I’m currently suffering in my attempt to refi my house because I mistakenly believed that adding a basement bedroom with an egress window would allow that bedroom to count. As I found out later, a bedroom below grade DOES not count, so instead of me having a three bedroom/three full bath house, I have a two bedroom, three full bath house that appraises for $30,000-$40,000 less! When I bought the house, I cannabalized what the former owner called a bedroom (which was actually a room you walked through to get to the bedroom on the second floor.) I installed a high end bathroom, assuming I could recoup the loss in the basement. I bought the fixer upper for 140,000 and have put about $50,000 into it (not counting my labor). Most houses sell quickly in my neighborhood (within two weeks). Having done work in many of my neighbors houses, I know that mine is much nicer, I thought I’d have no problem getting appraised for north of $200,000. When I was informed by my appraiser that it only counted as a two bedroom and then the appraisal came back as $150,000 I was extremely upset! Now the only way to get three bedrooms (according to my broker) is to rebuild a bedroom that was lost when the kitchen was expanded. The problem with this, is that it ruins the peninsula sitting area and the flow of the kitchen. My realtor told me that we can market the house as three bedrooms with the one in the basement, but when the prospective buyers attempt to get a loan they’ll run into the same problem. So, all of this is in the hope that turning the egress window in the basement into a walkout, will allow me to get more value from the basement. Any ideas on this problem…
Super upset in cincinnati….
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I gather you ignored all those experts who advised that you should never make a home improvement with the expectation that you'd get your money back.
If I follow this correctly, you originally had four bedrooms (technically) and converted two of them into an expanded bathroom and an expanded kitchen, reducing your house to two bedrooms. You created an additional bedroom in the basement, providing the required egress window. In my area, western Wisconsin, that would now be three bedrooms total, but we drink a lot of beer and aren't too picky about where we pass out. You must have interesting building codes. Ours are very specific as to size, habitability, etc., but below grade bedrooms aren't disqualified. In western Wisconsin, about this time of the year, all floors are equally dark, so basements don't seem any different to us.
In addition to building code differences, there are no doubt regional differences in how banks appraise houses. In this case it doesn't sound like code is the issue (you generally can't even advertise a bedroom unless it's code-legal) so much as the appraisal methods used.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
You are stuck....unless you decide to sell it "unconventionally". Most people, including you, think that the only way to sell a home is to go to a bank and get a conventional mortgage. Luckily for you, there are a host of other ways to sell a home. You are going to have to delve into this "dark" area of financing.
Or, you can walk away and let the bank take it back.
I'm open to any options....dark, white, whatever will help me salvage the investment. The house was a dump when I bought it----gang signs, dog piss, blue shag carpet. The original bedroom next to the kitchen was removed before I bought the house. The upstairs bedroom that I removed wasn't really a bedroom---I figured a mastersuite upstairs was a better option (now I know it wasn't). I realize I screwed up putting too much money into the house, but it's really a beautiful house. I don't want to move, but if I can't refi it to get the $40,000 or so I have on credit cards that I used to fix it up (when it was free money for a year) I'm going to have to sell it or declare bankruptcy. I know i was an idiot (pile on all who want) but I don't know what to do. I'm up at night tossing and turning. Haven't told wife, she'd be extremely upset. I used to be able to lesson the stress when I could rationalize that I could kill myself if the debt stress got too bad, but now that I'm married, I can't do that because I'd leave her with the debt!! (I still love her....maybe that would change if I didn't;) I'm panicking because I worked my a$$ off on weekends/nights thinking that I'd be moving up in the world, not down! It's hard to work construction all day, bid bills all night, accounting morning of weekend, home improvement at night...I'm so tired and have nothing to show for it. I'm mad at me for being so stupid, but I don't know what to do now. Why do the rich bankers get bailed out, but a small guy who works honestly, can't get a break?
The plot thickens...Selling unconventionally usually means that you are going to finance it without using a bank. That typically means that you might leave your mortgage intact and let another "buyer" use your credit line. Investors will typically be using someone elses credit (the people that are letting the house go) and sell it on a lease option or contract for deed. Your situation is complicated by the credit card debt. Typically, the "free" credit is really a high interest note that is accruing while the year elapses. It puts you into a serious hole when the minimum payments get started. 40k does not sound like an insurmountable sum to pay off but it might take some sacrifices. If it is impossible to payoff, you still might be able to declare bankruptcy and keep the house. Welcome to the world of upside down homeownership.
Thanks for the advice. I've been able to make the payments, but it's been tight. On top that, our rental house hasn't produced rental income for almost 7 months. (That's1200/mo lost!) The scumbag tenants that I eventually had to evict, moved in people that weren't on the lease. One of these was a two year old with elevated lead levels (on welfare of course!) The city put orders on the property that amounted to $15000 in improvements (all new windows/doors/new stairs). To help mitigate the costs, I went through lead abatement contractor training ($1000 for five excruciatingly boring days.) Plus the cost of the license ($500). Their lease was up in January, but the main "bread winner" was thrown in jail for trying to buy 5 kilos of coke from the DEA. Not wanting to be heartless, I let them stay month to month, until they stopped paying altogether. It took me several months to evict them, and then to order new windows, train all my workers in lead, and finally get it all done while attempting to earn money and run a company too. (Not to mention fix up the my own house.) If I can get the rental cleared, and I can at least have that money coming back in. I'm sorry to ramble, but my life has been so stressful and hellish, and since I haven't wanted to worry my wife, I've been carrying all of this alone. It's hard. Thank god I have no children!!! (My wife wants them too, but I can't take any more stress right now....)
Thanks for listening and for the advice. It helps...
Tell the wife. Better now than later, and your burden will be easier if she shares it.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
I would highly second telling the wife now. All your doing by not telling her is allowing the shock of what's coming (or maybe not) to hit her that much harder, and more immediately than if you both eased into it together. and if it doesn't hit ya, but you save the day, she won't be able to fully "reward" you. :)
second thought is that if this is going to scare her away and you dont tell her, something else will down the line. And then you might have kids and fluid assetts, and she can show you what true financial turmoil looks like. Best to find out now. You married her for a reason, let her strengthen you and be part of the solution, not part of your problem.
About those tenants....did you run a credit and background check? Or, did you just size them up when they promised that they would pay on time. Go to mrlandlord.com to get the lowdown on tenants. The lead thing is another story. It is one of the reasons that I've decided that I don't want to be in the remodeling business anymore. It is a huge can of worms waiting to suck a lot of contractors down a hole.
The first thing to do is to NOT use those credit cards, not even to buy a pack of gum. Use the cards and the CC companies will be able to jack up your rates even higher. Keep paying the minimum payment on time and they can't do that, if I understand the rules correctly.If you HAVE to use one of the credit cards, use the one with the lowest balance on it. But remember, it will be a very expensive pack of gum.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
I'm never late, but the recently tried to raise the interest rate of my "fixed" rate card from 7.9 to 13.6. I originally borrowed $30,000 at 0% for a year, fully expecting to be able to refi and tie the loan into the new loan. Now, with the market crazy, it's been really hard. Where's all this federal money that they want to loan? My original loan is $98,000 with a $27,000 second. The house was appraised erroneously at $150,000. Does it still make sense to refinance just for 80% if my current rate is 7.2 and they're offering 5.0? Even if I can't get my credit cards paid off, I'm still going to save on the interest rate---plus, the 7.2 is a ten year arm which is 3.5 years old....