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Ask the Neighbors: A Story of Murder, Hindsight, and Real Estate Investing

by Kevin Perk on January 7, 2013 · 11 comments

  
Murder House

When I first started in real estate investing, I was working in some of the small, rural towns near the city I live in.  I did a few deals out there because there was much less competition and the prices were cheaper.  I also learned one of the most important lessons of my real estate investing career.  That is to always ask the neighbors.

A Story of Murder

We found a nice home that had been foreclosed on.  It needed very little work, was in a nice part of town and the price was right.  We went and looked at it, ran the comps and estimated the repairs.  Everything looked good so we pulled the trigger and bought the property with the intent to rehab it and sell it on the retail market.

Upon closing, we drove out to the property to go over our checklists.  It was after 5 o’clock by this time so the neighbors were home from work.  It was not long after we got to the property when we heard a knock on the door.  A curious neighbor had come over after seeing some activity.  He asked if we had bought the house.  We told him yes.  His next statement floored us.  “Well y’all know about the murder right?”

No, we did not know about the murder, but everyone else in town did.  It seems that a sensational murder plot had resulted in a prominent member of the community losing their life in the house I had just bought.  “You can still see the blood splatter on the walls if you look real close,” said the neighbor.  And you could if you looked at it right.  “Who in the hell was I going to sell this house to?” I wondered.  Who is going to buy “the murder house?”

Long story short, we fixed up the property and listed it.  What else could we do?  We had to come way down on the price but someone from out of town came along and bought the property.  I think I ended up making about $0.10 per hour on the project, so I did come out slightly ahead.  But I would have written a check to get that one behind me.  Thankfully it worked out and I did not have to write a check and I believe the buyer is still there today.

Hindsight is 20/20

Hindsight being 20/20, I wish that I had just talked to the neighbors as part of my due diligence process.  In doing so, I would have certainly found out about this home’s unique condition.  Perhaps I would not have purchased it.  At the very least, my offer price would have been much, much lower and I could have made a decent profit.

Today, whenever I am looking at properties I always make it a point to talk to the neighbors.  Since many items do not have to be disclosed or can be hidden, you have no idea what you might find out.  This is especially true when buying properties “as is.”  I have learned about flooding and foundation problems and other neighborhood or situational issues that have influenced my offer and decision to buy.

So put “Talk with Neighbors” on your potential property purchase checklist.  You have no idea what you might find out.  By doing so, hopefully you can avoid having to sell or rent “the murder house.”

Photo: Mick Amato

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{ 11 comments… read them below or add one }

Jason January 7, 2013 at 7:19 am

Kevin,

Very good advice. Talking to the neighbors can be very helpful when renting a home, preventing breakins, reporting trouble, and selling a home.

Some questions: Doesn’t a murder have to be reported to you? or could you do a google search for the address? Did you go back and talk to the listing agent and ask why they did not report it? Did you report it to the buyer?

I ask, because it raises some questions on what we should do as investors ethically and if we should hold others to the same standard.

As usual Kevin, good post.

Jason

Reply

Kevin Perk January 7, 2013 at 11:56 pm

Jason,

Disclosure is not required here. Should such an event be required to disclose? Sounds like a good discussion question. So let’s discuss.

Thanks for the kind words and for reading and commenting,

Kevin

Reply

James January 8, 2013 at 10:18 am

I may be wrong, I’m not an agent or a lawyer :) But from what I have seen, things that require disclosure are typically things that may have a negative impact on the habitability or safety of the home. Since the fact that someone was murdered there (and other historical events) would not fit that qualification, how would requiring disclosure be justified?

As far as the ethics are concerned, that is another question- if you are selling a home to someone and snickering behind their back about how you are fleecing them, and/or thinking to yourself “if they only knew”… I think it is time to check your moral compass :) There is a swath of grey area here- when you are invested in it, it is easy to fool yourself into thinking what a great deal you are giving them and what a nice guy you are, without being totally honest to yourself. That is where a good agent can step in and say “we really should make sure they know what they are getting here.” (Note, I don’t have the specifics and don’t care to judge the original scenario, but merely laying out a general principal that can be adapted to a wide variety of situations.)

At least that is my 2 cents :)

Reply

Kevin Perk January 9, 2013 at 12:05 am

James,

A good two cents. Thanks for adding to the discussion.

Kevin

Jose Gonzalez January 7, 2013 at 8:01 am

Hello Kevin,
That mentioned is preety good, I did that in the beggining but now I got lazy about asking the neighbors, thanks to point that since it can be a true variable to consider!
What a story about the murder! I imagine how you felt when he told you, thanks again for sharing.. already made its impact with me! (Today I have to visit some properties which will apply this)
Have a great week!

Reply

Kevin Perk January 7, 2013 at 11:58 pm

Thanks Jose,

I appreciate you reading my article and taking the time to comment. Best of luck with your new investments! Let us know if you run across any good stories to tell.

Kevin

Reply

James January 7, 2013 at 10:50 am

Did you try marketing the murder as a feature? I would have called some spook crew to come in and claim the house was haunted, then marketed it as a feature :)

Reply

Kevin Perk January 7, 2013 at 11:59 pm

James,

Risky marketing strategy to say the least :)

Thanks for reading and commenting and trying to see the bright side!

Kevin

Reply

James January 8, 2013 at 10:07 am

I suppose success would depend a lot on your market. In some areas, people go crazy over places that are ‘haunted’. Mostly they are more historic establishments, but I think you could make it work with a more recent incident if the market was right. It would certainly narrow your target market to a certain niche of people

Reply

Al Williamson January 7, 2013 at 6:21 pm

Great advice Kevin,

I try to ask 5 random people to get a gripe on a neighborhood. The book “How to Measure Anything” calls this the Rule of 5. Author says you can be 93% confident that the median/most likely answer is within 5 random samples.

Reply

Kevin Perk January 8, 2013 at 12:04 am

Al,

Interesting and good idea. The more you ask the more you get!

Thanks for reading, commenting and for the kind words,

Kevin

Reply

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