Feeling the pain of my first purchase

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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...

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
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.

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  • Bienes Raices
    Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    15y

    Sherry,
    I don't have advice on this situation, but don't beat yourself up about the $800. So far I've lost about $1200 (lost $500 escrow to HUD + backing out after paying for inspection on two other properties).

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

    Michael, thank you for your response. I have a realtor in the Toledo area that was referred to me by someone on BP. He did get a bunch of photos. If you go back to page one the link is there to go see them. If you could look at them and then let me know what you think I would appreciate it.

    0Reply
  • Kathy V.
    Involved In Real Estate · Rochester, NY · Member since 2011 · 138 posts · 11 votes
    15y

    Sherry~~

    I don't have any advice either or should I say, my advice wouldn't mount to a hill of beans! But I agree with the others, don't beat yourself up over the $800. Demand your money back and go on!

    This thread alone, has probably educated more people than you know! I'm impressed by your straight-forward questions and scenerio.

    I just wish I had contacts in that area to help you. :cry:

    I am equally impressed with the responses from the seasoned BP'ers. You really can learn a lot here! :D

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

    Sherry - the pics I saw are on the bid 4 assets auction site where you purchased the property. I compared those to the ones you posted. The link to the property you purchased at 1460 Norwood Toledo, OH is in my previous posting above.

    0Reply
  • Roy H.
    Real Estate Investor · Monclova, OH · Member since 2008 · 16 posts · 0 votes
    15y

    Assessed value for that home is $21,300

    It is a relatively rough neighborhood... the high school isn't the best.

    Most of the recent activity in the area appear to be via sheriff sale.

    Looks like there are 2 active listings on Norwood right now..

    http://www.wellesbowen.com/search/property/1428/NORWOOD%20AVE/Toledo/Oh/43607/4665245

    http://www.wellesbowen.com/search/property/1639/NORWOOD/Toledo/Oh/43607/5019517

    0Reply
  • Alex K.
    Real Estate Investor · Sparks, NV · Member since 2008 · 45 posts · 28 votes
    15y

    Could you insure it very well and then rent it out to some fire jugglers?

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

    Carlos if you were looking at my auction I have no idea how you could think the property looks the same.

    Thanks Roy. That was part of what I based it on. When I bought it, the photos shown didnt look too bad and I thought I could do a quick flip to a section 8 rental investor or rent it out myself. I knew it wasn't the best of neighborhoods but for the price, even if a made a grand on the flip it seemed a safe bet. Sadly the house looked nothing like the photos at auction.
    Alex:
    Too funny and darn now you blew it for me! I can't do it since its now on the internet and they would catch me! LOL

    1Reply
  • Carlos Flores
    Commercial Real Estate Lender / Syndicator · Dallas, TX · Member since 2011 · 888 posts · 309 votes
    15y

    Sherry - I didn't say same, I said, "your pics are not all that different from those of the seller." Anyway I am not going to go back and forth with you over a broken window, broken door, some spray paint, and weed growth. You can have the WIN. I know you could really use one right now.

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

    Carlos and All:

    After the initial shock has worn off, I am seeing small possibilites arise and hopefully this is not as bad of a situation as I first felt. Carlos, sorry wasn't meaning to go tit for tat with you. I just really felt taken advantage of and as anyone I didn't like it lol... please forgive if it seemed I had to win... It's just been a very long 24 hours. Deep breath, remove emotions, pick myself up and dust myself off. I have a great support system with all of you and if I let this one bump in the road stress me I will freak myself out and not pursue my dream. Logic has kicked in. Thank you all for your wisdom, words of encouragement and reality checks when needed.

    Kathy, thank you hun! 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...

    2Reply
  • Carlos Flores
    Commercial Real Estate Lender / Syndicator · Dallas, TX · Member since 2011 · 888 posts · 309 votes
    15y

    Here I thought that was going to be my last post, and then you went and apologized (when it really wasn't necessary). Sorry if any of my earlier posts pushed any buttons. I know you went through several emotions there including fear, anger, and sadness. Expected. Now gather any missing facts, make a decision, and move on. I lost $2k on a car once that I purchased via simulcast auction. There's no substitute for boots on the ground. Anyway, that was a measly car. You, on the other hand, have a house. Cheer up!

    I think you have a couple of obvious choices.

    - Not perform (don't sign). May bar you from that auction site, which might not be a bad thing. You will lose what you've put in but you may not be responsible for the back taxes code violations, liability issues, etc., which would eat your lunch.

    - Take possession. Pay back taxes then risk loosing more money on code violations, rehab, bringing up to code, liability issues if neighborhood kids, druggies, or prostitutes get hurt or die on your property.

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    15y

    I believe a common error by investors is not defining the area you are buying correctly.

    Is it Urban core,suburban,rural?

    In how wide of a radius ring are sales at a constant for unit mix and build??

    I see some go it's just over the other street close by is a comp for ARV of 90k and base buying off of that.

    In these Urban cities it can go street by street and block by block between a great area,ok area,and a war zone.

    In a suburban to rural area many times the the property values are the same for the unit mix and the safety of the area is the same.

    Some people buy trash with cash but I don't like it.Too many things can go wrong.I like to stay patient and look for great deals in good areas.

    The number of beat up houses on the street is critical.What does the crime report show for that street versus violent and non-violent crimes?

    Are multiple properties vandalized? Has the mix changed mainly from home owner to investor owned and is the investor local or out of state? Many out of state investors might not be able to keep up with or properly maintain the properties like local investors.

    I am not saying they can't but they have to depend on a team of people much more heavily than handling issues themselves.

    In a high crime area rehabbing it it will just get vandalized over and over and will become a money pit.Section 8 depending on the inspector and company they farm out too will be very picky on the inspection.

    If the other properties turn out better I would put your energy into those.You don't want this to be a money pit and drag down other good performers in your portfolio.

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    2Reply
  • Michael R.
    Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    15y

    I would talk to a few local contractors and realtor before you make a decision. If it can be rehabbed and sold for a profit then I would still buy it. The only people who can advise you on rehab costs and what you may sell for would be local contractors and realtors. If after you break down the costs you are still not comfortable with it then you lost 800$ not really a huge loss. I remember my first rehab-looked as in the same condition as this place. Once it was done and rented it acually became one of my best properties. sometimes things look bad but are not as bad as they may seem

    0Reply
  • David Beard
    Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
    15y

    Contact Ryan Pyle on this site, a very experienced Toledo investor (owns 60 houses, I think he said.)

    2Reply
  • Sherry Lewis
    OP
    Rehabber · Fort Walton Beach, FL · Member since 2011 · 240 posts · 48 votes
    15y

    I wanted to thank everyone for all of their wonderful advice. I had contacted the seller via email and voicemail, but they never responded (no big suprise). I am going to take possession of the property and complete the deal because that is what I agreed to do. I don't want to start my business out with breaking a contract (even if I do feel their were fraudulent representation made). I will take one and consider it a very expensive (for me) learning experience.

    0Reply
  • Uwe S.
    Property Manager · Dublin, OH · Member since 2009 · 1k+ posts · 291 votes
    15y

    Sherry,
    I had also interest in this house in Toledo, but surroundings dont match my preferences. Back taxes was too high for me.
    On the other hand a house for only $800 is an opportunity. Check out which repairs be needed.

    -Uwe

    p.s.: How about the Cleveland propertie?

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    15y
    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
  • Chris Colvard
    Wholesaler · Dallas, TX · Member since 2009 · 308 posts · 92 votes
    15y

    Jon is a 100% right on this.

    Get some advise as to what you have signed up for. I doubt that there is no way out.

    You have no idea what the underlying encumbrances are over and above the taxes.

    Better to spend $400.00 on an attorney to find an out, than let this be your first and last deal that you never get out of.

    Did you pay by credit card, that may be an out in itself.

    0Reply
  • Ron K.
    Professional · Altoona, PA · Member since 2010 · 72 posts · 23 votes
    15y

    Sherry,

    I have to agree with Jon. This could turn into much more of a liability to you. If things really turn sour, could you take such a big hit this early in your business start up? At the very least, wait until the last moment to make a final decision and give yourself as much time to contemplate it. This is business, there is no shame in walking away from a bad deal, no matter where you are in the process.

    Sometimes it is better to run away so that you can fight another day.

    Best of luck to you.

    Ron K

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    15y

    I also meant to add that I agree with you, Sherry, that the pictures you posted are quite different than what's in the listing. Hard to say, though, whether or not the seller was aware of the real situation. This property is very likely one of the junkers out of some bulk REO package. The seller may have though the posted pictures were accurate. They're clearly the same property, so at some time, it really did look like that.

    0Reply
  • Michele Orgel
    Rental Property Investor · Seattle, WA · Member since 2011 · 3 posts · 9 votes
    15y

    Hi Sherry, I must say that no, you are NOT an idiot!!! Buying out of your area to invest is a very sound and tried and true option. Yes, you may have learned about a few things, but really, if you didn't move forward, you would just be stuck doing nothing like so many others. At least you're asking for help moving forward. Please listen to the good advice, and avoid the negative comments - nonconstructive and unhelpful. Welcome to the challenging and exciting world of RE investing!

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

    Wow, what wonderful advice once again. I tell you, I am constantly talking to my husband about this site and how helpful everyone is and how much I have learned... Glad its a multiple of folks or he would think I was cheating on him with some guy name "Big" lol...

    Ok I sent an email to the owner and told him I was going to take possession of the property because I did not want my first purcahse to be warfare. He never responded to my email or phone call. He did however decide to respond when I left him a poor score on bid 4 assets.... Suddently he had time for me. I did already run a title check on the property and it came back clear except the 1500 in back taxes. I have been battling emotion and business sense of course as it is my first transaction. So here is what I came up with. He will not refund my money; not even sure if I could get it with the little disclaimers that I should have read MUCH MORE CAREFULLY before buying a property on line. In the disclaimer it says the property could be severly damaged. This is the sites disclaimer not the sellers disclaimer. I am certain he knew he was misleading me because he told me to rekey the locks and there were no locks, no doors, no door. I found out that in Ohio only the Seller has to sign the deed so I may own it already and have no choice. I will be talking to an Ohio attorney that was referred by a bp member (thank you so much!) to see if I can just refuse possession and take the loss. If so I will do just that. It seems to be the overwhelming response and I know those opinions come from folks that are much more experienced then myself. If I cannot refuse possession then I will be very honest in a listing, not pay taxes and sell it for whatever someone will give me for it. Literally whatever they will take it for. If I can't get rid of it that way, I can check with the county to see if I can "give" it to them. Does that sound like a good plan?

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

    Jon, Thank you. I didn't think I was crazy. It looked drastically different to me too. The seller put plywood up over the openings which was still intact when Tim went there. He told me to rekey the locks after I paid him...hence I feel like he had to know what he sold me... he knew there was no door to rekey before the plywood went up. Also when he finally did answer my email he didn't deny knowing the condition he was just pissed that I left him a bad review.

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

    OK Now I see why some folks didn't think the property looked all that different. It only showed the first 6 pics. I have uploaded 2 additional galleries for you to see some of the inside. I didn't up load all of them...I figured this was enough to give everyone a good idea on HOW different the property was lol...

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

    http://www.biggerpockets.com/galleries/show/13895

    http://www.biggerpockets.com/galleries/show/13896

    0Reply
  • Mike G.
    Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes
    15y

    Sherry, I feel for you. I hate that feeling you get in your gut when you think you've just made a really bad decision, or been had by someone.

    In this business (like any other), you are going to make mistakes, and they will sometimes be very costly. For most people on here, it seems like an $800 - $2000 mistake is not that bad. And in the big picture it isn't. We aren't in your shoes, though, and it seems like that amount is more significant to you at this point. The good thing is that it doesn't seem like this will ultimately discourage you from continuing with RE investing.

    I agree with most others here. If you can walk away having only spent $800, do so. A property inspection here can cost us $400, so it's really not much different.

    Also, I have a couple offers out right now on houses that look significantly worse than yours and the offers are for an amount almost 300 times what you paid. The point is that what matters is what you can sell (or rent) it for. It sounds like the repaired value of your home makes it a bad deal, more than the condition of the house.

    In any case, good luck and hopefully the other places work out better for you!

    0Reply
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