Hipchickindc Talks About Foreclosed Homes in DC


Those of us who were around DC before the early 2000s, a relatively short time ago, can remember areas like Columbia Heights and Bloomingdale being dotted with several abandoned, boarded houses per block. Around that time, with the introduction of an internet bidding system, there was a major overhaul of the management of government owned real estate. It was deemed that the federal government was not in the business of residential property management and that this extensive inventory, comprised of houses that had been financed with FHA loans and were ultimately foreclosed upon, needed to hit the market. Thus began the speculative housing boom that revitalized many areas of the city.

As the market got hotter, the prices escalated, properties got renovated and re-sold, and there were fewer and fewer affordable shells on the market. Now that we are seeing a changing of the tide in the economic landscape, bank owned properties or REOs, are starting to appear on the market once again. The current bank-owned inventory is not, however, being managed by the federal government this time around, simply because for several years buyers did not frequently utilize FHA loan products.

Within the past month, I helped a couple of first time homebuyers make a deal on a bank-owned property in the Truxton Circle neighborhood of NW DC. (The house is pictured above on the far right). The property had been sold in August of 2006 for $500,000. When we wrote the offer, it was listed at $249,000. It was in surprisingly good shape for a foreclosure, and anybody that’s been perusing the market lately in DC knows that it’s tough to come by a decent one bedroom condo in NW for under $300,000. Not unexpectedly, two other offers came in at the same time ours did.  Story continues after the jump.

In addition to foreclosed properties, there are a lot of listings that are identified with the qualifier, “potential short sale”. This language indicates that the borrower owes more than the current market value of the home. While it is possible to get a good deal with these homes as well, there is a lot more red tape and uncertainty to deal with. Because short sales require approval from the lender, often the buyers can be left waiting in limbo not knowing whether their offer is accepted for thirty days or more. In the case of a foreclosure, the bank has already taken legal possession and has assigned an asset manager to deal with that specific property.

Bank-owned property can often make for a good buy, but it is not for the faint of heart. Often the properties are not in good condition. If they are in seriously bad condition, the only course for financing is a renovation loan (or cash, if you happen to have it on hand). I’ve recently worked with a couple of people who took advantage of the FHA(203)k loan product, which is a great option, but for homeowners only. (In response to the previous lax lending environment, investor rehab loans have become prohibitively expensive.) In most cases, it’s possible to incorporate an inspection contingency into a contract, however bank-owned properties are typically sold in AS IS condition.

Here is a sampling of some current listings of bank-owned property in a variety of DC neighborhoods: http://matrix.mris.com/Matrix/Public/Email.aspx?ID=27211661856 .

26 Comment

  • “and anybody that’s been perusing the market lately in DC knows that it’s tough to come by a decent one bedroom condo in NW for under $300,000.”

    Hmm… maybe that was true a year ago but that’s hasn’t seemed to be the case lately to me. Just a couple of examples http://www.redfin.com/DC/WASHINGTON/3314-MOUNT-PLEASANT-St-NORTHWEST-20010/unit-45/home/11747669, and actually a 2BR:

  • I looked at about a dozen 3 bedroom houses under $275 in Petworth and Columbia Heights. None was great, but many of them were perfectly serviceable and on good streets.

    There are some really good deals out there. Even if the house needs some work you’ll be hard pressed to find a renovated house in the same area for less than $200k more. Anyone who doesn’t mind taking on a long-term renovation project (and living in a less than perfect house in the meantime) would be smart to look around now. Even if you’re not at all handy, the market WILL rebound eventually. A couple years from now it will be a no brainer to get an equity line to pay for improvements if you don’t want to do it yourself.

  • uh, definitely still hard to find a 1BR under $300K. I’ve been looking with a friend of mine who is trying to buy her first place for months. We’ve seen the one on Mt Pleasant st, and it’s super cute but a 4th floor walk-up without central air. Nearly all 1BRs under $300K have some kind of fatal flaw – far from metro or need a lot of work. That 2BR is a block away from the Park Morton housing project, which explains the price.

    I think the market for 1BRs is still going up. Meanwhile there are some crazy deals on fixer upper houses. Unfortunately when you’re buying your first place, buying a home that needs a new roof and heating system is just not going to work…

  • If anyone is interested, there is a great, recently renovated rowhouse, just east of North Capital (Ft Totten Dr and Crittenden). Here is listing. I think this place could be had for a lot less than the $345 its listed for. Great neighbors come with the deal (me)!


  • I agree with SM’s assessment. Park and Georgia ain’t no cake walk. But as far as dealing with a house suffering from “deferred maintenance”… if a new roof and heating system is it’s biggest problem, that’s about the easiest stuff you’ll ever have to deal with.

    These houses almost always have hot water heat (which is great IMHO) and worst case scenario you you need a new boiler, it’s a one day job to the tune of about 4K. A new roof maybe another 4K. They are both pretty quick and not invasive or messy, and can be easily done before you move in. So add 10K in work (that you’ll never need to do again as long as you live there) to the price and you still have a fantastic deal.

    I’m not saying this is for everyone. Some people just would rather live in a completely sterile, modernized environment where they will have very few maintenance issues. Personally, I’d rather have four times as much space, a yard, a front door on the street, no condo fee, and much more appreciation potential, along with the warts and hassles that come with owning a non-updated home, for the same price.

  • “A new roof maybe another 4K” [-spits out coffee-] Huh? We just had a new roof put on our rowhouse for 9k and we got a good deal, judging by the six vendors we dealt with before settling on our guy (none of whom quoted less than 13k). Maybe there is some medium step you are referring to, like reshingling or something, but for actually demolishing and replacing a rubber-membrane roof that has worn out, 4k is really, really lowball.

  • there’s a 2br condo for 298 in the forum section not too far from the metro

  • It was a guess, and I am sure it depends on a lot of things, like whether the old roof needs to be removed. Even if it’s 13K (which honestly seems really high to me – I had one done 10 years ago and it was $2500), then use your number and add 17K to the cost of the ridiculously underpriced house. Still an awesome deal and still about the same or cheaper as any condo in a decent neighborhood.

  • I just had a rubber roof replaced. Labor and all came to 3500. st, either my guy was really cheap or your guy was really expensive.

  • First anon- that 2br one looks like it’s completely underground.

  • On the Park Morton issue, the area is still a bit dicey right now but the City is going forward with the plan to tear down that whole complex and replace it with a mixed income develpment. The demolition is slated to begin this fall. Also there is a lot of redevelopment in progress and scheduled for the whole Georgia Ave NW corridor from Howard Univ all the way up to Upshur. So an investment in the area now, particularly if close to the Metro, will likely pay dividends in just a couple of years. But I use the term “investment” loosely because if there is one thing the current real estate slump teaches, it is that you should never count on your primary home to be a significant investment asset.

  • nate – wow! If your guy was bonded & licensed, and guaranteed his work, you should put his contact # up on the forum – you’d be doing somebody a real favor, as there are a lot of folks charging a lot more than that (and as I said, I shopped around).

  • For $3500 vs. $9k-$13k, I could care less if he’s bonded licensed or insured!!

  • SM,

    If you are truly looking for a 1 bedroom under $300k, you should check out Hampshire Gardens, there are 4 one-bedrooms on the market for under $200K. Its an older building (built in 1929) but its a 5 min bus ride to metro, the 1 bedrooms are big (750 sq ft) and you can’t beat the nieghborhood in that price range.

    I am a resident and every single time someone new buys into the coop they are soo surprised at what they got for the money.

  • I am a big fan of that building and do think they would be a great deal for the right person.The big downside unfortunately is how far away they are from the metro (nearly a mile from either PW or Fort Totten). But for someone who drives to work anyway they would be great. Same thing for all the new condos on Longfellow where you can get a newly renovated 2BR for less than the price of a 1BR anywhere else.

  • Note I believe the Longfellow condo owners are generally leaving as fast as they can, if they can, due to crime and such. At the least there are many of these units currently for sale, and I believe they had all sold at some point a few years ago. I could be wrong of course. At the same time, many emails of the MPD-4D listserv were loudly complaining of the nonstop gangsta party going in that area 24 hours a day, regular shootings, etc.

  • I just wanted to mention that the house in the pic above, the one that was listed at $249k, passed the home inspection with flying colors, including a roof cert. It was renovated in the late 70’s or early 80’s probably, and gutted to the point that nothing is original except the outer shell, so not 100 year old plumbing, recently updated electrical, new furnace, central air, etc. Not much historic charm, but the cool thing about something that’s all dry wall is that it’s extremely malleable in terms of layout.

  • The Ft Totten Drive place is only about 1/2 mile to Ft Totten metro. Pretty easy walk. I cover it in about 10 minutes.

  • hipchick, what do you advise the buyers about potential vacant tax assessments on these foreclosed properties?

  • bogfrog, if my clients are buying a property that they are not going to live in within a short period of time due to extensive renovation, I advise them to get thy butt down to DC tax and revenue the day after settlement and apply for the exemption. One set of my clients was told that the application for permits starts an automatic exemption process but I would NOT trust that advice.

    I had also written previously about some owner occupant clients doing a total gut rehab here: http://www.princeofpetworth.com/?p=3792

    I will be updating that story periodically. Right now, I’m waiting for my invite to the champagne and candlelight “After cleanout Before construction” (ACBC) party, which I plan to take pics of and post.

  • SM – there’s a property on Randolph listed at 225k. It’s listed as a short sale, but it has been listed for several weeks now. The condo fee is actually $220 (not $250), and the condo board is very active and diligent. It’s 2.5 blocks from the Petworth metro. It kills me to see it, because I bought my condo for more last fall. 🙂

  • I’m waiting until the bottom falls out. This financial crisis is going to light a fire under a lot of already desperate sellers.

  • This is better than last week when you had a posting about hipchickindc and there was a picture of a guy and I got confused…

  • Um, yah, well, that was unfortunate.

  • hipchickindc, how do most people get financing for properties like the one on W St you linked to?

    Trying to get a rehab loan seems very daunting, since rehab loan requires specifc contractor estimates and committments, etc. From what I understand, it doesn’t seem like one can do any of the work him/herself to lower costs under those loan terms. So basically, one has to use contractors. One can’t just buy a W St type property with a regular loan and afterwords look for best deals and do some of the easier work himself. Am I off base here?

  • Hi dc_publius. Anything in shell condition has to be a rehab loan or cash. Otherwise, it is too much of a risk for the bank, because you can’t live in it as is, and there’s no plan or guarantee in place for the work to be done. No bank would touch it. Especially not in this lending environment.

    With an FHA(203)k, you don’t run around getting estimates ahead of time for individual jobs (although you can). You work with an estimator, who helps put together the plan and then later supervises the distribution of the money for the rehab. You need one licensed general contractor.

    If someone is wanting to do a lot of the work themselves, I suggest looking more on the scale of finding something that’s basically sound but needs mostly cosmetics (i.e. work that does not need permits pulled). When you buy a shell, there is a lot of work that you need permits for and licensed contractors to perform the work.

    The rehab loan can still be structured with as little or as much $ as fits the after-improved value of the property. If you only want to borrow enough to make it livable (electric, plumbing, heat) and then finish the rest yourself, you can structure the plan that way. You can also end up not using money borrowed for the construction costs and put that back toward the principal of the loan.

    Until very recently, you couldn’t really save any money buying and renovating because the price of the shells had gotten so high from demand. Owner occupants who bought shells did so because they wanted to create something, rather than to save money. Now, it is possible to buy something with sweat equity, where you could save in the process.

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