At one time or another, you’ve probably seen a condemned home in a desolate area or maybe even in the middle of a thriving city: a dilapidated, ignored, rundown home. If there’s a “For Sale” sign in the yard, the thought may have crossed your mind: Who would ever buy that?
Most people wouldn’t, and arguably most homebuyers shouldn’t even consider it, but many condemned homes are eventually bought and sold. According to the real estate data company ATTOM, there are an estimated 1.4 million residential properties in the United States (1.3% of all the homes in the country) that are currently vacant, although that doesn’t always mean the home is condemned. Plenty of homes are abandoned due to foreclosure, when the homeowner can no longer afford to live there. Still, abandoned or condemned homes might be part of the solution to the current U.S. housing shortage.
While investors often are the buyers of condemned homes, here’s what to know if you’re selling or buying one.
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If You Are Selling a Condemned Home
Your real estate agent can probably tell you everything you need to know. But there are some key considerations to keep in mind.
Get Acquainted With Your Community’s Rules
Ben Wagner, owner of Leave the Key Homebuyers, a cash homebuying company headquartered in Amityville, New York, suggests that sellers quickly get up to speed on “any local ordinances or violations on the property that may affect the sale, such as required inspections or demolition orders.”
Wagner suggests contacting your local building or code enforcement office, which he says is usually part of the town, city or county government.
“These agencies can provide information on the property’s condemned status, local ordinances, zoning regulations and any violations that need to be addressed to remove the condemnation,” Wagner says.
Your Price Needs to Be Realistic
Be realistic about what you ask from buyers, Wagner advises — common sense should also tell you that. If you’re the one who bought the house before it was condemned, you may understandably hate the idea of selling it for a bargain basement price. But you’re going to have little choice, Wagner says.
“There is a limited buyer pool for condemned homes and any potential buyers are investors who are well-versed in the costs of rehabilitation or teardown, so pricing it correctly from the start is essential to attract their attention,” he says.
How should you price your condemned home correctly? Assuming you know the house is going to have to come down and that nobody’s buying the property as- is, “owners should start by researching the value of similar lots or land in the area,” Wagner says. “On websites like Zillow and Redfin, users can filter by ‘lots’ to see what land is going for in the area.”
If you think the home is “salvageable,” Wagner suggests looking at the lowest-priced sales in the area on websites like Zillow and Redfin.
“This will give you an idea of what properties in the worst conditions are selling for and could be useful when pricing your home,” he says.
Don’t Forget About Demolition Costs
If you’re selling a condemned home, you’re going to pay for the demolition costs one way or another. It may be that you sell the house as-is, and your buyer will spend the money to raze the home. Or you may feel that you’ll do better if you get rid of the house yourself and just sell the land.
If you go that route — and it’s best to talk to a real estate agent, a real estate attorney and maybe a financial advisor since everybody’s situation will be different — recognize that demolition costs can get pricey.
“For an average home you’ll typically be looking at $10,000 to $25,000,” Wagner says. “If no action is taken, and the house ends up getting demolished by the town, they charge even more.”
Wagner says demolition costs can go as high as $50,000 and will sometimes be attached as a lien on the property. If that happens, the city would collect $50,000 from the proceeds of the sale, and you would get the rest.
Wagner’s advice for the average homeowner is to sell a condemned home to a real estate investor and let them worry about the demolition costs.
“Investors are able to get wholesale pricing on construction or demolition work, so while they would deduct that amount from their offer, it would cost them less than it would cost a homeowner and the homeowner wouldn’t have to deal with the hassle, like demolition permits,” Wagner says.
[Read: What You Need to Know About Those Companies That Buy Houses.]
If You Are Buying a Condemned Home
Again, your real estate agent can probably tell you everything you need to know. Here’s what to keep in mind.
Do Your Research
Peter Hullinger is owner of PeteBuysHomes.com in Elmhurst, Illinois. He is, in other words, a home rehabber and flipper.
He says that if you’re buying a condemned home and think you’re going to keep the structure but remodel and refurbish it (assuming the city will allow it), you’ll want to do a home inspection first. After all, you may not need a professional to tell you that you’re buying a lemon, but you’d still like to know how rotten the lemon is.
Hullinger also suggests a preliminary title search to check for any liens or back taxes owed.
“Verify why the property was condemned and what it will take to bring it back up to code,” he says.
He also points out — and this is important for sellers to know, too, Hullinger says — that there could be environmental issues with the home.
“Properties that have been condemned might contain hazardous materials like asbestos, lead or mold,” Hullinger says.
If there are hazardous materials, like asbestos or lead, aside from your own health worries, that can drive up repair and demolition costs, says Darin Tansey, a real estate agent with Douglas Elliman in Miami, Florida. Tansey typically specializes in luxury homes and not condemned ones, but either way, he knows of what he speaks.
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Zoning May Be an Issue
Hullinger advises potential buyers to check with the local municipality to understand the regulations involving zoning rules, building restrictions or permits that that might be needed to fix or rebuild the condemned home.
“Doing your homework in advance can prevent costly surprises later on in the process,” he says.
It May Need to Be a Cash Purchase
You may have trouble getting a traditional mortgage on a condemned home, Hullinger says. So you may need to find some sort of alternate financing, such a private lender lending you the money to buy the home. Or you may just want to pay cash.
This Is Going to Take Time
Whether you’re buying or selling a condemned home, this probably won’t be one of those quick sales that everybody dreams of, warns Tansey.
“Restoring or selling a condemned home is often a lengthy, expensive process. Don’t underestimate the cost or time required,” Tansey says. “Buyers must be prepared for major renovations, and sellers should set realistic expectations regarding price and process.”
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How to Buy or Sell a Condemned Home originally appeared on usnews.com
