Feeling the pain of my first purchase

Starting Out
15yFollow

Feeling the pain of my first purchase

Sherry Lewis
Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes

Ok all, I got the photos back on my Toledo property purchase and my heart sank. I now know for sure my move wasn't gutsy it was stupid with a capital S. What really bites me is that I believe the investor who sold me this at auction intentionally misrepresented what he had and I had Sucker written all over me. He on the other hand made sure to word it properly to cover his butt. Anyway, it is what it is. Now I am here with my dilemma and I am praying all of you wonderful professionals can help me figure out what to do so my first few purchases in my new business are not my last few purchases in my dead business.

What to do with this mess. He sent me the deed to sign and notorize but I have not done so yet. Do I just take the loss and tell him to keep it, donate the house (assuming anyone would have it) for a tax write off, try to find someone that wants to fix the place and give it to them for what I paid for it (it also has about 1500 in back taxes due on it),.... I just hate the idea of paying another `1500 wasting a total of 2200 on a property I dont know how to get my money back out of. I started out with very meager equity. I took the chance on a cheap property hoping to make a minimal profit for quick flip to build some equity. I can hardly afford to loose the money. The realtor that took the photos for me said he has a guy that would take it if I paid HIM 3k but I didn't have to worry about the taxes...yeah ok... I could re-list it at the same site I bought it, but I do not want to do this to someone else that is trying to start a business so to me that is not an option. Ok there is my long whine and my desperate plea for rapid advise. If anyone needs to see the photos I would be happy to add them if you could tell me how to. Anxiously awaiting a life vest from any passing boat here...

1Reply
84 views

Most Popular Reply

Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
Originally posted by Sherry Lewis:
Somehow I don't think the refund is going to happen, but I refuse to allow him to keep my money AND the house lol...

Don't let emotions make this decision for you. If you take title to this property, you may be on the hook for a lot more than your $800 and the back taxes. Don't turn an $800 loss into an $8,000 one.

3Reply
See this reply in the discussion

81 Replies

Jump to latestLatest
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    Ok I uploaded the photos to my gallery named Toledo Disaster if anyone needs to see the photos. Oh yeah, I did do the title search too (another 100 bucks lol) and it showed the only thing owing is those back taxes.

    Does anyone think there is a chance of another investor/gut rehabber that might purchase this from me with any profit? I am actually into the property at this point for 800 plus there is 1500 taxes due; figuring 2300, the land should at least be worth that right? lol... sorry had to laugh if not I might cry lol

    1Reply
  • Jason Davis
    Rehabber · Powhatan, VA · Member since 2011 · 190 posts · 21 votes
    15y

    Where are the pictures? Post a link

    You are in Florida, what are you doing buying in Ohio?

    0Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    15y

    You should be able to back out, not sign the deed. Say he misrepresented this to you and tell him to disappear or you will sue him for fraud. See what happens.

    1Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    He already has my money and he had stipulations in is add saying as is where is the day of auction end. He had photos of the property inside and out that looking nothing like these, but the way he worded it I think he covered himself. As to why Ohio, because apparently I am an idiot. I didnt have much money to get started so I tried getting several properties at auction. I cannot afford the Florida market yet so I bought up north. Did all my due diligence via internet. Ok I hope I do this link properly. First time trying one here.

    http://www.biggerpockets.com/galleries/show/13875

    0Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    Great I think it worked!

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    15y

    Sherry if you have not taken title or closed yet consult an attorney and NO you actually stand to lose much more on this property if you proceed.

    How much do you have to invest total? 5k,10k,20k to buy other properties ?

    Was 800 your whole worth to start with ?

    Did you not pay a spotter 50 bucks to go take pics of this property before hand ?

    With bad or changing areas I have seen MLS pics that look great and 1 month later the place is destroyed and picked apart.This is why you need a spotter on the ground to tell you what the condition is TODAY.

    The value of the property and what you could get out of it depends on the ARV value and trending of the surrounding houses.Are all the houses on the street like this or 2 out of 10,5 out of 10,8 out of 10 etc.

    What are the rents going for and foreclosures selling for?

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    2Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    15y

    Sorry this worked out this way, Sherry. I can't say I'm surprised, though. Anyone who thinks buying properties in far away places sight-unseen is a good idea would do well to heed this lesson. These properties sold in this way are the dregs of the dregs.

    That said, I've seen worse. I've seen a house on the MLS for $300K that was worse. I've seen a house on the MLS for $90K that had plastic sheeting for a back wall. Yes, this is a mess and needs work, but the property appears to be salvagable. If I had this property, just as it is, anywhere here in Denver, and I mean ANYWHERE, for $2,300, I'd be dancing in the street.

    Any idea what the kitchen looks like?

    What does your due diligence tell you about values and sales in Toledo? What will this bring if its fixed up? You're looking at some very significant fixup expenses. But if the retail sale value is high enough, and there are sales actually occurring, it might still work. If there are bunches of similar, fixed up properties on the MLS for $40K, you're in trouble. Unfortunately, realtor.com shows 553 houses in Toledo under $40K, 84 under $10K, and a handful that look similar to yours under $5K. OTOH, there are a similar number in the $75K-100K range and 818 over $100K. If you could fix this place up and sell it for $100K, you could make this work. Assuming there's nothing structural wrong with this place, $50K (or less) would work wonders.

    I recall you were looking for hard money to do the fixup. You'll need to work on sorting that out, if you're going to proceed. As this property is, you have very little collateral to use to secure a loan.

    I also recall from your other posts that you've bought four more house under similar circumstances. If you can possible unwind some or all of these transactions, I'd give some serious though to doing that. I have a bad feeling those three in Michigan (IIRC) are going to make this one look good.

    If you do take possession, I would get someone to immediately secure the place and clear the overgrowth. Around here, the city would be looking for someone to fine for the way the property looks. I get violation letters if the tenants don't mow frequently enough.

    1Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    Brian, I did purchase it thru an online auction but no back out period. All sales final on winning bid; and yes it looked pretty bad to me too. Looks like it will end up being a gut rehab. It just erks me because the photos that went with the listing looked nothing like this but.... I was told after I paid for auction to rekey doors. When realtor got there plywood was over openings. The doors and frames are completely gone so how am I supposed to rekey. He had to know that, I mean I am sure the vandals didnt decide to plywood up the place.

    Joel yes 800 is what I have put in so far and I have not paid the taxes yet nor signed on the dotted line. To be honest Joel I was naive. It was my first purchase and I did all that I was told to do online, but I didn't know about or think about getting the spotter. It was an auction that I came across on the last day it was open. I did corelogic, google, altos, trulia, rent o meter, county etc. and was proud of myself thinking I hit all the steps. I am too trusting I guess. I will need to change that. When I saw the pics posted I believed what the seller showed me. HUDS FMR for 2011 on a 4 bedroom is 900 and rentometer showed 800 average. The property value with corelogic was 40k.

    0Reply
  • Greg P.
    Los Angeles, CA · Member since 2009 · 717 posts · 50 votes
    15y

    Hi Sherry. Are you saying you only lost $800? I've been scammed out of thousands in my beginning days. Take the hit and never do it again. Don't stress about it. Btw, there was one time where I put 2,500 earnest on a online auction and after I won, I realized it wasn't a deal. I basically begged the auction's customer service and spoke with upper management. They said they couldn't do anything, but they must of had a change of heart because the money wasn't ever taken out of the bank account. Good luck.

    0Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    Jon, I know I am an idiot at this point. please see above as to what I had as far as comparible data goes and it wont be a 100k property. Not the best of neighborhoods (obviously). I am extremely nervous about my other purchases now. I am praying that the tax auctions by the county fair better then the other darn site I dealt with and I still have to see what the one in Cleveland turns out to be. Just really mad at myself right now. I spent months of researching before I made a move and I came out the gate with rookie mistakes that could cost me from keeping the business going. If its just this one I can survive it, but all 5 and I am sunk. As for the kitchen, there is none. The destroyed everything. Removed ALL plumbing, electrical, furnace, hot water heater, smashed what they could etc. My husband doesn't want me to give up on the property. He thinks I can sell it to another local investor in Cleveland, but I just don't see how they could make the numbers work. There is just too much damage. I told him I am seriously thinking about telling the guy that sold it to me to just keep it and take my loss at 800 rather then going deeper into debt for something I can't get out of. No I can't afford nor am I crazy about loosing 800, but it is a lesson well learned.

    0Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    Greg, well at this point its only 800 but there is 1500 in back taxes and I would be stuck with it not knowing what to do with it. Can I just refuse to take the property?

    0Reply
  • Justin S.
    Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
    15y

    You will only lose $800?

    0Reply
  • Greg P.
    Los Angeles, CA · Member since 2009 · 717 posts · 50 votes
    15y

    Definitely back out of the deal and DO NOT sign anything. Like Joel said, it will cost you tons more. Do not let anyone talk you into signing either, just don't do it. Take it as a loss and become stronger for this. Good luck.

    0Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    Thank you all. That is kind of what I figured. I will send the seller an email and let him know I was quite displeased with his representation of the property and I will not proceed with the purchase. So darned mad at myself right now. I will be going crazy until I find out what I have with my other 4

    0Reply
  • Greg P.
    Los Angeles, CA · Member since 2009 · 717 posts · 50 votes
    15y

    He must be pretty desperate if his purposely tried to misrepresent the property for a few dollars. Goes to show that you really gotta do your due diligence before you trust others.

    0Reply
  • Justin S.
    Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
    15y

    Sherry

    Losing $800 is next to nothing. When you buy properly and perform inspections, that will be close $800 on it's own. You really need to think about what you are doing if $800 is going to drive you crazy. Buying 5 properties in 2 weeks is a recipe for disaster for a new investor.

    2Reply
  • James Hiddle
    Altus, OK · Member since 2008 · 2k+ posts · 690 votes
    15y

    $800 is chicken feed compared to others that have lost thousands to tens of thousands on bad deals so if you decide to leave well enough alone and not take title on this property than you can count your lucky stars that you didn't lose much more.

    However you might want to do some more due diligence on this to see if this can be salvageable. See if you can get some estimates on what the repairs would cost and check local comps to see what the ARV might be. You could still wholesale this to another investor if the ARV is very high(although from what I'm reading it might not be)and the repairs aren't going to kill anyone.

    Other than that the only thing is count your loses,learn from your mistake and move on to a more favorable deal.

    0Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    I agree Greg, hindesight is always 20/20.

    Justin, I agree 800 does not seem like much money. For me its alot because I am doing this after being laid up for 2 years with no income.. that being said, more then the 800 I think I am angry that I was taken advantage of and my ego is bruised lol.

    Sadly James, I just do not see how the numbers can work. If I thought for one second I could truly recover the situation I would go for it but the ARV is not going to be there. It will take more then the house is worth to make it whole again.

    As to buying too many properties at one time; I was feeling confident right up until those pictures arrived a few hours ago lol... Normally I would never have jumped in this deep, but the tax auctions for full deed ownership and no lean attachments were taking place at the county sites. I got my hands on 3 properties all in the same area by a university. The FMV's looked good and the rentals in the area are great. I can only hope and pray they don't all crash and burn. I will say lesson well learned.

    0Reply
  • Carlos Flores
    Commercial Real Estate Lender / Syndicator · Dallas, TX · Member since 2011 · 888 posts · 309 votes
    15y

    I presume this is the property in question?

    The URL will not display correctly. Copy into your browser, remove the spaces surrounding the "4" then hit enter key.

    http://www.bid 4 assets.com/auction/index.cfm?auctionid=520372

    You paid $201 for the property plus 7% buyers premium plus a $500 auction processing fee.

    Seller gets $201 minus a minimum of $100 in seller fees for a NR auction.

    I feel for you and don't want to come off as insensitive, but your pics are not all that different from those of the seller. What exactly did you think you were getting for $200?

    1Reply
  • Micah Coburn
    Real Estate Investor · Santa Monica, CA · Member since 2011 · 1 post · 1 vote
    15y

    Sherry:

    Believe me , we've all blundered. It's called "earning your stripes." I bought one house unseen (photos showed a very pretty 10-year old ranch home), but they literally gutted everything on the inside - - including carpets, kitchen and bath cabinets, HVAC unit, and even the interior doors.

    Don't beat yourself up over it. That experience will save you tens-of-thousands going forward.

    A few observations. 1. You have a rich foreclosure market in FL. Between Okaloosa and Santa Rosa Counties there is a population base of approx 330,000. Plenty of foreclosures right in your back yard.

    I'm actively buying commercial lots in Florida for future development.

    2. You seem like the ideal candidate to do bird-dogging for other investors. You'll get paid for finding deals & it's a great way to really learn your market until you get enough cash from deals to do your own.

    You can make anywhere from 3k to 20k per deal with zero risk to your limited cash.

    Here is a BiggerPockets link on the subject; http://www.biggerpockets.com/articles/wholesaling-strategy-help.html

    Whatever you do, don't get discouraged. I always say, "if it was that easy there wouldn't be any opportunity as everyone would be doing it."

    1Reply
  • Michael R.
    Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    15y

    Sherry,
    The photos are not all that bad. In my markets I would pay 500-1k for a similar property. The roof looks decent and it does have vinyl siding. I did not see the interior pics though. Guessing it needs all plumbing and complete rehab. If you do buy it I would have someone clean the yard asap and remove or paint over the tagging on the front. Then I would have someone board access points. You might be able to sell it for a few k once it is cleaned up and more presentable. Otherwise this is exaclty what I would be expecting to get for a 800$ property.

    0Reply
  • Rob Gillespie
    Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
    15y

    Hi Sherry!
    Cheer up, we all pay for our education in one form or another. At least you are taking action and doin something, that is more than many can say.

    I have had a lot of success selling on Ebay. I have a 6 foot banner that I hang on the front of the house that says buy this home for $1 no reserve on Ebay! It has the big color logo too.

    I then run the same ad in the paper and on craigslist. It generates a lot of traffic as well as gets people excited quickly about owning something for 5 bucks.

    This gets their emotions in it. Before you know, you have sold it for a few grand! I would also run ads in a California paper, those folks seem to buy a lot in Ohio.

    If you have any in Cleveland, I can assist you, I have a big network in the area. Good luck!! :mrgreen:

    0Reply
  • Ibrahim Hughes
    Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
    15y

    Sherry, I wouldn't take the property. Also, if you're going to be successful in this biz you have to be a pitbull at times. You can't let folks push you around and take advantage of you.

    Call the seller up and demand your $800 back. Let him know that you will spend months letting everyone online and off know about your bad experiences with him. He will soon realize that the $800 he made off of you aint worth it.

    Now put your growl on and let the dogs (pitbulls) loose! LOL - Good luck.

    1Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    Wow, lots of great feedback.

    Carlos, I didn't know what to expect. This is my first project. As for the pics not being that much different? They are drastically different. I am not sure what picks you saw?

    Micah, Yes I feel I have definately earned my blunder stripes with this one. Thank you for the fantastic advice. I will take a look at the link. I think that may be a very good avenue. Will follow up with you once I have checked it out.

    Michael, thank you for the advise. I did send a note to the seller and I will see what he has to say. The interior was horrid. Banisters through the wall, holes everywhere, staircase destroyed, all plumbing, electrical, furnace, water heater... anything of any value gone, fire in the corner of one room, like they made themselves a campfire, all bathroom smashed tubs, toilets, etc. really really bad lol.. The realtor told me he had someone that would take it if I paid them 3k. Of course that is not even a contemplation for me. I would rather donate it and get the tax write off even if I had to pay the back taxes first. That would cost me 1/2. Now I know too what to expect for 800 lol.

    Rob, I do have a property in Cleveland. I sent you an email last week but haven't heard back from you yet. Still trying to find someone up there to look at it for me and see if I made the same blunder. PLEASE get in touch with me. I really need to know the condition. I already paid the back taxes on it. I am in that property for almost 5k.

    0Reply
  • Michael Lauther
    Investor · Hampton Bays, NY · Member since 2009 · 907 posts · 258 votes
    15y

    Sherry, I am a buy and hold investor active in Dayton OH and live in NY. To consider any property you should have at least one reliable contact in the area to take pictures at the very least. next I would need a handy man, a contractor and a realtor. The first thing I would do if you take possession of this property, is to get some good pictures inside and out. next get a contractor to walk through and get some idea of what needs to be done and some preliminary cost. to do this you will need to get the electric and water turner on. you will need a plumber and electrician to be available for this. You may find that you no longer have copper pipes and wires, this will complicate matters a bit. i have had this happen several times, it helps to know this before you bid on the property. Depending on the neighborhood, the condition of the properties in the specific area and the rental income you could expect you may still have a workable property for a buy and hold investor like myself. Unfortunately I do not have the necessary contacts in Toledo to make it workable for me but feel free to contact me if you would like to benefit from my experience in Dayton.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free