Whether it’s a charming cottage or a three-story palace, an abandoned building could make for a great home if you’re willing to put some money and work into it. But an abandoned property belongs to someone, whether it’s a private owner, an investor, a lender or the government. Buying unclaimed property means sometimes waiting for foreclosure paperwork to make its way through the court system and getting a thorough inspection to ensure there are no serious issues.
Buying Abandoned Houses
If you see an abandoned home, the truth is that it belongs to someone. An owner who stops paying the mortgage will eventually go into foreclosure, at which point the bank takes it over. The county will take a nonmortgaged property over if property taxes aren’t paid. When you see an abandoned property for sale, it’s actually in foreclosure and either the bank or county is selling it to help settle the debt.
Before you consider buying abandoned houses, be sure you know what you’re getting yourself into. Often these properties have fallen into disrepair, sometimes even containing serious issues like mold and structural damage. You’ll need to be prepared to invest hard work or money into getting the home in livable condition before you can move in, so this needs to be factored into whatever you pay for the property.
Finding a Property’s Owner
The first step in buying unclaimed property is to determine whether it is, indeed, actually abandoned. You can try asking neighbors or even Google the address and see what comes up. In some cases, a property may appear abandoned but there is still someone claiming legal ownership of it. As long as they’re paying the mortgage and property taxes, that property remains theirs.
If you find the property belongs to someone, though, it still may be worthwhile to track down the owner. Your county tax assessor’s website is the first place to check, although you may have to pay a fee to access the information. Once you’ve tracked down the owner, you can ask if the abandoned property is for sale, or if the owner would be interested in selling it to you.
Finding Abandoned Property for Sale
Once you’ve tracked down the situation involving an abandoned property, it may be a matter of waiting for it to become available. If a home has fallen into foreclosure, the bank probably wants it off its hands more than you want to buy it. However, they have to go through the legal process of clearing the previous owner off the title, and the foreclosure process can take years.
Before buying unclaimed property, you should pay for a professional property inspection. In addition to obvious issues, an expert will look for latent defects like plumbing and electrical problems. As excited as you might be about a house, you’ll find yourself in a tough situation if you put money into a property that has problems you don’t know about until later.
Mortgaging an Abandoned House
If you aren’t paying cash for your next home, you may find that you lose your competitive edge. Many buyers come to the table with cash in hand, which means you’ll miss out on the deal if you need to take the time to apply for a mortgage loan. The best thing you can do is get preapproved beforehand. With a preapproval letter in place, you’ll be able to bid competitively on any abandoned property.
Even if you do get preapproval, mortgage loans are typically contingent on a home inspection. But that contingency should be part of your offer whether you're paying cash or financing through a mortgage. It isn’t worth it to waive the home inspection requirement to beat someone else. Preapproval will give the seller the reassurance necessary to accept your contract, but an inspection will give you the peace of mind you need.
Items you will need
- Abandoned property lists
- Pre-approval letter from your bank
- Money for deposit and down payment
- Buying abandoned property isn't easy -- it takes a lot of work at every level, whether locating properties, qualifying them, determining how much you need to purchase the property for to make a profit, finding good workers to make necessary repairs and even protecting the property from thieves and vandals as you begin the rehab process. Be realistic about the time, money and expertise you have to succeed.
- Be cautious when you're getting the pre-approval letter -- banks sometimes bring up a new credit or financial issue before the closing that either delays or ends the process. When filling out the pre-approval application, make sure the bank is aware of any potential credit or financial issues that could be a problem later. It's better to have the pre-approval denied than to have your loan application turned down after you've made an offer, causing you to lose your earnest payment.
- David De Lossy/Photodisc/Getty Images