House badly located in Virginia (5)
I believe the answer is:
villa
'house' is the definition.
(I know that villa is a type of house)
'badly located in virginia' is the wordplay.
'badly' becomes 'i'll' (eg in ill-advised).
'located in' means one lot of letters goes inside another.
'virginia' becomes 'va' (US state abbreviation).
'ill' put inside 'va' is 'VILLA'.
(Other definitions for villa that I've seen before include "Classical country house" , "SECOND PART OF 8" , "Aston ..., English Premier League club" , "Country residence" , "Midlands football team" .)