There are two kinds of people in this world: house people and everybody else. While everybody else watches the movie It's A Wonderful Life for the feel-good message about the important things in life, house people take away a completely different point. They drool over the scenes in which Jimmy Stewart and Donna Reed's characters buy a huge old house for a song and set about fixing it up with lots of elbow grease and not a lot of money.
Oak Park housing is widely varied, but it's unusual to find an opportunity along the lines of the house in It's A Wonderful Life. There are plenty of fixer-uppers, but rock-bottom prices are a rarity. As foreclosures ramp up in the wake of the real estate bust, good deals on gorgeous houses might become more prevalent. One estate home in Oak Park offers a glimpse of the possibilities.
When 516 Augusta was built in 1927, it was quite a grand estate. The Norman Smith House was designed by architectural powerhouses Graham, Anderson, Probst and White, designers of the Wrigley Building, Civic Opera House and Merchandise Mart in Chicago.
The Tudor Style home offers over 5,800 interior square feet above ground, a coach house and 22,000 square feet of yard, complete with a wrought iron and stone fence. Wood paneled rooms and stone fireplaces abound. Stone and brick detailing, leaded windows and impressive woodwork are testaments to the care and money that originally went into the home.
With all that space and original detail comes a lot of upkeep. The home's previous owners were not able to pay the original $1.5 million mortgage, and the home first faced foreclosure in February of 2010. At the original auction, there were no bidders, and the home was again put on the auction block in September of last year for over $1.8 million. With no takers at that price, the home remained bank-owned.
In September of 2011, Michael Hobbs, President of Pahroo Appraisal & Consultancy in Chicago, chose the home as his foreclosure bargain of the week on his blog for Cherry Picker Investments, a local foreclosure website.
"I review this type of information regularly, and when the listing for this house came up, I immediately noticed it. This is an interesting house because you don't normally see a house of such grandeur in Oak Park on the foreclosure auction list," he says. "If the price were discounted enough, people would have been happy to put the work in on an estate this grand. Even with all the work necessary, it would still yield a very good investment."
A few months ago, the bank listed the home on the MLS for $949,000 and quickly dropped the price to $879,000. By the end of June, the home was under contract. While the new owners seem to have gotten a veritable bargain, that bargain calls for a lot of future spending.
The view from the curb is impressive, but peer closer and the realities of a poorly-maintained house are hard to miss. The MLS listing cites mold and asbestos issues, and a photo of the wiring indicates the home needs an updated electrical system as well. Listing photos also reflect the poor condition of the bathrooms and kitchen, indicating a major overhaul is needed.
Alice McMahon, a broker for Weichert Realtors-Nickel Group, who works in their distressed property group, notes that these issues are not surprising.
"The downside with a foreclosure is that these properties have been vacant for a long period of time, which can lead to damages," she says. "It's a buyer beware kind of situation. A potential buyer can still have an inspection, but the bank doesn't typically make a lot of disclosures and will not offer any credits at closing for defects."
Chad Chimenti of Brennan's Environmental Services specializes in mold and asbestos remediation and does a lot of work in the western suburbs and on foreclosed homes. He notes that asbestos in older homes is only a problem if disturbed.
"If the owner were planning a major remodel, the asbestos would need to be taken care of. Asbestos is regulated by Cook County, so you need to get the proper permits before doing anything," he says. "A consultant needs to come in, take a sample and send a report to the county before we can begin work. It takes about ten working days for the permitting process, and then we can get to work on containment and removal.
"With mold, it has a quicker breeding habit, as far as spores go, so you want to take care of that immediately. You not only need to address what is causing the mold, but you have to get it out of there whether it's alive, dormant or dead. We kill the mold, remove it and treat it so the mold won't come back."
Chimenti notes that while mold and asbestos may scare some potential homebuyers, both can be completely remediated with appropriate steps. "I've never had a case in which we couldn't remove it."
Ed Farnan, of Oak Park's Serv Pro, specializes in mold removal and stresses the importance of meticulous removal.
"First, you have to do swab tests and take air quality samples, and certain standards must be followed for mitigation. You have to have protective equipment for your workers, contain the affected environment with plastic walls and set up a negative air flow to keep the spores from traveling to places where the mold hasn't already spread."
Farnan stresses that when a home has been foreclosed and left vacant for a long period of time, mold issues might be larger than they first appear.
"Once you start opening up ceilings and walls, you never know what you're going to find," he says. "In the past two summers, we've had big rains that have caused all kinds of flooding. In cases of a sewer back-up, the mold is full of some really bad bacteria."
For those who can see past the up-front work, buying a foreclosure as a dream home can have some real benefits. Not the least of which is price.
McMahon notes that she prefers working with foreclosures to short sales.
"In a foreclosure the time frame is so much quicker because you're just working with another realtor who the bank chose to represent the property. By the time a foreclosure comes on the market, all the liens have been covered, which is not always the case in a short sale," she explains. "Usually, a bank will price a foreclosure below market in hopes that there are multiple bids, and nine times out of ten, there are."
According to McMahon, Oak Park has not seen that many foreclosures, but they can represent an opportunity.
"There are a lot of variables, but at the end of the day, you can buy a lot more house for the money."