Posted on October 17, 2015 - 10:10 AM
by Cary Beach
Been Crazy 2 weeks, wrote a offer on a home in Liberty Hill, TX, that had a septic system and seller had made additions that increased it from a 3 bedroom home to a 5 bedroom home. Just BEWARE if your on a septic system you must get health department approval from your county for the added bedrooms to your septic system. Septic systems are designed by how many people will live in the home. Add more bedrooms equals more people using the septic system. So now in this case the sellers have to replace the entire system at a cost of $23,500 because they did not do their homework up front. Even if you don't need building permits in the county were you live, you always have to have health department approvals on septic systems when you increase the number of bedrooms in a home. Then to top it off the foundation is bad, on cinder blocks and a pad and are leaning and braking. So now it needs another $26,000 in repairs with this home. After all this my buyer terminated and off to find something else. Basic Math is on investments for Distressed properties is average condition Appraisal value less repair cost X .70 this allows 30% profit. In a hot market like Austin you could go .80 at a 20% because there is so much competition and resale is very fast in the Austin Market. Using this basic formula the appraisal came in at 200k, (even though it was listed at 234,900) - $50,000 in repairs =$150,000 x.70 is $105,000 sell price or using .80 its $120,000 sell price. Unfortunately these sellers could not sell for less than $150,000 the math just don't work for a buyer to buy it as is. All this would of been prevented if they would of had a profession do the additions using proper Pier and Beam and getting health department approval on the added bedrooms. If they would of done all this we would of been closing at full Retail price this week.
Moral of the this story, do it yourself stuff is fine. But use a professional on major improvements. Know building codes and make sure you follow these minimum requirements. These folks cost themselves about $100,000 by not doing their homework up front.
In this case my recommendation to the sellers would be make all repairs and come back on market in the spring.
Here is a great site from Rainbow Septic that has lots of informative information :
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