Fix it up or sell as is?

[BB_TX]

A bit off topic here, but I know of no better source of info than here at TBN.
I have an aging cousin whose health is declining and beginning some mild dementia and has had to be moved to an assisted living center. She has no immediate family. I have a durable power of attorney for her and am trying to resolve her financial issues. She has limited income and limited assets. Now here is the question. She has a small 4 room house, built in the ‘40s, less than 1000 sq ft, that she has allowed to deteriorate quite a bit. It is on the tax rolls at about $45K but would bring much less than that in the condition it is in. I don’t see that she will ever be able to move back home. I just noticed that the roof on the back side is sagging considerably. That back part needs to be completely stripped off and reframed. I am trying to determine if it would be more financially beneficial to her to have it repaired and try to sell it at full value (whatever that is), or just sell it as-is to someone who buys and repairs older houses like that. Does anyone have ideas/suggestions?

 

[_RaT_]

Talk to a real estate agent and get their thoughts. Location has a lot to do with how something sells. Out here, anything under $300,000 sells immediately. After that it slows down and once over $1,000,000, the sales have stopped. If a home such as the one you describe was here, just the land would easily have that much value. I would think a real estate agent with knowledge of the area could really assist you. Also your cousins finnances should be looked at by a financial planner to see how it may impact her health benefits with state and federal health care.

 

[riptides]

What RaT said,

And remember never short yourself. For every price there is a buyer.

-Mike Z. /forums/images/graemlins/grin.gif

 

[bontai_Joe]

Definitely talk to a couple of real estate agents and get a feel of what it would sell for as is vs. fixed up, and then access if the repairs are worth it.

Example: If it's worth $40,000 as is, and it will take $50,000 to repair it to sell at $65,000, you would be $35,000 in the hole... Not good!

If it's worth $40,000 as is and it will take $50,000 to repair but then sell fairly quickly at $150,000... you make $60,000 profit that wasn't there before.

I have NO CLUE as to property values in Texas, so a local real estate agent would be the best resource I can think of.

 

[billbill1]

Bill, sad but true, in Kansas it doesn't matter how much the home is worth-either way the state will gobble up any income or property that she has to sustain her in the assisted living and nursing home care. If it is worth $40,000 or $4,000,000 the state will probably eat it up to pay for caring for her.

 

[TN_rebel]

First I would contest the tax appraisal. If the house isn't worth what it's being taxed for, then you should be paying less tax.

I don't know if the location makes renting the property an option or not, but if it is, and there's no mortgage on the property, there's an opportunity here to boost the available income for your relative.

At 1000 sqft, if you are going to do the work personally then it most likely will be in your best interest to fix it up (sweat equity). If you are going to contract the repairs you will probably make a bit extra, but possibly lose a little bit of money. The best way to guage that risk is to speak with a reliable real estate professional, and 2 or more contractors.

The decision will be easy to make once you have all the information you need to make a wise one.


Good luck.

 

[BB_TX]

As far as the tax implications, let me elaborate a little further. She is not under state/federal care. She is retired civil service and has lifetime BC/BS health insurance benefits. Her civil service pension plus a small SS monthly income cover about 80% of the assisted living center. Insurance/medicare/medicade do not cover any. This particular living center has some medicare coverable rooms, but the waiting list is long. Her deceased husband was a vet and she will probably be eligible for enough vet benefits to cover the balance of the cost of the living center with a little left over for incidentals. Unfortunately, it is obvious that she has not been able to properly maintain her finances. She has substantial credit card debt that will be difficult to pay off. I am going to try to negotiate that down as much as possible.
As far as property values, this town/county has been in the top 10 (and even #1) in growth in the US in most of the last several years. Unfortunately, hers is in the older part of town and far from the more desirable areas and will not benefit from the growth in the foreseeable future.

 

[MikePA]

When my mother was in a similar position, i.e., having to move into an assisted living arrangement, we did what others have recommended, we contacted a real estate agent and followed their recommendations. It was well worth the commission to not have to deal with the headaches. Having to move a parent, or anyone for that matter, out of a home they feel safe in, raised a family in, where I grew up, was sressful enough. My goal was to get cash in order to pay the assisted living costs. As it was, it took about a year to sell the house, after reducing the price a couple of times.

The other thing we wanted was to minimize the amount of time the house sat empty. Insurance companies need to know if a house is unoccupied. We also allowed the children to buy (not take), any items they wanted from the house, then got three bids from used furniture places to buy the entire contents of the house. Hopefully, there are places like that where you live. We did not want to hold an auction. Some other things we learned along the way.

Someone has to cut the grass and keep the place looking presentable for sale.
Someone has to shovel snow (although maybe not in Texas /forums/images/graemlins/smile.gif )
Someone has to make sure the heat stays on (no frozen pipes)
If there's fixing up that needs done, someone from the family usually has to be there or at least oversee the activity.
Keep track of everything, particularly expenses and who takes what out of the house.
Decide with the other relatives (if there are any) what, if anything, you expect to be reimbursed for what you're doing.
Reserve time to meet with real estate agents and, perhaps, lawyers.
If there are other relatives, consider adding three way calling to your phone. It becomes tiring telling each relative the same information. Much easier to have a conference call.
Again, if there are other relatives, communicate, communicate, communicate about what's going on.
Remember, if you're the closest (geographically) relative, others will assume you will handle 'everything'.

 

[EddieWalker]

I have some experience buying fixer uppers, rebuilding them and selling them here in East Texas.

My first consideration is what are the houses in top condition selling for in the neighborhood?

Then I've learned that for materials alone, doing all the labor myself, it will usually cost $20,000 to redo a house. Small or large, it's gonna be close to that amount.

I also know that it will take me about 3 to 4 months to do a total rebuild.

I then add the cost of the house, the cost of materials, commisions and taxes. Then subtract that from what the house should sell for at a low price for a quick sale. If there's isn't at least $20,000 grand left over for profit, I won't bother with it.

There's allot to it, more then most people realize. If your not looking to make a profit, I'd pass on doing anything to it other than cleaning things up a little and make your real estate agent earn their commision.

Good luck,
Eddie

 

[browns40]

Hi BB_TX,

Contact your local Dept of Human Services/TX equivalent regarding Estate recovery rules surrounding Medicaid...

Generally, once someone enters Assisted Living, the cost to stay there is far beyond any sort of income they have coming in...

Sell the house "as is" and put that money towards her debt, then towards her care... more money from the sale once fixed up will simply go to the assisted living center until she becomes eligible for Medicaid, and will only delay that process from occurring... find a friend who is looking to buy the "fixer-upper" at market value...

There will be a "spend-down" period until your cousins assets reach the level that Medicaid will kick in... the house will be viewed as an asset if not sold, and the State will be granted any proceeds from the sale of the home, being granted first lien under estate recovery rules, at least in Maine.

Most dementia is a progressive and heartbreaking disease, and her condition will ultimately deteriorate over time... focus on earlier memories, as they'll be most intact, and write a "life story" of hers for the staff at the center so they have a common subject to converse about. School, marriage, kids, pets, favorite activities, accomplishments, etc.

Take some time to look around at Assisted Living Centers, and also Nursing Facilities in your area... as the disease progresses, so will her needs. Note the staff interactions with residents, the activities programs, smells of the place, the feel you get when walking around. Have the Administrator take you around and watch how they interact with residents & staff during the tour... go to medicare.gov and look at Nursing Home Compare to see how they've done in annual surveys.

Take the time to plan ahead for her now, even checking on Guardianship if her condition dictates this, and be prepared for the future.

Best wishes to you, and thank you for taking this on--it's a big undertaking--you are a good cousin!

Happy tractoring! /forums/images/graemlins/cool.gif