Abandoned houses are known to be one of the most profitable real estate investments. Their low-cost values and high ROI attract lots of prospective home buyers and real estate investors.
However, the whole process of how to find abandoned house for sale or a property with no apparent known owner can be somewhat challenging. “Abandoned house for sale” signs might not be as common as “For Sale” ones. You may also not be able to find such properties on the list of regular auctions.
But don’t worry- this article is going to give you every piece of relevant information related to abandoned houses. This guide will reveal to you all the steps to find and purchase an abandoned property.
Here we go.
What is an Abandoned House?
Abandoned houses are property whose original owner is no longer in possession of the house. This might be due to the owner’s financial problems, inability to pay back the loan, death of the owner, etc.
Abandoned houses may or may not be found in good condition. Also, the owners want to unload the property before a formal foreclosure and you can get the whole property at heavy discounts. This can also offer you a high return on investment (ROIs).
Many times, the law does not easily allow people to claim these types of homes. However, if you investigate your area’s law and find a good property, you can claim it.
Challenges in Buying an Abandoned House
Here are some of the challenges you might find while buying an abandoned house:
- Due to the owner’s financial difficulties or the time period for which the home was left abandoned, the house can be in extremely poor condition and need repair.
- This repair and renovation requirement can be an extra burden on the new buyers and can add a lot of money to the basic cost of the property.
- Many times, the owner has died or left the place, making it difficult to track the current owners of the home. As you can understand that an abandoned property is never actually unclaimed as there would be an ultimate owner of the property. This could be a relative or lender. At such times, you would have to track down the owner to buy it legally.
How to Buy Abandoned Houses?
Buying an abandoned property requires similar procedures as buying any other property. Here are the steps you have to follow to buy an abandoned house:
1) Review Your Finances
As already mentioned, abandoned houses are often found in damaged conditions and require renovation and repairs. So, remember that there will be additional expenditure over the original sale price of the house.
In order to meet these expenses, it is recommended that you get a pre-qualification from your bank or lender and get a basic estimate of what mortgage amount you qualify for. Also, many banks or lenders require a pre-approval letter to offer you the loan. So, it is advisable to get the letter before applying for the mortgage.
2) Find the Right Property
Once you have an idea of how much you can offer for a home, the next step is to find the property in your budget price range.
Most abandoned houses are on their way to foreclosure. However, when the bank has not begun the foreclosing process, then you can find the listings of abandoned houses in their property auction listings.
When you are looking for abandoned houses, look for homes with phrases like “immediate possession,” “must sell,” “below market value,” or “under appraisal.”
You can also consult your local real estate agents to know about available abandoned houses for sale. Real estate agents have valuable knowledge of abandoned houses in the area and are also familiar with the laws related to buying such homes. Consulting real estate agents can also provide you with a selection of homes that are about to be foreclosed on by the bank.
3) Make sure the home is Abandoned
An important step in the direction of purchasing abandoned houses is making sure that the home is actually abandoned. Just because the property is vacant or appears abandoned, doesn’t necessarily mean that it’s abandoned. The owners might have decided that selling it was more hassle than it’s worth and might have simply left it.
4) Check the Laws for Property with No Owner
Laws related to buying abandoned houses differ with the locations. Some properties are abandoned but are not listed for sale. So, if you ever come across such property, you should check the significant laws related to claiming unclaimed property and inspect the limitations on its return.
It is advisable that you visit your county clerk’s office and get information about past homeowners, the current value of the home, liens, or tax issues.
You could also track down the owners and ask them directly to sell their property. Many times, the property has liens or tax problems and the owners want to get rid of the house as soon as possible. In such conditions, you can get the house at huge discounts.
5) Calculate the Cost
Once you have found a potential home and have been pre-approved, the next step is to calculate the total cost of the house to get the home in a good condition.
Here are the steps to do so:
- Get a thorough inspection performed on the property with the help of a real estate agent or contractor.
- Take note of what needs to be fixed, replaced, or renovated.
- Calculate the total amount of repairs and add it to the basic price of the home.
- Add other costs such as appraisal fees, pest, and lead inspection fees, title insurance, closing costs, and other legal fees to the overall calculated price.
- The real estate agent will also help you calculate future expenses on the home and figuring out the value of your bids.
- If you don’t find the house worth investment after making all the calculations, go for another property.
- If the house is still valuable and can offer you high ROIs, it is time to place your bid and buy the house.
6) Make the Offer and Get the home
Once you are sure about the value of the home and have tracked the ultimate owner of the property, it is time to take action and buy it.
If the owner owes back taxes, you can simply acquire the house by offering to pay the taxes. You can also make an offer based on your calculations.