Buying Abandoned Properties: What You Need To Know
Sam Hawrylack6-minute read
February 27, 2023
Abandoned properties can be a pot of gold for some home buyers, especially those who love the thrill and challenge of renovating them. But the sense of satisfaction from buying and renovating this type of home versus the work and money put into it should be carefully considered.
Here’s what you must know about buying abandoned buildings or properties to determine if it’s right for you.
What Is Abandoned Property?
You may have come across abandoned properties before and didn’t realize it. In most states, abandoned property is real estate that includes any house or building that’s been unoccupied for at least 1 year. However, it also includes any property that the owners forfeited their rights to and that remains unoccupied.
For example, if homeowners lose their house in foreclosure and are evicted, the property may sit for over a year unsold and unoccupied, becoming abandoned. Properties can also be abandoned when the owner dies, and no one takes over the property to maintain and/or sell it.
Abandoned properties are often confused with vacant and condemned properties. Vacant properties still belong to the owner, but no one lives there, and condemned properties are considered unfit for living by the local governments.
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How To Buy Abandoned Property
Before buying abandoned property, learning everything you can about it is important. This includes contacting the property owners, conducting a home inspection and weighing the property’s pros and cons. Then, if you’re ready to purchase it, making an offer and obtaining financing is the final step in buying a house.
It might feel overwhelming or even scary to find abandoned real estate to buy, but the process isn’t much different than looking for any other property.
1. Find Available Abandoned Real Estate
To find available abandoned real estate, you’ll use many of the same methods to buy regular property. For example, you could work with a real estate agent or do the research yourself. You’ll need to scour the area you want to buy a house and look for abandoned homes or other vacant properties. You may recognize them from their rundown appearance, or you may be lucky enough to find foreclosure or auction listings in the local paper.
2. Contact The Property Owner
Sometimes, abandoned properties are still owned by the original property owner, but they haven’t done anything with the property. So the key to buying abandoned property is to get in touch with the property owners to determine your next steps.
This will take some legwork on your part, so prepare yourself. You can start by asking the county clerk for the tax records. This will provide you with the property owners’ names. You can then try to locate their contact information online.
If the property owners aren’t listed, you can visit the property and leave a note or business card in the mailbox or on the door. You might not be the only buyer interested, so always follow up if you can. Also, since the property is abandoned, the owners may not come around often, so it could be a while before you hear anything.
Finally, you can ask the county clerk if the home will go to tax auction soon. If there are unpaid back taxes, chances are it will, making it much easier for you to buy an abandoned property. Just make sure you know the required terms, including the cost and how much money you need upfront to win the auction.
3. Conduct A Home Inspection
If the property isn’t part of a real estate auction, you may be able to pay for a professional home inspection before purchasing it. This step is important because the home’s condition can alter your plans if it needs more work than you can afford.
If you’re buying the home at auction and the bank or county isn’t allowing inspections, consider bringing a professional inspector with you to the auction so they can give you a feel for what they think of the property, even from the outside.
If you can inspect the property, figure out what home maintenance and repairs are necessary to make the home livable. Depending on the type of financing you get, you may have to do the work before you close on the property, and it can affect your finances, so pay close attention to the report.
4. Weigh The Pros And Cons
Even though abandoned properties may cost less, they may not be worth it in the end. Therefore, it’s important to weigh the property’s pros and cons, considering the home’s condition, the work it needs and the cost.
If you have to put too much work into the home to make it livable or to increase its value, it might not be worth it. So first, look at the property values of other homes around it to determine if you’d be investing more than the home might be worth when you’re done.
5. Purchase The Abandoned Property
You’ll likely need financing when you decide to purchase an abandoned property. Before you commit to buying the property, determine your timeline. For example, if you’re buying an abandoned home from an auction, you may need the financing upfront to close quickly. But, if you’re buying it from the owners directly, you may have more time to work out financing details.
Since the home is already abandoned, the current homeowners likely aren’t in a big hurry to close the sale.
It’s best to get preapproved for a mortgage before looking at abandoned homes so you know how much you can spend and what the lender requires. After you’re preapproved and find a home, the lender will order the appraisal and title work on the property to ensure it’s worth enough money (or will be after your renovations) and there aren’t any liens, such as back taxes on it.
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Where To Find Abandoned Properties
There are several ways to find abandoned properties. The right method depends on how much work you want to put in and how much time you have.
- Consult with a REALTOR®: A REALTOR® or real estate agent can help potential buyers find abandoned properties. They often know about abandoned homes before anyone else, which may give you a leg up on the competition if you want to buy it first. Many abandoned homes are from foreclosure, and real estate agents have access to this information first, helping you find homes faster.
- Browse online listings: It may take a little work, but you might find abandoned properties in online listings. Like when you look for other real estate properties, you can filter your search to find what you want. In the listings, search specifically for foreclosures or vacant properties to get the desired results.
- Find and attend a property auction: Property auctions occur when a bank, government agency or any other entity takes possession of a home but doesn’t want to keep it. Instead, they want to liquidate the property to get their money back. You can learn about property auctions from local real estate agents, county clerks or newspapers.
- Check with your local bank: Check with local banks to see if they have a list of recently foreclosure properties. These homes may be abandoned, or you may even come across abandoned buildings, such as an apartment complex or condo development, that the owners couldn’t keep up with the bills.
- Visit your local county clerk’s office: The county clerk’s office can provide you with a list of homes in the area under foreclosure. They may also have the necessary information to contact the owners to discuss buying the abandoned property.
The Pros And Cons Of Buying Abandoned Property
Whether you’re purchasing a brand-new home or an abandoned property, there are pros and cons to consider. Weighing the good and bad can help determine if buying abandoned property is right for you.
- Lower price: Many abandoned homes sell for less than the market value, especially if they’re in bad condition. This means you may be able to buy the home for less money, allowing you to make a profit when you sell it.
- Less competition: Abandoned houses are abandoned because no one wants to deal with them. If you find a property you want to purchase, you might not face the same competition you would if you were buying a newer home.
- Possibility to earn profit: If you can buy a property for much less than its market value and keep repair costs down, you might be able to turn the property for a nice profit, or you may turn it into a rental property and make a monthly income.
- High maintenance and repair costs: Buying an abandoned property can be risky. Without occupancy, the home may have become extremely run down due to neglect. Plus, you must ensure the home meets all code enforcement rules for the area, which can lead to more expenses.
- Responsible for any existing liens or back taxes: Any liens on the property follow the property, not the owners. This means if there are back taxes on the property, you must pay them before you can close on a mortgage. It’s important to understand the property's liens before committing to buy it.
- Hard to finance traditionally: Unless you’re lucky enough to find an abandoned property in perfect condition, you might have a harder time financing it. Most lenders can’t finance a property unless it’s livable, and abandoned homes typically aren’t livable.
The Bottom Line
When done right, buying abandoned properties can be a gold mine, but there are many considerations. It’s important to do your research, understand the home’s condition and the financial impact of buying a home that needs a lot of work.
If you find an abandoned property that would qualify for traditional financing or you choose to buy a lived-in home, you can start the mortgage process to have your financing ready.
Get approved to buy a home.
Rocket Mortgage® lets you get to house hunting sooner.
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