Real Estate Advice - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

OilKiller · 10-08-2010, 11:56 AM

Since CP is good for just about anything else, I figured there would be some experts or at least people who know more than me (not hard when it comes to this type of stuff) around that could help.

My wife and I purchased our house about three years ago when the boom was on. We paid $360,000. The balance still owing on the property is about $310,000 (or close to that). We had ripped some stuff apart during renovations and the person who was doing the renovations (a friend), up and moved to Ontario. So now our house has been ripped apart for quite some time and we haven't been able to afford to hire someone to do it. I'm personally not a handy guy at all.

It it's current state, the house might be worth about $260,000 - $270,000. So even at the best of sales, that leaves a balance of $40,000.

How does something like this work? Is there any way we can get out? Could we sell the property for what we can get and make arrangements to pay the difference?

Just would like to know what options we have, if any. We really, really want to get out. We can't afford to fix it and I'm sick of living in a construction zone. Going to the bank to get a loan to hire someone to fix it is not an option...we have been down that road already. We also thought about trying to get an investment company to purchase the property for what is owing and tear down the house and put up a fourplex. The area is zoned for it and I've seen several not far from here. It is a huge corner lot that would hold something like this, but I've had no luck in trying to get through to any company that might be interested in this sort of thing or even finding them.

We're in quite the spot and any advice from those who know more about this stuff would be greatly appreciated. Thanks!

Cowboy89 · 10-08-2010, 12:09 PM

Not a real estate expert, but I would figure that your shortfall will be much more than $40,000 when factoring transactions costs (realtor fees, mortgage breaking fees, etc.). From a banking perspective I'm not sure what you can do considering you need to finance $40,000 and up without home equity as collateral.

OilKiller · 10-08-2010, 12:11 PM

Yup, although I would not involve a real estate agent. I would sell through Comfree. Can't afford the real estate costs.

henry07 · 10-08-2010, 12:14 PM

im sorry to hear about your situation. the cost will be much more than $40k unfortunately. I would advise you to talk to your mortgage company first to see what the payout penalty will be to get out. there will be legal costs and real estate fees if you use a realtor as well

Clarkey · 10-08-2010, 12:18 PM

What kind of work needs to be done?

COGENT · 10-08-2010, 12:23 PM

What area of the city is the house in?

OilKiller · 10-08-2010, 12:58 PM

House is in Edmonton. We ripped apart the downstairs, the kitchen (although some of the work has been done), the front entrance way and hallway floor is all ripped out, we were going to put in an en-suite off the master, so several hallways closets have been gutted. I would say to hire someone to do the work, we would be looking at about 15 - 20 k. We had some pretty big plans and with the friend moving away and unable to do it anymore, well, that really left us in a spot.

billybob123 · 10-08-2010, 01:01 PM

I'm fairly certain you'd have to come up with the difference on closing. Our RE agent told us about some clients of his having to write a cheque for $60,000 to cover the mortgage. I had no idea that's how it worked.

And that's on top of any realtor commissions and lawyer fees you'll have to pay to close. I'd sooner find someone who can fix up the house - if you hire a general contractor, you might get a guy running a few projects (i.e. not going to fix your place in a day and a half) but at least you might save a few $$$.

I wouldn't sell, especially in this market, and with a house that's in terrible state of repair. You're going to take a bath. And you'll have to scrounge up (by your estimate), $40,000 cash, to make the sale. That's a lot of cash to find, especially if you can't afford to finish the job. Maybe it's a good time to learn some home repair skills. They have classes at Home Depot (free, usually) that will help teach you the basics.

troutman · 10-08-2010, 01:04 PM

Can you rent out a room until the market improves?

opendoor · 10-08-2010, 01:10 PM

Selling is probably the worst thing you can do if you're underwater, especially with a house in the state that yours is in. If option A is to have to come up with $40K+ just to sell your house and option B is to come up with $15K to fix it up, option B seems like the only way to go. If you can't come up with $15K to finish it, how are you going to come up with the money to pay the outstanding mortgage?

I'd either figure out a way to finish it for as little money as possible, or just get used to living in a construction zone. I don't see how selling it is a viable option.

Though I'm not sure I understand the scenario; was your friend doing all the work for free?

VladtheImpaler · 10-08-2010, 01:10 PM

I'm no expert, but thinking logically, you are almost better off finding a developer, and jointly developing the land (assuming that's viable) - i.e. you put up the land and he does the work. You should be able to make enough from the proceeds to cover your debt, and maybe even earn a wee bit of profit. Of course, that depends on the area, the market, etc, etc, etc... And, of course, you have to live somewhere while this happens.
If this was 1981, you'd just stop making mortgage payments and walk away...

Pinner · 10-08-2010, 01:16 PM

Maybe you could find someone to do the work in exchange for room & board.

VladtheImpaler · 10-08-2010, 01:19 PM

Quote:

Originally Posted by Pinner

Maybe you could find someone to do the work in exchange for room & board.

Nothing better than some bums living in the house.

Just ask Locke.

Winsor_Pilates · 10-08-2010, 01:20 PM

Sounds like a big loss if you sell. I'd advise trying to finish the work or holding out for a time where you can afford to finish it or the property value it higher.

OilKiller · 10-08-2010, 01:21 PM

Quote:

Originally Posted by opendoor

If you can't come up with $15K to finish it, how are you going to come up with the money to pay the outstanding mortgage?

Well, that's why I was asking. Would I have to come up with the difference in one shot or could I make payments. That's the difference. Someone coming in to fix the place up for 15 to 20k most likely isn't going to take payments. They'll want it paid in full.

Quote:

Originally Posted by opendoor

Though I'm not sure I understand the scenario; was your friend doing all the work for free?

Yes, pretty much. Beer, pizza, and I would throw him some cash when I could.

Quote:

Originally Posted by VladtheImpaler

I'm no expert, but thinking logically, you are almost better off finding a developer, and jointly developing the land (assuming that's viable) - i.e. you put up the land and he does the work. You should be able to make enough from the proceeds to cover your debt, and maybe even earn a wee bit of profit. Of course, that depends on the area, the market, etc, etc, etc... And, of course, you have to live somewhere while this happens.
If this was 1981, you'd just stop making mortgage payments and walk away...

I have tried to find someone, but so far no luck. Like I said, it's a huge lot, easy to put a 4-plex here and make a pretty decent profit, even paying off what is owed in the property and bulldozing it down.

Looks like pretty much what I thought. We are stuck here until such time as the market really rebounds, or we go bankrupt. Sweet...

albertGQ · 10-08-2010, 01:22 PM

To be honest, you're almost better off just getting all your stuff out of there and move to a different place and rent

OilKiller · 10-08-2010, 01:23 PM

Quote:

Originally Posted by albertGQ

To be honest, you're almost better off just getting all your stuff out of there and move to a different place and rent

Yes, that's what we would like to do. But...how? That's the point of my thread.

Frank MetaMusil · 10-08-2010, 01:26 PM

What amount are you paying monthly/bi-weekly on the mortgage? Might be time to trim some of your spending on non-essentials.....are you still making the payments on schedule?

If you've got a solid job and patience you can get out of this no problem.

I_H8_Crawford · 10-08-2010, 01:30 PM

Quote:

Originally Posted by Frank MetaMusil

What amount are you paying monthly/bi-weekly on the mortgage? Might be time to trim some of your spending on non-essentials.....are you still making the payments on schedule?

If you've got a solid job and patience you can get out of this no problem.

Agreed.

Cut back on spending on all non-essentials... drop TV, renegotiate cell phone contract if you can to get it cheaper, no eating out, etc. If you have car payments, look into selling it and buying what you can with cash...

Save up the $15K as soon as you can and get the job finished.

What I am reading from you right now is you would rather take at least a $40K hit than live in your place which isn't finished renos... and even if you could make monthly payments on that $40K, you must also factor in whatever rent you would be paying for your new place on top of that.

If you don't have enough cash to cover $15K now, I fail to see how taking a $40K hit is going to help you at all...

photon · 10-08-2010, 01:36 PM

You probably can find the $$ to complete the reno, even if it means getting your entertainment budget down to 8 a month for Netflix. Medium term pain for long term gain.

As for finding someone to develop the place, you might check here:

http://www.albertarein.com/
http://www.myreinspace.com/forums

I'm not sure non-members can post anything meaningful, but it might be worth it to become a member to try and find someone to do the development (which sounds to me like the solution with the most win-win in it).