Smart Buy on Prospect Avenue

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…