The $125,000 "Fixer Upper Deal" In Key West

Yesterday, I called a Realtor friend and had her meet me and my girlfriend at a bank owned townhouse which is advertised in this way at the keywestmls.com website:

3/2 Townhome, priced to sell. Great renovation project. Vacant and easy to show! HomePath® Renovation Mortgage Financing Available only on homes you make your primary residence and offers these benefits: Financing to fund both your purchase and light renovation Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate) Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer


Status:Active
Original Price:$123,500
Listing
Price:$123,500
Listing Number: 110862
Property Type:Townhouse
On
Market: 18 Days
Address: 3225 Pearl Ave
Key: Key West
Mile Marker: 4
Neighborhood: New
Town
Subdivision: KW Estates
Building Style: Townhouse, A-Frame,Two
Story
Bedrooms: 3
Bathrooms: 1.1
Price Per Sq. Ft. $119.67
Square
Footage: 1,032
Lot Sq Ft: 1,719
Year Built: 1988
Taxes: $1,848
Tax
Year: 2008
Exemptions:None
Lender Owned: Yes

Before entering this REO townhouse, my Realtor friend had to stand on the steps and read a bunch of disclaimers which we (my girlfriend and I) had to agree to acknowledge.

Among the problems which the bank wants you to know:

1. The house is infested with termites.

2. We were not allowed to walk out on the upstairs balcony as it might collapse

3. Home was being sold "as is" and any problems with plumbing, wiring, air conditioning, etc., were to be problems of the new owner(s).

4. Damage to the outside of the house could result in injury. Watch your head and feet as you walked around the property.

Here is the photo of this townhouse home from the outside which the bagholder bank is asking only $123,500:

Let me explain this townhome's layout:

Each home is 1/4 of a quadplex of town homes. Looked at from above, your town home would look like a quarter slice of a pie, except the imaginary rounded edge of the pie is not all home, by the outside porch.

Before entering the home, we looked at the siding on the outside. It was dry rotted, waterlogged in areas (from recent rains, not Katrina), and filled with termites. I could easily kick holes through the siding and walls behind it.

Next, the porch is about to fall down. Some boards are warped. Others are weather beaten to a point they will soon look like the siding.

And the yard looks like Hell. There is a big above ground swimming pool, the lining torn and sun beaten, weeds growing in spots.

The entire fence around this yard is warped, missing boards in places, and so decrepit it would need to be entirely replaced.

The door opened in an off square frame. The smell of mold and termite droppings permeates throughout. Carpet on the stairs was dryrotted and had stains on every step. The kitchen floor was tilted and buckled in places. A light fixture hung so low from the ceiling that a toddler walking under it would hit their head. The cabinetry was not level as there was obviously some settling or sinking of the house.

The kitchen appliances were old and probably would not work after setting so long. (Judging by the weeds in the swimming pool outside, I'd say this house has been vacant for at least 2 years.)

We asked the Realtor how long this place had remained empty. She did not know. I told her there was no need to tour the upstairs as this was a catastrophe of a property. She agreed. However, my girlfriend wanted to see the remainder of this trainwreck and tour the bedrooms and bathroom.

Upstairs, the bedrooms were a wreck, the carpet was dryrotted, all the walls needed painting. The bathroom needed a total renovation. She said the only nice thing up there was a sort of new ceiling fan.

While my girlfriend was reporting back her observations, my Realtor friend explained just one of the huge problems one would run into trying to renovate such a sorry problem. She used the issue of termite extermination:

Keeping in mind you are one slice of a pie of a quad-plex foursome of townhomes, the proper way to exterminate would be to have all three of your neighbors agree to have their townhomes tented at the same time you tent yours. The going price would be about $3,000. However, if just one neighbor objected, you could still tent your own home for $800. The problem here is the termites in your neighbors untreated walls could come back to haunt you later after the pesticides have worn off.

After I came home, I thought about this property and shook my head.

It is a total disaster.

There's no way anyone could "renovate" this place for anything less than $75,000 . . . and what really needs to be done is for the town home to be demolished and if the owner of the land wants, build a new townhome with new materials.

Meanwhile, some bank, is offering this "deal" at $123,500. In all honesty, the bank should simply bulldoze the place and sell the land.

Anyone buying this eyesore is not getting a deal.

If you can get the bank to move down to $100,000, you're still going to lose money and your sanity as you negotiate with your new neighbors to start tenting, demolishing faulty walls, etc.

I wouldn't give the bank $50,000 for this place.

The only way I'd take this townhome would be if the bank paid me $15,000 to take it off their hands.

Then I'd spend $25,000 on demolition. Then I'd sell the land.

I cannot believe any bank in this town would be so stupid as to market this house as a "deal".

This house will suck the lifeblood out of any poor couple who is only wanting a low payment mortgage, and who think they can do a "Flip This House" renovation on the cheap. I hope no Key Wester is ignorant enough to buy something which is not livable, dangerous, and a gaping money pit which will drain away their money and sanity.

As always, buyer beware!

Rock Trueblood

p.s. As we were driving away, I watched a young couple drive up and take a flyer from the plastic box nailed to the falling down fence. I looked at that young couple and sent them a mental note: wait two or three more years, there will be plenty of great properties coming on the market as the Option ARM and Prime Borrowers go down in flames just like the Sub-Prime borrowers.

Next up: My Realtor friend believes pricing is "firming" up and that we've hit bottom. Why I totally disagree with her.