I'm a new member in a bit of a pickle. Can anyone help?

Question

Hello everyone,

I’m in a bit of a dilemma and I just joined Biggerpockets to see if someone can offer any suggestions. I had plans to sell my old house which I’ve had for almost 40 years (yes, I am a grandmother!). This house is very old (1920s) but in a very good location in the Bay Area. My real estate agent helped me with organizing inspections and they found many problems with the house, including issues with the foundation and the roof. They said I could sell the property as-is, but I probably won’t get very much for it. Or I could try to fix things, but it will be very expensive because there's lots of issues. I’m starting to wonder if I should just tear down the entire place and rebuild a new house? If the problems are as bad as they seem, I feel bad about throwing away my 40-year old investment like this, especially since the Bay Area is such a popular place to live now. But I don’t know anything about how these inspections work and how to analyze whether it’s more worth it to: 1) hire workers to try to fix the problems, 2) tear it down and rebuild, or 3) sell it as-is. Should I try to get a second opinion, or talk to other people? I don't even know where to start or who I should talk to. Hoping someone here can offer some advice. Much appreciated!

Brian Spohr · Answer

Hi Debbie,

Without doing the analysis between these options, you will not be able to determine what the best course of action is. Without solid data or estimates, this analysis will not be of much value. Because you say you do not know how to do this analysis, I suggest you hire a professional, such as an appraiser; or perhaps your agent is able to assist with this. Once you know which course of action is the most profitable, or which best fits your risk tolerance, timing, finances, etc., then you can proceed.

Brian

Rhonda Wilson · Answer

Hi Debbie,

I suggest that you get at least one second opinion. My thinking is that your best bet may be to sell the house "as is." The reason is that there are many potential buyers who simply want a good location and would be happy to tear a house down and build a home to their exact specifications. From that point-of-view, it's better that you sell as-is because you are selling a "blank slate" to the buyer rather than building something that may or may not be what buyers are looking for.

I'm also thinking that if the location is good, that the value should be there. It is, after all, a matter of supply and demand.

Good luck!

-Rhonda

Nick C. · Answer

It's tough to give advice on this one without more details. Here's what you should do:

1. get an appraisal on the property

2. get quotes for fixing the foundation and the roof, preferably from more than one company.

3. do the math

What I mean by that is if the house is worth 500k and the repairs will cost you 50k, then you should definitely do the repairs. If the house is worth 200k and the repairs will cost you 150k then it's probably not worth it.

Michael Strachan · Answer

It sounds like a second opinion would definitely be a good idea. Your agent should be able to provide you at least a general overview of what you can expect given each course of action (fix up and sell vs. sell as-is). In general, I advise most of my clients to sell as-is (especially if they have no experience making repairs) with a few exceptions like just making the home more attractive before going on the market. This is of course highly dependent on the individual property and you shouldn't take any advice from anyone who hasn't at least seen and become familiar with the specifics of your home. Our local market is at such a high price point that many buyers out there are looking to buy a property that's a little bit run down with the hopes of fixing it up themselves to their own liking. The last thing you want is to spend $100K fixing it up and the buyers decide to gut it and do a total remodel anyway. It generally saves quite a bit of headache to sell as-is because as you said, our local area is in such high demand as it is.

Brianne H. · Answer

Hi @Debbie Cost,

If your agent hasn't been helpful so far, probably best to look for a new one. They're unlikely to suddenly start being more helpful! I've only dealt with appraisers for refinance purposes, not for actually giving a value to selling the place, so in my experience, the appraiser has had to follow the lender's instructions to a T on what to include, or not to include for value (example they can only count one outbuilding and no more than 5 acres of value for rural properties.) What may be a better idea depending on your area is to meet with at least 3 different realtors. Get to know them a little bit, see who you'd like to work with, but also get their opinions on what the house could realistically be sold for A) as-is, and B) if you do the necessary repairs. In theory they should know the area and be able to give you realistic figures, and then you'll also know who you'd like to work with. If one of them throws out numbers that are way higher/lower than the other estimates, that might give you an indication that they don't know the market.

Also, it would be a good idea to get an estimate or two on what the estimated repair costs will be. It will help you be able to make your decision, as well as if you got an estimate on a new house build. Good luck!

Arlen Chou · Answer

@Debbie Cost it is very difficult to give advice on this topic without knowing your reason for wanting to sell. Also it is important to understand the timeline you want to follow. You should consider your NET profits and also your timeline before making any decision. Your agent will want to sell at the highest possible price because his/her commission is based upon that. Is your agent a personal friend or somebody that was referred to you?

In your analysis you should also consider that your taxes could POTENTIALLY be higher if you do a new build.  Also do you have a place to live during the building process?

As for the construction of a new house, it really depends on the finishes you choose and the size of the completed project.  Typically you would base an ESTIMATE on a dollar/sqft basis and then go from there.

What city is your home? Are the sales prices you are seeing based on existing homes or new homes?  There are a TON of questions that really need to be addressed before you make a big decision like this.

Bob Woelfel · Answer

@Debbie Cost...you definitely need to get more opinions.  I know the Bay area is expensive, but you're talking about maybe up to a million dollars or more here.  If you aren't in love with your realtor and they haven't been very helpful I would highly suggest moving on and interviewing a few more.  Bring them to the house to see what they think.  I would even suggest finding really successful investors in your area and see what they would pay for the house as-is.  You could get it appraised as well for another opinion.  Get a few bids for the work you think it would need to sell, particularly roof and foundation as those will probably be bigger ticket items that will need to be addressed before sale.  Talk to developers to see what they would give you for the land.  It's clearly important to you because you are here looking for advice.  Do a little work on the front end so you can feel good about the decision you ultimately make.  Best of luck.

Rhonda Wilson · Answer

Hi Debbie, I suggest that you reach out to our very own David Greene. In addition to his contributions on BiggerPockets he is also a Keller Williams realtor in the Bay Area. If he can't help you personally, he could almost certainly refer you to someone who could help you. I found his webpage here David Greene website . Scroll down to the bottom of the page for his phone number.

Theresa Harris · Answer

I'd also suggest getting a second opinion, both from another realtor and inspector.  When you fill out the disclosure statement you may want to know if something really is a problem especially now that someone has said something might be a problem.

Matthew Paul · Answer

What is the land worth ?      I would do nothing to the house . I would sell it for the location .

I'm a new member in a bit of a pickle. Can anyone help?

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