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The Tucson fixer upper is finally sold

November 14th, 2007 by Kenric

Man this has been a wild real estate journey.  Here is the story of the Tucson fixer upper.

My friend and I bought this house in February of this year around $120,000.  Our plan was to flip it as soon as possible with a budget of around $20,000 at a potential sale price of $155,000-$175,000.  I realize that this was not much profit potential, but the goal of the project was to try out a flip and hopefully make $5,000 while learning… a boy did we learn alot.

The house had not been lived in for many years.  We had the seller finance a 1 year note for $82,000.  The seller lived in California.

The first month of the flip went as planned.  We spent around $15,000 and had much of the house completed.  The only things left to complete were the electrical and HVAC.  We could not access if the HVAC unit was working without power. 

This is where the problems began.  In order to get the power turned on, we had to get a reconnect permit from the city.  The city inspector kept failing our electrical inspections with new problems.  It’s been so long I can’t remember what they were, but they were little things everytime.  We got to the point where we were wondering if we had to pay the guy off.  After talking to a few electricians, they all knew him as the anal inspector.  We were the unlucky ones who bought a home in his territory. 

Taking a page from the how to beat a traffic ticket book, I called down to the city and asked for him.  The secretary said he wasn’t there and I asked if he had any days off during the week.  She told me he was off on Thursday, so we scheduled our inspection for Thursday.  A new guy came, bingo, electrical permit approved.  This delayed us 3 weeks.  The next step was to call the power company and have them juice it up.

The original power panel was located under the carport.  The power company came out and said we can’t have our power meter there.  I found out that power meters under the carport are grandfathered in but once you get a reconnect permit, you can no longer have it located there.  So we had two choices, either remove the carport or move the electrical panel.

This is where we made the wrong choice.  You wouldn’t think that you’d be kicking yourself, for not tearing down the carport vs. moving a panel a few feet.  We had just got the roof repaired so we opted to keep the carport and move the panel.  Of course, this meant new permit and more inspections.  Our electrician moved the panel and the original inspector came out for an inspection.  The panel checked out fine, but the inspector went inside and began to nitpick things.  The ultimate issue was that the power outlets and lights were not grounded.  The house was built in the 1930′s with 2 wire electrical and he wanted us to run a ground wires to each outlet and light fixture.  So back and forth we went with the inspector.  He didn’t take any days off this time, believe me we kept checking.  I even called his supervisor to see if we could get his inspections reviewed.  Finally we got the electrical approved. 3 months and $2,000 later.

In July, we didn’t really do anything because I was on vacation in Colorado.  In August during monsoon season Tucson received alot of rain.  Unfortunately, our fixed roof had a few leaks which ruined some of the drywall on the ceiling.  After hearing this we just made a decision to just sell it as is.  We were at a breakeven point.  The cost to fix and sell could possibly break us even.  But we could be putting good money after bad.  So we decided to dump it and cut our losses.

So it went on the market as a fixer upper.  It was a home that basically needed landscaping, HVAC, roof patching, drywall repair and maybe a few new kitchen cabinets.  We got many many offers on the home because it was the lowest priced in the area and had a 1/4 acre lot.  In this low end price range you are going to get alot of 100% financing, seller financing and bad credit score offers.  We tried to take the best of the worst.

The first offer we accepted fell through because the buyer couldn’t get financed.  The second offer cancelled after their inspection.  The third offer is the one that finally closed.

This offer was made in early September.  Closing took forever because of a bunch of issues.  This buyer was preapproved for 100% financing.  However, during the middle of his loan process, his lender decided not to do 100% financing anymore.  He found another lender but that delayed us 2 weeks.  Then came the appraisal.  The appraiser said that we needed a stove in the house or they couldn’t close the loan.  So I had the buyer move his stove into the home just for the appraiser to see and then take it back to his apartment.  The house ended up appraising for more than our contract price.  The termite inspection came back with signs of termite damage so we had to get that treated.  Every little thing kept delaying the funding of the loan.

Meanwhile, during this time we couldn’t find the previous seller who held my note.  Both her phone numbers were disconnected, but someone was still cashing the mortgage payments.  I sent a letter to that address that said, “CALL ME!!!” and someone did.  It was a friend of the note holders who apparently picks up mail for that address once in a while.  I found out that the note holder had moved to a small village in Italy.  Title had to overnight her the paperwork for the payoff statement and lien release.  She said that in her village there is only a notary there once a week or she’d had to drive 4 hours to a big city.  So we had to wait a week for the documents.  Once they arrived, the payoff statement was wrong. She said that we missed a mortgage payment.  So I was off to the bank to get copies of cancelled checks to bring to title as proof.  Luckily we didn’t need her to correct the payoff statement and get it notarized or else we’d still be waiting for this to close.

It is day 260 and it is finally over!!!  I haven’t calculated the exact numbers, but from the $20,000 in fix ups, $2,000 in electrical, $4500 in holding costs, $2000 in closing costs and a few hundred here and there for miscellaneous, I’m estimating a loss of $15,000-$18,000 on this project.  What killed us was the electrical, it wasted about 5 months and put us way over budget.  The water damage also set us back.  Without it, we could have priced the home alot higher than we did.  In the end, our sales price was about $137,000 and the house appraised in as is condition for $140,000.  The other offers that fell through were all in the $140′s.  We just wanted to get rid of the house and get our capital back.  If things went correctly, I think our initial numbers forecast would have worked.  This home could have sold for $155,000 easily.  But we all know things never go as planned.

So it’s on to the next project!

Posted in Tucson fixer 1 | 14 Comments »
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