Our 1st Deal: Lakefront Short Sale Near Downtown Gilbert, AZ

12 Replies

Hi BP! My wife and I are about to start the inspection process on a SFR about a half mile from the quickly developing downtown Gilbert area outside of Phoenix. The house sits on one of the many artificial lakes here in the desert, and was built in 1993. Our plan is to live there for a year or two and then buy another distressed property to live in, and rent this one out.

Comparable homes in the area are selling for around $305k - $320k after renovations, and the seller's lender (Wells Fargo) accepted our offer price of $275k but will not make additional concessions for any repairs. Aside from the paint and carpets that need to be replaced, I noticed a crack that runs along the grout that may be indicative of foundation heaving - something we are going to have several foundation experts look at before we hire an inspector for the rest of the house. The way I see it, if the foundation repairs cost less than $10-15k this could still be a good deal if there are no other major repairs needed.

Wells Fargo is currently waiting for HUD approval, which they say could take a couple weeks, but we are planning on starting our inspection period early next week. Any thoughts or advice for us newbies? Thanks in advance!

This is why I always have inspections happen right after contract, and ideally before BPO. That way everyone starts off with the same knowledge of condition issues and you are less likely to have a value problem later.  However, If you can document other necessary repair items, the listing agent can compile a value dispute for the lender, which may or may not result in them lowering their value.

Thanks for your insight Minna. Do you think we should do both the foundation assessment and the general home inspection at the same time in order to compile a value dispute, even though Wells Fargo indicated they would not entertain any concessions? 

Or should we look at the potential foundation issue first, and then proceed with the general inspection after we confirm the foundation problem is a small one? My worry is that we would lose the cost of the inspection if the foundation repair ends up costing $15k+ and if WF won't make any concessions at all.

Short sales are sold as-is. Repairs should be baked into the purchase price. 

HUD approval generally is provided 72 hours prior to closing for the green light to close so it seems like you may be confusing terms as a buyers inspection would already be done by this point.

Do you already have the short sale approval letter?

A couple days ago, the listing agent told our agent verbally that the bank approved of the purchase price, but we have not yet received the actual letter. 

Thanks for the clarification on the HUD approval - I am still a little unclear as to what the purpose of the HUD approval is.

Yes, I think you are unclear on exactly what the agent is meaning. HUD, as in Housing and Urban Development Agency is only involved if this is an fha short sale, which would be a different animal. HUD, as in the (formerly) HUD 1 Closing Statement, should have been submitted the contract.....it details all the costs the lender is paying (the seller side costs) to close the sale which they review to see if there are costs they will not pay. Any time any sort of renegotiation occurs, and new HUD/closing statement has to be approved.

Thanks everyone for your input! I asked for additional clarification from my agent, and this is indeed an FHA short sale. That said, are there additional considerations we should be aware of?

A little late now, but as said above, this is why inspections need to be done up front....going through the whole approval process and Then finding something you want a price reduction for never works out well..

We considered getting the inspection done up front but our agent said we should wait until the bank accepts our offer before paying for the inspection, otherwise we could waste several hundred dollars on the inspection if the bank doesn't accept. I see now that getting it done up front and submitting a lower offer probably would have been a better move, even though we would potentially lose the cost of the inspection if the bank doesn't accept our offer. 

At this point, we have permission from the seller to bring inspectors and contractors to evaluate the property without starting our 10-day inspection period, so we will bring them out next week. Hopefully the potential foundation issue turns out to be minor. I'll you all know what we find out.

In the meantime, here is a video walk through of the property that I took last week: https://www.youtube.com/watch?v=FUPbnMcXTUs 

Ty,

Looks like a decent place for a family without kids - mine would be in that water in a heartbeat. I bought a place built in 99 and it had a post tensioned slab.  This prevents the heaving that can happen in Gilbert's soil conditions, known as expansive soil.  This was a requirement for me when buying in Gilbert as foundation repairs can ruin you.  There are stamps in my garage warning that the slab is post tensioned and should not be drilled into as there are cables in the concrete.  If you see those stamps, you can probably rest easier about the future.  They started doing this in the 90s after builders faced lawsuits.  You've probably gathered some of this info from the web, but hopefully you can find this stamp and the worst case may be ruled out.

Best of luck.

Sam

@Samuel Greene @Ty Wightman I just added a bathroom with underground slab to a post tension house. It took some searching and calls to the structural engineer of record and a little luck to find a plumber/concrete cutter who wasn't afraid to work in there. Still a lot of myth and rumor about what might happen if one drills or cuts into a post tension slab. It was no big deal.

I had a trusted contractor come out to give his assessment of the situation and our fears have been confirmed: the crack in the foundation is about 1/4" wide and likely runs the entire length of the house, right down the middle. We are passing on this property - this is one type of project we don't want to get into for our first one. Back to searching!

Ty, I applaud your decision to not get emotionally attached to the property. I've passed up similar major fixer-uppers and I'm thankful that I waited until I better understood rehab projects. 

If you want to network with folks that are in the business of rehabbing distressed properties, your homepage may display local events in Gilbert or the Phoenix area. Best of luck in your purchase!