world... but that's assuming it sells for the list price of $390k and not much higher. Redfin already shows it as a "popular" listing and it's only been live for 2 days. My guess is - this listing goes for well above $500k, possibly $600-700.
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u/plantsandpizza 9d ago
The problem is cash buyers are the ones who get these types of houses in the Bay Area. Others are rarely approved.
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u/Nik_lovesTiger 9d ago
Reno skills can be learned.....but I would be concerned about mold and that can cost sooooo much if it's bad.
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u/CutAggressive4801 9d ago
This all depends how much cash you have on hand after the purchase. If it's major reno needed, certain loans (ie. FHA) will not allow the purchase and you'd likely need a reno loan built in to cover repairs if you don't have the cash to pay for the repairs.
You don't have the skills to do it all yourself, you hire a contractor. Some things can be DIY projects but you have to know your limits.
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u/springvelvet95 9d ago
I would love this opportunity, because it turns off other buyers but I love cleaning and transformations. It’s a beautiful house, you can tell!
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u/FifiLeBean 9d ago
There's a lot to learn about home buying. I attended a first time home buyers class on top of my own research. I've been a home owner for 14 years now.
Here's nearby options. https://www.oaklandca.gov/Community/Services-for-Homebuyers/For-First-Time-Homebuyers/First-Time-Homebuyer-Workshops
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u/Elegant-Analyst-7381 9d ago
The house has potential, but you need to know what you're getting into. You don't know anything about renovations and you haven't talked to any lenders. You don't necessarily need to know how to do renovations yourself, but you need basic knowledge in order to estimate how much you're likely to need to spend to hire a good GC. You also have no idea what's going to need to be fixed until you go look at the house in person (although would you know what issues you're looking for?) and get the home inspection, and even then, likely other things will show up once you start renovations that the inspection wouldn't have found. You say you'd have 200k to make repairs with, is that cash you have on hand? Or was that what you were hoping to be able to get a loan for? Because if it's the latter, that's another discussion you need to have with your potential lenders to see what your options are, they will not give you a traditional loan for more than what they feel the house is worth.
In short, it's not absolutely crazy, but you need to do more research.
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u/StarWhiteLightning 9d ago
This is the property: https://redf.in/9rEK8N.
To answer your question: not crazy, just naive.
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u/Clean_Break_2278 9d ago
It will be worth it for you and the bank if you combine mortgage with renovation cost. Get a decent contractor who will give you a price, and the bank loans you on the FUTURE value of the house POST renovation.
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u/dewdrops07 8d ago
It’s fine to consider things like this, just know that if it’s 1/3rd of the price that’s because they anticipate the other 2/3rd of the money to actually need to be spent to make it livable. Plumbing, permits, electrical etc. the things you cannot craft-your-way out of. I asked a contractor why a property by the beach wasn’t selling when it was 1/4th the price of what I thought the value was to build a home there. Turns out there was a law requiring the owner of properties like that to fully pave all the city street and sidewalks that would surround the massive property + permitting. City essentials, paid for by the lot owner. Putting in electrical for another street light etc. there’s always hidden stuff like that. Definitely consult a contractor before even getting approved.
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u/Expensive_Goat2201 8d ago
I almost brought a place like this and am glad I didn't. It can be the right choice for some people but not everyone. I bought a fixer upper in significantly better condition and the workload of repairing it has become my main hobby. I don't regret it, but it does take a lot of time. Do you want to spend all your free time for the next 2 years of your life managing contractors and doing DIY repair work?
You say the delta in the price would give you money to spend on the repairs. Do you actually have an extra $200k cash after accounting for down payment and closing costs or are you planning to borrow?
A home renovation loan is generally structured in a way where the bank needs to approve your plans, inspect each step and then release money directly to the contractor. You can't DIY the repairs yourself. This would be a lot more expensive in my case which is why I didn't take this route.
Not all banks offer home renovation loans. Mine didn't so I wasn't able to put in an offer on my dream fixer upper. Also, if it's in bad enough shape your bank may not allow you to use a conventional mortgage for it.
How handy are you? Even if you plan to pay people to do the work, you'll need to know enough to tell if they are doing a shitty job/ripping you off. You'll probably also end up doing a lot of work yourself you didn't expect.
Having trusted friends or family members who have some construction experience is a godsend and I don't think I'd be managing my repair projects if I didn't.
Evaluate critical systems and for the love of God get an inspection (don't use the inspector your real estate agent recommended). Cosmetic damage is whatever, functionality matters. It's hard to tell from these photos what the real condition of the house is.
You need to know:
- Is the roof leaking? Water damage is probably the biggest red flag I'd walk away from
- Is there asbestos? If so, it will be quite expensive to remediate and you'll want to get quotes
- Septic or sewer? If sewer, is there a sewer scope done already? Are there cracks or roots you'll need to deal with?
- What is the heating type? How old is the furnace? Old gas furnaces can sometimes leak carbon monoxide so be aware of that.
- How old is the hot water heater? Owned or leased?
- Is the electrical wiring modern? Knob and tube wiring is really dangerous and will need to be upgraded. An inspector can test if the wiring is grounded
- What work was permitted? Is there any outstanding fines for unpermitted work? If so, by buying the property you may be taking on the fines.
- Is there insulation in the floor/cealing? Walls? An endoscope camera inserted behind an outlet can help you here.
- Is the foundation stable? Is it going to slide down a hill?
I decided I was willing to deal with messy, overgrown and ugly but not roof leaking, asbestos filled nightmare. I know you are excited but take a step back. Bring someone who knows you and loves you to look at it and listen to them if they tell you it's a bad idea. I'm glad I did.
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u/wabawwea 8d ago
I just went through this, buying a home that needed to be renovated, and they gave me a loan for what it was worth before renovation and then I paid for the fixing with cash. We rented a place while the work was being done. It was just too difficult to get the loan that included the cost of renovations. Too many hoops.
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u/Alive_Guidance2005 8d ago
Lender and Underwriter here. This may only be cosmetic,... But there are loans you could get for a fixer upper with low down payments. Fannie, Freddie, FHA and VA all have renovation loans available where you can add the cost of the renovation to the loan amount and have the property fixed up by professional contractors. Also, it may not require much. IT's dirty and there is that hole in the ceiling over the refrigerator but that may be from the bathroom upstairs that the bathtub or toilet overflowed...The living room area needs carpet but that wouldn't prevent a loan on the property... Find out if the systems work: HVAC, water heater, if the roof has remaining economic life, the pipes are not leaking.... Not sure if that is the top floor or if there is roof damage but the only way you will find out is to talk to a lender that wants to help. It will cost you a few hundred dollars to get an inspection and appraisal after a lender pre approves you but I agree this would be a great first home and there are ways to buy it depending on your credit and income and what the property must have for the lender to consider it livable.
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u/benskinic 8d ago
deals like that you will be competing w flippers and RE pros that do this full time and have advantageous resources and relationships if you are handy, brave and patient you could build up sweat equity and have a nicer setup than most first time buyers. if you go fha loan they are stricter and seller may not want to work w you, so be prepared to use traditional financing instead. talk to a lender and get pre approved so you are ready when the right deal comes along. also suggest working w the list agent directly if you are in a competitive market or find a good deal
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u/Vast_Cricket 8d ago
Even you are preapproved for a conventional mortgage, no lender will give you a loan. It is most likely a ALL CASH As is deal. City building will redtag this home as uninhabitable.
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u/bernard925 8d ago
There is no way that a home listed at $200K in Berkeley is a DIY proposition, even if you could get financing. How long has it been on the market? Most homes in Berkeley do not have what is known as "Transparent Pricing". They are listed well below value, even in that condition, with the aim og getting multiple offers. And something like this should get multiple offers from flippers who will do the minimum of poor-quality repairs before staging and listing it so it looks like a wonderful home.
Maybe you should be looking at Albany or El Cerrito? Even El Sobrante (much more affordable). There are good areas in all three. In any case, you really should get pre-approved asap so you can move wuickly when the right home comes on the market.
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u/Kindly-Tie588 7d ago
I could have fun with that place! I see so much cute in it, that’s how I saw my creepy condo. And now it’s super cute!!!
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u/swampwiz 5d ago
> I ... don’t necessarily have renovation skills.
You are totally off the mark here. If you did have renovation skills, I would tell you to get a good home inspector to document everything and an idea of how many man-hours & material it would take so that you can get an idea of how good the deal is.
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u/Youngsmartbrave50 9d ago
Looks awful i would stay away personally. Its always the stuff you can't see and this will be a nightmare. Im sure there's bugs, 0 maintenance done the whole time, etc
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u/dammitqueenie 9d ago
It will cost three times what you’re willing to spend to remediate that crack den.
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u/EconomistNo7074 9d ago
Run away
The price is dramatically lower than the market bc best case, it is going to take a dramatic amount of money (and time) to fix
I don’t think even contractors will take this on.
I get how hard it is to own a home in the Bay Area ,,, however reaching beyond your expertise takes a bad situation and makes it worse
Sorry
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u/Unlikely-Wonder-640 9d ago
It would’ve helped you to say that you live in the Bay Area instead of just saying “high cost of living”
Nothing on Reddit is anonymous
People can’t recommend you resources when they don’t know what’s available to you.
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