Charlotte County, Virginia. A 1957 brick ranch on five acres: two bedrooms, one bath, 918 square feet above a full unfinished basement. It went on the market in February at $115,000, came down twice, and was still sitting more than 200 days later. On October 2 it closed at $85,000, financed with a $120,000 first lien from us, on the settlement date written into the contract.
Why It Sat
The listing photos explained most of it. A roof leak had opened up a bedroom ceiling. Water was standing on the basement slab. The kitchen and bath were the originals. The house had come out of an estate, and the owner lived in another county. In that zip code, the few houses that sold this summer averaged about five months on the market, and a two-bedroom with those photos does not get many showings.
What the Operator Saw
The operator has three completed flips on the county record going back to 2018. Since July they had sent us five properties to value, this one among them, and walked away from a two-house deal in August when the seller would not pay for a septic repair.
What they saw here was square footage the listing didn't count. On one end of the house, a 338-square-foot screened porch on a masonry base, already under the roof. Underneath, a full basement the size of the main floor. Enclose the porch for a third bedroom and a second bath, finish the basement, and the two-bedroom becomes a three-bedroom, two-bath with about 1,900 square feet. The plan is to rent it and refinance, or sell it.
How the Number Got Set
On a Tuesday in mid-September they emailed us the address and asked for our after-repair value, so they would know how high they could go. The immediate area had almost no renovated sales, so we pulled comps across a 12-mile ring and valued the house three ways:
- Renovated as it stands, a two-bedroom, one-bath: about $145,000
- With the porch converted to a third bedroom and a second bath: about $175,000
- With the basement finished as well: $185,000
The term sheet went out the next day. The seller's last position had been $95,000. The operator offered $85,000 with our terms in hand, and the contract was signed two days later.
The Loan
- $120,000 first lien, six months, interest only
- $76,500 at closing, 90% of the $85,000 purchase price
- $43,500 held back for the rehab, 100% of the budget, released in draws
- 65% of the $185,000 after-repair value
- Three points and a $995 document fee
- $8,500 down
- No prepayment penalty
Draws work the way they do on every loan we make: a video walkthrough of the finished work through the portal, and the money wires within 24 hours of verification, $100 per draw.
The Title
The house had come through two estates, and the title work showed it. A second owner held a half interest and was not on the contract. A bank deed of trust recorded in 1959 had never been released of record. The title company traced the half interest, the deed was revised so both owners signed, and the 1959 lien came off the commitment. The second owner signed by remote notary on closing day.
The loan funded on October 2, the settlement date in the contract, 14 days after it was signed.
What This Means for Your Deal
Three things worth taking from this file.
First, price each scope item against what it adds. On our numbers, the porch conversion carried most of the value: about $30,000 of after-repair value for a bedroom and a bath built inside walls and under a roof that already existed. Finishing the basement added about $10,000 more. Both were the operator's call, made with the value of each piece in front of them before the work started.
Second, get your lender's after-repair value before you set your ceiling. The operator knew their number before they made the offer, and they bought $10,000 under the seller's last position.
Third, a house that came out of an estate can carry title problems nobody sees until the commitment comes back. This one had three, and all three cleared before the settlement date.
Every loan we have funded is on our Funded Deals page with its numbers. If you have a house under contract, or an address you are deciding on, send it. Call 804-208-0465 or use the Discuss My Deal form, and we will tell you where we land on value and why.