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Short Sale with lots of baggage.

My husband and I are looking to buy our first home. We have three young children. I want to buy a fixer and over the next five years or so, slowly create our dream home as we are on a budget and cannot afford the homes already beautified. We are looking closely at a short sale. It appears to have quite a few problems and I am wondering if it is worth it. The detached garage has a major mold issue that you can smell upon entering. There is also black mold in a small area in the basement just above the floor. It has asbestos siding that appears to be in good shape. It looks like it has an underground abandoned oil tank that the homeowners are playing dumb to (and yes I would ask them to remove it). It needs a complete overhaul with wallpaper removal, kitchen, and all bathrooms remodeled, and some walls opened up. Suddenly, I am worried about lead paint as this house was built in 1969. It is however, in a great location and on a great lot. This property offers the most bang for the money which is why we are still considering it. Any advice?
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March 19 - South Brunswick
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Answers (9)

some others have explained the roller coaster of a short sale (its a lot of time, money, frustration... with ZERO assurances you will ever see a light at the end of the tunnel).

As far as your comments on this particular short sale... You say that you would ask the homeowner to remove the underground oil tank, I ask you to consider this fact... The homeowner is not going to walk away with any moneys on this sale, so why in heavens name would they be willing to spend one red CENT on ANYTHING?

Be a little careful with regard to assuming mold, black mold, etc. (unless you had a lab test the material in question). 

at the end of the day, this does not sound like its a possible home to pursue... a bank wont lend money on the house without some work being done (including oil tank removal), the homeowner darn sure is not going to do it, the bank is darn sure not going to do it unless they own it (which they dont), that leaves YOU needing to put up serious money with ZERO assurance of a close (you wont be able to simply do a "hold back" on an underground oil tank because their is no way to know if the damage is $1,000 or $1,000,000.00 until the fire dept inspector is their and the tank is dug up).

move on to a more conventional sale... 
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March 26
Profile picture for cullinsccg
I have been through a major renovation including mold removal, and a small reno on a short sale with my daughter's condo.  Here is what I learned.  Mold can be removed by professionals.  My entire basement had to undergo removal of all the drywall and flooring, scrubbing and chemical treatment to remove the mold, water proofing -= including a French drain and sump pump and then refinishing.  The mold removal and demo was $7000, the water proofing etc was another $7000 and termite treatment was $2000.  All of that had to be done before I could even start the construction upstairs.  I put about $100,000 total into the project and wound up with my dream home.  But I did it all before I moved in. 
On my daughter's short sale we were able to close in about 4 months but we were prepared to wait 6.  It went thru OK but the bank reneged on the sellers promise to pay closing and we had to pay all those costs ourselves. 
In both cases we got properties that were worth a lot more than we paid, including the costs of renovations
Finally, look into and FHA product called a 203K.  It is a special financing program for fixer-upers and can provide the money you need to do the basic renovations you need to make the house livable.  It is not well known but you can Google it and get all the info you need. 
Good luck!
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March 26
Profile picture for user0689911
Thank you all for your insight and contributions. I greatly appreciate your thoughts, expertise, and time. It has certainly helped give me clarity.
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March 26
My advice based on what you shared?

Run in the opposite direction.

It sounds like the proverbial money pit......and, do you have any idea how challenging a short sale can be? Also, if there's mold and an oil tank (don't count on the sellers who are upside down on their loan to do anything)......an appraiser will most likely make any mortgage commitment subject to those items being addressed.
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March 23
If I was advising you the "black mold" and "abandoned oil tank" would be deal breakers on this particular property.  Although short sales can be inspected by the Buyer, it is almost always written into the contract that "the Buyers sole remedy is to cancel the contract" if they are not happy with the inspection results.  Rarely do Sellers perform any repairs.  Major renovations with 3 young children living in the home would be "challenging" at best.  Opening walls could also make lead paint particles airborne which could be a health danger to your children.  Keep your hopes up and keep looking!!!  This is not the only great deal that will present itself.  This one sounds like one for a contractor to purchase and renovate, not a first time Buyer.  Good luck to you and your family!!!!
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March 23
Real Estate is an investment.  Short sales despite the pain they offer sometimes, are the best value in town.  If the listing agent is a short sale expert, the mold and the oil tank issues can be resolved by the bank.  It may take time but they can happen, subject to which bank that is.  All other issues are cosmetic as far as I am concerned.  If it offers the best bang for the buck, the question is why not.  As long as you have faith in your ability to resolve what comes your way, it can be done.  I had a young buyer a few years back who was a first time homebuyer.  The home was tenant occupied and during the contract, the home deteriorated, the tenants neglect caused him to remove the entire sheetrock from the basement because of mold.  He resolved the tenant eviction issues, the mold issues and renovated the space.  He added so much equity in the house, he has already bought his second one.  Having said that, such massive repairs are not everybody's cup of tea.  If you have faith in yourself. Go right ahead and do it.
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March 20
Profile picture for Dan Tabit
Do you like roller coasters? Long before you open your first can of paint or take on your first project in this house, the fact that it's a short sale is going to drive you nuts.  I've been doing them since 2002 when no one knew what they were.  The process has changed over the years and some agents are pretty good at them, but too many still aren't. Even if you have a great agent handling the listing and negotiations with the bank, the process has more twists and turns than a steep mountain trail.  Often just as you think you're making progress, you hit a snag, have to start over, the bank loses the paperwork, the valuation expires, they come back at a higher price, the bank forecloses, the approval comes through but is only good for 10 days and you don't have your mortgage in place or you eventually close but the seller won't move out.  All of these have happened to me and more. 
I recognize and appreciate your desire for a home you can beautify over time, but you may find other options without all the grief of 3 to 12 months of waiting out the typical short sale.
My other concern for you is doing home fix ups while trying to raise 3 young kids is not as easy or cute as it looks.  Your hands are full and projects drag on and get old. This causes stress that a young family can often do better without.   
I don't mean to be a downer, and if you were in my market I'd love to help you find a home.  I just prefer that people have a realistic view of everything they are getting into when considering a combination of projects like you are considering. 
If after all of this you choose to move forward on the house, please make sure you have agents with successful short sale experience on both ends of the transaction. I've bailed out a few listing agents for my buyers and learned from some buyers agents on my listings. Make sure you do a thorough inspection and don't count on the sellers doing or fixing anything. Short sellers will claim poverty, which is why they need to do a short sale. 
Best of luck and please let us know what you decide to do and how it turns out. 
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March 19
"Been There done that" I am sure your question will elicit other responses from those of us who qualify for that phrase.
My main concerns are many fold
firstly how much experience do you have? If the answer is "not much " then stay away as this sounds like a major project For example you talk about 'opening up walls' but do you know the work that this involves and the dirt and dust.(answer this question quickly- does the house have sheetrock or lath and plaster walls)
 You say it maybe has an abandoned oil tank - well do you know how to go about finding out for sure before you commit to buying the property.
 You say the garage has a major mold problem -well mold is caused by dampness. Dampness creates 2 more problems - rot and termites. It will have to be torn down dollars to donuts. Will the town allow you to construct a new garage in its place.
You say there is a small area of black mold in the basement well let me correct your statement - there is a small area of black mold THAT YOU CAN SEE. I guarantee that there is many times the area of mold that you CANNOT see
Is your husband a plumber/electrician or other craftsman. If not  then you are going to have to hire them
 Do you know how much work the town will allow you to do without pulling permits
Last and certainly not least I would have very serious concerns about raising 3 small children in a construction zone
Sorry to be a damp squib 
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March 19
Profile picture for wetdawgs
If the property with all its warts offers the most bang for the money and you plan to have energy and resources for repairs and remodeling,  you've answered your own question.   However, if you are thinking of asking the seller to re-mediate any of the problems and you are considering that in your calculations, be aware that repairs don't tend to happen with short sales.  
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March 19
 
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