What Was Kay Thinking?

In 2010 we bought a Real Estate Owned (REO) property in Huntington Beach. We'd sold a home downtown that we'd bought at the height of the market in 2006 and knew we had to let it go before we lost all the money we'd invested in it. It was heartbreaking, because we loved our downtown home, but investments are just that...investments. We'd leased for a year after we sold the home, waiting for two things: the market to settle to its perceived low and for the model we wanted to come up in the community we'd chosen as our next move. When the townhome came up on the MLS, it was an REO, which meant the previous owners had defaulted on their loan and the bank now owned it. Generally speaking, especially in those depressing days when so many lost so much, REO properties were stripped of many of their appliances, light fixtures, mirrors, sometimes AC units...you name it. It seemed that if it would fit into a moving truck, owners, angry at the world and their banks, loaded it up and moved on out. The home we made our offer on was no exception, although it could have been worse.

                  As you can see from this MLS picture, the chandelier was cut down in the dining area.

                      Though it's a little hard to see here, the window was broken in the master.

The carpet was very dirty, the sliding doors and all the windows were old and almost impossible to open and close. The bathrooms still had the tiny toilets that were installed in the 1980's, and the kitchen, though somewhat upgraded, needed little facelift. All in all, we were excited about the opportunity to purchase our favorite plan in our favorite community (a five minute walk to the beach) for the lowest price for that model in many, many years.

We offered on the home at Christmas time when our daughter and her family were here from D.C. I took her over one morning while we were still in the negotiation process to take a look! As my daughter walked into the kitchen, she said: "Mom, what happened here? Did it look this way when you bought it?" Stepping into the kitchen, I was flabbergasted! All the soffiting was loose from the ceiling and dripping and there were pools of water on the floor. It looked like there'd been a flood, and my guess was it started in the upstairs bathroom which was directly over the kitchen. 

(Imagine all the soffiting hanging down in shreds and water and drywall all over the floor.)

I ran up the stairs and sure enough, the tiny toilet looked like a lonely island in the Pacific, and standing water had seeped through the master suite carpeting, further damaging it. Clearly, a realtor had been in the home with clients the day before and someone had used the master bath restroom. It hadn't flushed properly, overflowed, and there was no one there to notice.

I called the realtor in charge of the listing, told her she needed to get someone out with large heaters to dry out the damage. I also told her we now needed to renegotiate the price of the home. She sent a handyman out who estimated the cost of repairs to be roughly $1500. Of course, that didn't cover the replacement of the carpet, only drying it out and reattaching it to the floor. However, we agreed upon that estimate and closed the deal in early February without the repairs being done. The bank had escrow hold $1500 back until we could prove we made the repairs. The first thing we did was change the bathroom toilets...all of them. Our dear friend is a plumber, so he came late one evening after work to install beautiful new ones. He was definitely underwhelmed with our new purchase. In fact, he went home and told his wife, "I don't know what Kay was thinking on this one." At the install, our plumber found gobs of baby wipes clogging every single drain line from the bathrooms. Free advice...don't throw baby wipes into the toilet. They strangle the drains.

New Chandelier

New Vinyl doors and windows

The second thing we did was replace all the old windows and sliding doors in the home with dual pane tinted ones. It made the entire home look newer. And, we had to replace the broken window upstairs anyway. The carpeting was ruined even before the flood-- stained, worn and discolored. We added white-washed birch in the living room and new carpeting in the rest of the home. I found a new chandelier for the dining area, but had to hire a professional to hang it since the ceilings are over 12 feet high.

Wood flooring in the living area

The kitchen took longer, of course, since it was a huge mess. Ruined drywall was pulled down and replaced, the floors were caked with all the residue. I replaced the island counter top in the process, too, then we repainted.

The last thing we did was have an electrician install ceiling fans in all our rooms so that those cool ocean breezes are always blowing, even inside! It took a while to get it together, and our home is still a work in progress, but we are blessed to have bought a Real Estate Owned home that needed a minimal amount of work to become livable. It was just like purchasing from the owner, so it wasn't the daunting task some might fear. Multiple offers on these properties were the hardest thing to overcome in the years when distressed properties were so often on the market.

We had our friend, the plumber, back out to our home with his wife, both really dear friends, when the work was completed, and he couldn't believe his eyes. It's actually her favorite home we've lived in, and they've known us for enough years to see a few!



Bottom Line: Real Estate Owned homes are as simple to purchase as other homes as long as they have clear title (something you want to make sure your realtor and title company establish as early in the process as possible with any home you purchase or sell). They are usually a good value if you have some capital to invest to repair and upgrade them. What was I thinking when we bought this? Wow! This is an amazing purchase!