Lately, I've been working with a client looking for a property to fix up and resell. As we scouted different possibilities, one trend has been unmistakably noticeable: there are a lot of partially completed projects on the market! While some of these are priced at a level that can only be described as "potential worth," many are being sold well under market--allowing for someone to come in and take advantage of a good opportunity to buy a home to live in that may have previously been considered out of their budget range with a little sweat equity.
Another client of mine did just that, gaining a home on a huge corner lot, with basic finish work the only chores left to complete. Fortunately, this client has knowledge and experience in several aspects of construction to make the job simple & relatively easy to get done without it being a "someday" project. He was able to get conventional financing for the home too! Working closely with the lender, we made sure that certain underwriting criteria were met by the property itself before making an offer, identified exactly what work needed to be done to finish the home, put together a budget, plan and "real life" timetable for completion. This property was previously acquired through foreclosure and was a major remodeling project for the seller. Circumstances and a lack of cash forced seller to put it on the market before completion...and it stayed incomplete...to the benefit of my client. He was able to get a nicer home in a more desirable neighborhood than he thought without having to strain his resources to do so! The seller was able to get out of a bad situation and move on in his life. An overall win/win for all parties involved.
For my client, a property like this was a golden opportunity. All basic systems were in place and operable, new flooring, cabinetry installed, drywall & texture completed, etc. What needed to be done was finish wiring on the new HVAC, finish paint on the walls, installation of a new water heater (and vent to code)and hooking up the sinks, installing new fixtures (already purchased but not yet installed by seller). Some landscaping was already in place, to be completed in the spring and fencing will be repaired to accomodate the dogs. In order to pass muster with the lender's criteria, we got the seller to agree to have one sink, one toilet and one shower in working order before appraisal, allow my client (a licensed electrician) to complete the wiring hookup of the HVAC on a trade basis for the water heater and pay for the appraisal if the deal didn't go through--all in writing, of course.
As the market progresses and starts to inch its way back to recovery, I expect to see more opportunities like this one: properties obtained through foreclosure with remodeling/updating in varying stages of completion for sale well below market. For some of them it will be a matter of a bigger project than initially envisioned by inexperienced people watching the plethora of easy-money infomercials & "flipping shows," while others will be available as victims of cash flow and slow markets.
Not every client will be a good candidate for such a purchase & neither will every incomplete project. Nevertheless with a thorough understanding of what is in front of them & the ability to get it done without undue stress, there will be some excellent opportunities for buyers to take advantage and get more than they thought they could...at a lower price.
My electrician client is extremely happy (and I've already received calls from 2 of his friends who will be ready in summer!). The first client I mentioned is awaiting approval of his offer by the lenders on a short-sale property that needs extensive work.
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A sad day for those flippers out there. For anyone who got caught up in the frenzy and is now trying to flip it is having a tough time. Most paid too much to begin with and now can't get what they want for it. Does anyone know anyone who wants a nice little cabin in Show Low? Low maintenance and new in 2005, very cute. Send them on up.