How to buy abandoned house next door

If you live next to an abandoned house, it can be quite an eyesore.   In addition to neighborhood blight, abandoned properties are a target for vandalism, drug use, and other illegal activity. You may want to purchase it yourself, or you may be wishing someone else will buy it and fix it up.

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Sarah Feldscher and her husband Josh, bought an abandoned home on four acres of land without ever seeing it for $700 in their home state of Missouri.  Their goal according to Ms Feldscher, is to “turn the property into our dream homestead”.  How did they manage to buy a home for $700 and how can you do it?  We’ll get to that in a moment, but first some basics.

What is an abandoned house?

Abandoned House Next Door
Abandoned homes were pretty common during the Recession.  However, you may still find an occasional abandoned home in your neighborhood.  These are usually bank owned properties referred to as REOs (Real Estate Owned).  These properties can sit vacant for years while the bank deals with unlawful foreclosure lawsuits, unlawful detainers (eviction) and a myriad of other legal challenges.

They can also be abandoned by owners facing foreclosure.  The most common reason we see are homes that belong to family members who are either now in retirement homes or who are simply no longer living in the home.  Often, these homes have a lot of deferred maintenance and need quite a few repairs.

How do I buy an abandoned house?

f you are looking at purchasing an abandoned house, you need to do your due diligence. The Feldschers’ didn’t stop with buying just one abandoned house. Since their first $700 homestead, they’ve acquired additional properties.

Related article:  Unlock Home Wealth:  The Ultimate House Hacking Guide

So how did they do it?  Ms. Feldscher says, “We take time to research each potential property”.   It may take a lot of work, but it can be very rewarding if you find the right opportunity. Keep in mind, you may have to look at a lot of abandoned houses before you are able to buy one.

You have to kiss a lot of frogs, before you find a prince.

Who owns abandoned house?

  1.  Identify the owner

Just because a house is vacant doesn’t mean it isn’t owned by someone. You’ll need to find out who owns the house in order to try to purchase it.  Feldscher says their research includes “includes researching the previous owners, visiting the site and more”.

Start by making a trip to your local county recorder’s office.  The recorder can help you identify the current owner of the property, as well as a potential mailing address.  You’ll want to research both the property address, as well as the owner’s name.

Out of town owners

Sometimes family members inherit properties but live out of town and are unable to maintain the property.  They may not have the money necessary to make the needed repairs in order to sell the property the traditional way.  If you are a cash buyer, then you may have a great opportunity to help the owner by buying their house as-is.

Probate properties

If the owner is deceased, you may find the property is being held up by probate court.  There won’t be much you can do to speed the probate process up.  However, if you search the county records for the decedents name, you should be able to find the probate proceedings and who the attorney is for the estate.

If there is not an attorney represent the estate, you should at least find the executor/executrix of the estate.  This will typically be a family member who is handling the estate.  In addition to the executor, if there are any other heirs, they will also identified in the probate documents.

Bank owned properties

If the owner is a bank, you will need to contact their “loss mitigation” or REO department.   The staff in these departments usually work with real estate agents, rather than directly with buyers. You probably won’t e able to negotiate directly with the bank to purchase the home.  If they don’t work directly with buyers, ask for the contact information of the real estate agent who represents the bank for the property.

Don’t be fooled into thinking that you’re going to be pulling one over on the bank.  Banks use what is called an Automated Valuation Model.  The AVM gives the bank an estimate of the fair market value of every property in the US.  The AVM is similar to Zillow and Redfin valuation models.  As a result, you can probably buy the property at a small discount.  But, don’t expect to pay pennies on the dollar unless the home is in major disrepair or the bank has a lot of REOs on their books.

don’t expect to pay pennies on the dollar unless the home is in major disrepair

2.  Write the owner a letter

Once you have the owner or attorney information, write them a letter.  Let them know you are looking to possibly purchase the property and ask them if they would be willing to discuss selling it.  Don’t call them unless you have a personal relationship, this might be too creepy for some people.

Make your letter as personal as possible.  Hand written is the best.   Keep in mind these homeowners may be getting flooded with letters from other investors or potential buyers.

If you don’t get a response, follow up with another letter in a couple of months.  Let them know it’s just a gentle reminder that if they ever decide they want to sell, you would be interested in making an offer.

3.  Inspect the property

If the owner is willing to sell the property, hire a home inspector to inspect the property.  You will need the results of this inspection to know all you can about the property.  You might be surprised to find a home was abandoned due to a significant safety risk.

Years ago when my family and I were looking to move, we heard about an abandoned house.  We spent several months looking for the owner, even asking our Realtor® to help us track them down, to no avail.  Finally, after several months, we  found the real estate who was representing the bank who owned the property.  She proceeded to tell me that the house was in major litigation due to naturally occurring asbestos in the area.  Had we simply relied on our own visual inspection, we would have never known about the litigation or the asbestos.

4.  Make an offer

Once you have inspected the property, it’s time to make an offer.  Start with what the value of the home would be worth fixed up.  Then subtract the costs of repairs and any purchase costs such as escrow and title fees.  If there’s any unpaid utility liens, property taxes or IRS liens, you’ll want to be sure to account for these in your offer.  In most scenarios, the seller is responsible for paying these from their proceeds, but you both want to be clear on that up front.

Abandoned properties can need a lot of work and hard to find the information needed according to Ms. Felscher.  But she says “if you are able to dig through and find this information you can end up with a great property for less than 1 months rent”.

Lastly, you have to decide how much your work and effort to repair the home is worth?  If the house only needs paint and carpet, then you shouldn’t expect a big discount.  If on the other hand, the house has foundation issues, needs a roof or asbestos abatement, then you should account for the greater risk you have.  One way to evaluate your risk is to compare the total dollars you have to spend on repairs with your return on investment.

If you have only$10,000 in repairs, it’s not reasonable to think you should make a profit of $50,000.  If on the other hand, you have to spend $50,000 on repairs, it’s not reasonable to look for a profit of only $10,000.

What if I don’t want to buy it, I just want it cleaned up?

You may have tried talking to the owner without success.  Or, you may be unable to find the current owner.  When this happens, you want to call a company that buys houses.  You might also suggest to the owner that they call a company that buys houses for cash, as-is.

Companies like The Real Estate Solutions Guy are always looking for abandoned properties to buy. And, we have access to data to allow us to track down the owner and present them with a fair cash offer.  Often, these owners feel overwhelmed and without any options.  These homes may need significant repairs, have un-permitted work or have other issues that make a traditional home sale unlikely.

Companies that buy houses can provide the owner a cash offer and buy houses as is.  This means the seller doesn’t have to make any repairs, cleaning or have a parade of nosey people walking through their house.