Are we crazy to consider buying this home?
I need a gut check and would love to hear from this group. This is a bit long-thanks in advance for reading.
We have been in the market for a home for some time. We are looking at a place that is off the market, but we learned about it through our network. It was purchased a couple of years ago, gutted for renovation, and then the work was stopped. The sale would include approved plans, to which we would want to make small changes only. The size, layout, and location of the home are perfect for us. Multiple contractors and a structural engineer have walked through and are of the view that it is structurally sound and the work that was done was not detrimental or done improperly. We are comfortable with the possibility of a gut renovation, as a general matter, and have been looking at other places that need one as well. Assume financing is not an issue and the home would be delivered free and clear of DOB violations.
The issue is price. The seller is not discounting for the fact that the home is gutted and uninhabitable and, unfortunately, is not flexible with respect to the asking price, which, in our view, is high. (Basically, it’s take it or leave it.) It is more than what the seller paid and probably would cover all the seller’s costs (closing, gutting, architect, DOB, realtor’s commission). It leaves us some money in our budget for renovation, but not as much as we think would be ideal – it would be tight. While we don’t think the asking price is out of range for a livable home of this size that needs a gut renovation in this neighborhood, we do not have any comps for a gutted house, and we don’t know how to account for the fact that, in this case, the fact that the house is gutted already and the plans have been drafted and approved would save us some some time, money, and, possible, DOB hassles.
At the end of the day, we think the price is too high and we would have to be very careful in terms of the cost of the renovation – and we know that even a carefully planned renovation that is not as budget-sensitive as this can quickly escalate in costs – but we would be getting a new home, and the home’s value when the work is finished would be equal to or greater than what we put in. It would be a wonderful long-term home for us, and we are very familiar with the market and haven’t seen anything else that would serve all of our needs, in terms of size, location, etc. for a better price.
Are we nuts to consider this?
mstamib
in General Discussion 6 years ago
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28 replies
greenworks | 6 years ago
We looked FOREVER before buying and. can only say that sometimes things are or are not meant to be. I was heartbroken several times before we found our house and are now in the house we were meant to be in. As a counterpoint to my post above, sometimes things being this complicated are a sign that it’s not meant to be . . .
greenworks | 6 years ago
Maybe this is crazy talk but if the price is high, most investors will pass, and this project isn’t for your average homebuyer, so it may just sit. What about waiting a while to see if the seller come to their $$ senses and/or just needs to dump the property?
cate | 6 years ago
That’s right — changes are possible but cost money and can lead to delays. Altering the kitchen layout — because it’s an alt-2 type alteration — should be less risky than, say, altering an exit, an addition, or the number of units (alt-1 alterations).
mstamib
in General Discussion 6 years ago
Thanks for these thoughts-my big concern was whether we would be suckers to pay what I think is a pretty high price and to stretch our budget to buy a gutted out shell, and it sounds Lurker and mms222 are suggesting that we aren’t totally crazy to consider it.
The next concern is the other stuff that Lurker and cate mention. This would have to go very smoothly and very close to a tight budget to work. It’s possible, but I know it’s dicey.
We have reno and building experience, but not in NYC. Have not settled on a GC or architect yet (although we already have plans, as mentioned), but are in touch with some solid prospects. We would not do a deal unless we were clear on the CoO and any violations were addressed. It’s not landmarked (but we might need a gas line–hope that gets sorted soon!) We aren’t excited about the stress or the cost of renting while paying a mortgage, but we can get by.
As far as post-approval amendments, cate, can you shed any light on your comment that you can’t do this? It is my understanding that PAAs are possible but cost money and could lead to delays. There is one issue with the kitchen layout that we would really want to change (and, if we were doing that, maybe a couple of other small changes that we could live without but would want to explore), so we would plan to discuss with an architect before moving forward with a sale.
dorkofwindsor | 6 years ago
“It would be a wonderful long-term home for us” –> Probably your answer.
As you described my only question would be why would the investor want to sell? Perhaps they included their full profit in their ask and that’s how it makes sense for them. Perhaps something else.
If the work completed is done well, you can get your team on board, and you like the plans, I would say you have some flexibility in the cost of your fixtures, which could be significant but also could be upgraded later if you run into financial constraints. I agree you will save yourself a lot of time (6 months minimum) and your Team needs to be on board with a firm quote.
Having said that, knowing you are having a hard time finding the right place, I would probabaly be inclined to pursue if I were in your position.
Lurker | 6 years ago
It’s crazy but also may be doable. If you have the sorts of cash that can buy a house in NY, and you don’t have a family depending on moving soon, and you and your spouse won’t get divorced over stress, then it may be a good shot. There aren’t a lot of houses that go up for sale relatively speaking and you can go years looking and never land one.
But of all possible situations for buying a home, this one is sort of the diciest. (Oh, and right now you can’t get a new gas line, so put that into your planning.)
Even already gutted and with plans in place you should count on it being a year out before you move in, if everything goes perfectly.
Personally I would not consider buying until I had a WELL-VETTED architect, GC, plumber, electrician give you bids to finish the job based on as-is conditions, in writing, so that you could be sure they would be on board.
If you are doing Alt-1 work, then budget for your taxes going through the roof. We did alt 2 and ours more than doubled.
Make sure what is happening with the CofO and whether it’s legal and/or will cause you a nightmare.
Is this home in a landmark district? That will make your costs go even higher and take longer.
As for the price. Take the long term view. If they’ve priced in their costs and aren’t budging, you might see whether the price after the reno is done helps justify it. If you are less worried about home value and more about having a long-term place to call home, then a bump of X percent may be water under the bridge long term.
cate | 6 years ago
Do you have renovation experience? Are you already working with an architect? Do you already have your GC and crew? Can you afford to live elsewhere while construction goes on? The actual construction could take a year or two — but good crews are booked at least six months out. One major thing to be aware of: You cannot make changes to the approved plans (except cosmetic finishes).
jen-kg | 6 years ago
The work they have done so far is extensive – I’m in the middle of a gut renovation now so I speak from personal experience – if you want this house they’ve just saved you a minimum of 3-9 months of work in addition to what they paid for that work. If I sold now I would definitely include my outlay in my asking price. Would I get it? No idea but I’m not sure why they wouldn’t want to.