I once witnessed an auction where a bank was selling a house to recoup funds, after 2 brothers did the WORST RENOVATION EVER and ended in mortgage distress!
The new new owners are good friends of mine. They were lucky enough to snap up the bargain of the century on that day, but wow, we all felt really sorry for the vendors. The brothers worked hard, but lost big!!
This is how their renovation disaster unfolded:
They paid full market price in February 2010 for $1,195,000 (plus $52,000 stamp duty and legals). Total purchase price = $1,247,000
Property snapshot: 730 sqm ‘battle ax’ block, 3 bedroom, 2 bathroom, 2 living, 2 storey and nice waterviews, only one house back from the bay.
Their spent at least $100,000 and took over 2 years, completing most of the renovation work themselves.
Total spend: $1,347,000.
What they did right
The external red bricks were rendered and they painted the house a light brown giving the house a new modern look. They replaced the old kitchen and bathrooms and added a north facing balcony area to enjoy the sunshine and waterviews.
What they did wrong
Their workmanship was poor; it looked rough and nothing was finished properly. As inexperienced renovators, they attempted the tough jobs too (e.g. the tiling) and the result was terrible. Inspecting the house with potential buyers, moving from room to room that lack of quality finish was really telling and people noticed. It hurt their ability to sell at the price they wanted.
An attractive new kitchen was installed, but the finish was terrible.
Cheap lino flooring was glued over quality floorboards. If you look closely, you can see a glimpse of the old floor in this kitchen photo.
They spent money making a private and grand entry way, which actually made it difficult for people to work out where to enter the house. It looked good and created some privacy, but caused confusion.
Coupled with the fact that they blocked off the original front door to make a study nook, no one could work out where they were supposed to enter the house with glass sliding doors both upstairs and down.
The rear door in the original laundry was also closed in. They combined the old laundry and bathroom, making a larger bathroom space and tiled it with black tiles, which are polarising. Simply, potential buyers either liked them or hated them.
(Images via. http://www.onthehouse.com.au)
The laundry was moved into the garage downstairs, however the property had to be sold before its completion.
The Final Figures
When the boys knew they were facing financial difficulties, in an attempt to recoup their money, they attempted to sell the house at $1,300,000 plus. However, as mentioned before, most of the renovation decisions they made and the quality of their work was poor. They received no offers near their asking price, so held out until the bank eventually took possession of the property for sale.
The Winners
My good friends attended the auction with their cheque book in hand, having previously sold their own home and bought the house that day for $1,000,000 !! The boys LOST $347,000
Since moving in, they have worked hard to repair most of the issues with the home by repainting, ripping up the lino and polishing the original floor boards, finishing the laundry area and make the front entry look like a front entry. As well as adding nice furniture and their own style. Compounding their good fortune, the Sydney property market has moved and they have had the house revalued at close to $1,400,000.
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