Greater Hartford Real Estate Blog

One of my favorite houses on Prospect Avenue in West Hartford recently sold.

I typically walk by it on a daily basis while walking my dog. Well, in July, it went up for sale. It was bank owned and being sold As Is, originally listed at $769,900, which was about $100 a square foot. Not bad considering that houses on Prospect Avenue typically sell for $150-$225 a square foot.

I went to take a look and my general observation was that someone had started fairly extensive renovations and appeared to run out of money. Hence, bank owned. The kitchen had been completely updated, baths were gutted and updates stopped mid-stream, walls were freshly painted throughout. There were beautiful architectural details and hardwood floors, but fireplace mantles and stained glass windows had been pulled out and were strewn about the house. In the basement, it appeared that fire damage had occured at some point. There was a sizeable carriage house with a lower level office and upper level apartment, both in disrepair. Going through my mental checklist, I estimated that the house and carriage barn needed about $200,000 in work to get it up to Prospect Avenue snuff. Adding that to the list price of $769,900 was too much for an investor because they would never be able to recoup the investment, given that it’s on the first block of Prospect north of Farmington Avenue.

But I continued to watch the drama unfold over the next few months. The listing expired in September and was re-listed again in October at $719,900. Still too much. It expired again in November and was relisted at $699,900. It went under contract at the end of November. It closed on December 31, 2007 for $450,000. That’s right, it was last listed at $699,900 and closed for $450,000.

Holy schniekies. Happy New Year to the buyer! There are a few lessons to be learned from this…

1. With a bank owned property, find out how much the bank is owed, don’t assume it’s the asking price. They really only need to cover what they are owed and their fees to close the deal (real estate commission, attorney fees, etc.).

2. You’ve got to have cash and a squeeky clean contract (basically no contingencies) to pull off these deals.

3. The neighbors of this house are going to be peeved because it will drop the property value for that block. I mean, come on, $59 a square foot? Crazy!

4. The neighbors of this house will be happy when the buyer (most likely) finishes the renovations and flips this sucker in a few months. My guess, just in time for the spring/summer market. It could probably go for $850,000+ once everything is fixed and in tip-top shape.

So, if you’ve got some cash and the stomach for investing, here’s an example of how it can really pay off. Best of luck to the new buyer. I hope whatever their strategy is works out for them, flip or hold. I’ll provide updates as I see this unfold over the spring…

This past Sunday there were 36 foreclosures advertised in the Hartford Courant. A few months ago there would only be one page of foreclosures advertised. Now we’re up to 3-4 pages of foreclosures every Sunday. This week, one of them was on my block in the West End.

The sign went up on the lawn 2 weeks ago. After it was listed in the Courant, I had 3 people call me to ask how they could go about purchasing the house. Here was my quick and dirty response… First, you should call the attorney managing the sale. They will give you specifics on how much debt is outstanding on the property (that they actually know about). The bank has also done an appraisal and you’ll need to bring a bank check to the auction in order to participate. The check is for 10% of the appraised value, or about $45,000 in the case of the subject house. There is no mortgage contingency allowed, so you need to have your money lined up if you were to actually win the auction, otherwise you can lose your deposit if for some reason you couldn’t secure a mortgage (the $45,000). Essentially, you have to be a cash buyer. There is no guarantee that you will actually be able to get into the house on the day of the auction in order to perform an inspection, so you may be buying the house blind. Who knows what the condition will be on the inside?

The takeaways from my mini-lesson: you need to have cash readily available in order to participate, you’d better be handy or have a contractor in your back pocket because the property may be a mess on the inside, and you need to have a market analysis done before the auction to understand what you’re willing to pay and the actual value of the property (the bank’s appraisal isn’t always accurate).

Everyone is fascinated with foreclosures now and think they’re a great way to make a quick buck. My advice, leave them to the savvy investors or contractors. But if it’s something you want to try and get into, here’s an excellent article from the New York Times that talks about someone that does short sales as their business. I personally hope my neighbor can save his house before it goes to auction.

I’ve mentioned previously that I recently became an investment property owner and believe the market is now ripe for people who have a little extra cash to dive in. There is a new book out that I’ve started reading and it’s excellent. Here’s a supporting book review that I found on Boston.com. Enjoy!