If you basically like the house...keep your eye on it. Eventually, the bank will be forced to reappraise by the auditors & mark to market. Then, the price will come down. The bank's appraisals have to be less than one year old. After its reappraised & the charge-off has been taken...the price will come down. This is happening all over the country in one form or another. If the lender is a regulated bank or credit union they will eventually have to answer to the auditors though. This is another one of the proverbial "shoes" that's still left to drop in this whole real estate bubble mess...the marking to market of all this foreclosed real estate.

We've been watching one since February. In our case, it's going to take longer for the lender to have their reality check though because they are unregulated although they will have to answer eventually to shareholders.

Tricia

Maybe the land is worth $500k?

Also - most of the problematic things that are mentioned are cosmetic and not all that costly to redo (with exception of the exposed FL room). Carpets(some underlayment), sinks, appliances, faucets, dirty rooms and dirty fireplace, resanding wood floors are common elements that are redone in homes all the time. All those things can probably be done for $10,000+-. Even add new cabinets and the cost isn't prohibitive.

I'm curious...what are comps selling for? If it is a very pricey area....the comps in good condition could be close to tiwce as much....that could explain the $600K price tag...

Last but not least...the condition is somewhat typical of foreclosed proeprties...as often, those who are forelosed upon seem to attempt to get some level of satisfaction in making it hard for the banks to sell by vandalizing the home...

If the comparable homes in the neighborhood were selling for a million and up I would certainly consider it. Everything is relative.

Without more information it's impossible to say if the place is worth $600k "as is". Let's say you put $300k into it, would it be worth at least $900k? Then it might be worth $600k now. There are some lots worth so much that it wouldn't matter if the house was a shack, the land value is still there. I don't know what the second largest home in our county would go for, but it would be over $5m, so $600k for a teardown would be a bargain.

Or maybe the bank is just delusional!

Actually, it's always cheaper to tear down and rebuild than to remodel. The true value of any property is in the land, not the house.

It isn't "always" cheaper to tear down and rebuilt. It depends on a number of factors including what is entailed in the "remodel" and costs of permitting (some towns charge a premium for a permit to tear down plus debris removal). A remodel could be as simple as a new kitchen, new carpet and new paint. Or it could be a "to the studs" tear out (leaving just a bare shell).

The value of a property isn't always in the land. There are still plenty of places in this country where lots are $30k, but a small house might cost $100k+ to build.

My house is nowhere near the second largest or most expensive in the county (or even the town), but a $200-300k remodel would be FAR less expensive than the cost of a tear-down a re-build.

Oops, sorry about the typo when I was talking about replacing things inside - I meant to say $20,000. That's what I get for typing too fast. Not sure of what the comps are for that area. I went just out of curiousity.

Besides the interior needing work, all the outside lights need to be replaced, roof needs work (cedar shingles and a good number of them have all ready fallen off)sprinkler system needs new heads, total landscaping needed (I can't recall seeing so many overgrown bushes and ivy is all over the back of the house) and back flagstone patio needs almost all of them replaced. Additionally there was water damage in the basement and all the drywall had been removed going downstairs. I have no idea what the basement looked like as the electricity had been turned off.

It's really too much house for me but just wanted to see if it was as bad as she had described. The neighbor that told me about how the people who lived there acted, also told me that it had been on the market now for over a year. Doesn't surprise me.

>>It isn't "always" cheaper to tear down and rebuilt. It depends on a number of factors Any market that is asking $600K for what is clearly a vandalized house, cosmetics or not, is probably a market where land IS more valuable than the house. That is way, way, above the average cost of RE in the US - in other words, a market similar to where I live.

"Actually, it's always cheaper to tear down and rebuild than to remodel."

All generalizations are false.

Rebuilding runs around $100/square foot in my area, remodeling is anywhere from a fourth of that to twice that, depending on what you have done and if you do any of the work yourself. There is no "always".

jkom51 Actually, it's always cheaper to tear down and rebuild than to remodel. The true value of any property is in the land, not the house.

Wow do I disagree with this. We've actually found this to be the opposite in my area. YMMV

To answer the original question, NO, unless the property was quite unique, such as waterfront or surrounded by national park or something that made this parcel particularly valuable!
I certainly wouldn't pay that kind of money for the house.

as said before it all depends on the area. My house is worth $400K. If it were a tear down it would be worth $300k. Its on a 50x100 ft lot Some houses are on properties 2-3 times the size, and will go for 6-700k or so.

Definitely YMMV, then, regarding teardown vs remodeling. It is always interesting to see how different most parts of the country are from the San Francisco Bay Area. Out here, building costs run $250-400/sq. ft. Remodeling can cost 35-100% more than that for anything which involves bringing the systems up to code (which is almost anything, around here).

One of our neighbors budgeted $75K to do a modest expansion of their 1940's cottage to add a second bathroom and a 10x12' single story bedroom (they have 2 teenaged girls sharing a basement).

The city informed them they would have to put in more than 20 concrete pier footings, drilling 26' down - 10 of them would anchor the entire north side of the house. We're all halfway up a hill and only by doing this will they meet new earthquake requirements (the codes get progressively stricter every year; it's already been mandated).

The footings alone came in with an estimate of $60K.

Needless to say, they decided not to do the remodel even though they did get the permits pretty fast, which around here means they got them in less than 18 months. So they basically paid out close to $10K for drawings, permits and engineering appraisals for the fun of deciding they couldn't afford to do it after all.