Friday, February 13, 2009

The one that got away

14170 Onaway

I've mentioned this house before. This is the one that we probably would have purchased if the listing agent hadn't been impossible to reach and totally non-responsive. It also had an awful listing photograph:

Listing photograph

This was the only photograph in the listing, and is displayed here at full resolution.

It appears to have been relisted listed by a different agent, after quite a few months off the market.

It's really an attractive house, for the right person, although I believe that the asking price is too high. I think, right now, something around $20-30K would be reasonable, with the seller paying the back taxes and city assessments. There are numerous small code violations that need to be fixed, and there is a leak in the roof in one spot due to a gutter that doesn't have a downspout. The big issue is that the property was not properly secured and the copper plumbing has been ripped out everywhere it could be reached with a bolt cutter.

The lot is more than twice the size of what one might expect for a duplex like this - .4 acres. If we had purchased it, I'd convert it into a single family home. I'd take the opportunity created by the lack of plumbing to have all the mechanicals replaced. One could buy this house and have the mechanical work done very comfortably in a 15 year mortgage, with money left over for other rehab work in the house as well. When one considers the size of the house, the yard, the location, and that you'd essentially have a very livable shell with great mechanicals for $100,000, it suddenly looks like a good value.

What bank would be willing to finance such a project, with the economy as it is? I discussed this with my lender, Third Federal Savings & Loan, who said that there should be no problem getting a loan to purchase and rehab this house, so long as the house would appraise for the total value once the work was complete. The rate would be the same as their published rates for a standard mortgage (currently 4.8% on a 15 year or 5.05% on a 30 year). They'd require that an outside contractor would do the work. Other than this, they saw no problem with my plan.

It's a great house for someone with a bit of vision.


Laurel said...

Seems like it could be an interesting project. It it just me, or are those taxes really high given the asking price of the house? I complain about my taxes all the time but $8,570.00 on a house in the $50k range seems steep.

Christopher Busta-Peck said...

Laurel, around here, property taxes are based upon the assessed value of the property, which is based on neighborhood comparables. In a normal housing market, the sale price of houses would tend to be about 25% above assessed value.

The house is assessed at somewhere around a quarter million. This is the problem with the foreclosures around here - while an owner can appeal the valuation, based on neighborhood comparables, there is a limited time each year that one can do this (between January and March) and no guarantee that the outcome will be the desired one.

That was the problem with a lot of the foreclosures that we looked at - while we afford the purchase price, we couldn't afford the property taxes.

Of course, Shaker Heights, where I live, has the highest effective property tax rate in the area - 3.05% of the actual value of the property. It's the cost of one of the best school systems in the area in a city without any industry. It's worth it, I think, but it does keep the property prices lower than they would be otherwise.