How To Buy Abandoned Property In 7 Steps

A move-in ready home will unsurprisingly appeal to the majority of home buyers. But a smaller, more ambitious group of house hunters see the charm in a fixer-upper.

For some, the ideal fixer-upper requires cosmetic changes like new paint and updated hardware. Ambitious house hunters might notice the potential in any structure, no matter how dilapidated or haunted it may look. One nontraditional type of home provides buyers a blank slate and even less competition – an abandoned house.

If you’ve seen an abandoned house around your neighborhood, you may be wondering if there’s a way to take ownership of it. Well, it’s possible. In this article, we’ll walk through how to find and buy an abandoned house, and how to decide if it’s the right path to homeownership for you.

What Is An Abandoned Property?

An abandoned house is a property that a homeowner has surrendered rights to, most commonly due to a foreclosure. In other cases, the owners may have passed away, got evicted or had to move unexpectedly. By some definitions, an abandoned house is any property that’s been unoccupied for a year or more. The definition of an abandoned house can vary by state.

One thing most abandoned homes have in common is they’re typically run down. Neglected abandoned properties can become safety hazards, lower surrounding property values and even become a site for illegal activity. On the other hand, abandoned properties can be an affordable option for home buyers searching for a fixer-upper.

Abandoned Vs. Vacant Vs. Condemned Property

Abandoned, vacant and condemned houses look similar from the outside looking in. But while a vacant property still legally belongs to its owner, a property is only considered abandoned once the owner has forfeited all rights to it.

If the house has serious safety issues, a government entity may deem it condemned by marking it an unsafe place to live. Buying a property once it has been condemned can be challenging. Lenders are unlikely to approve a home loan when the collateral has such severe damage. Instead, you may need to purchase the land, demolish the structure and start anew.

How To Buy An Abandoned House

Whether you’re an aspiring real estate investor or an ambitious first-time home buyer in search of a fixer-upper, buying an abandoned property has the potential for a high return on investment. But how do you go about buying an abandoned property? Follow these seven steps.

Step 1: Determine Your Goals

Buying and rehabbing an abandoned property is a long process, so it’s important to know why you’re doing it. Your end goal will impact how much you spend and the type of repairs you make, so take the time to understand your objective.

Determine if you’re planning to reside in the home, flip the property or sit on it to sell later. But remember that waiting too long may mean paying additional property taxes, maintenance expenses and utility bills that can cut into your profit.

Step 2: Review Your Finances

The next step is to get your finances in order and figure out what you can realistically afford. A mortgage preapproval will tell you exactly how much the lender is willing to lend you and all additional fees. A preapproval will also give you the power to move quickly once you find an abandoned property you’d like to purchase.

Like any other home loan, you’ll need to save for your down payment and closing costs. But in addition to the purchase price of the property, you’ll also need to be prepared for the cost of repairs and renovations to make the home habitable. These costs can vary drastically between properties, so it’s important to leave some wiggle room in your budget for any unexpected costs.

Step 3: Find Abandoned Homes For Sale Near You

With your finances in order, it’s time to start house hunting. But browsing for abandoned homes will look a little different than your typical home search. Let’s dive into some different ways to find abandoned properties.

Drive Around Your Neighborhood

The first place to look for abandoned homes is in your local market. Start by driving around your neighborhood and searching for abandoned houses with obvious signs of disrepair or vacancy. Maybe you noticed overgrown landscaping or newspapers piling up on the front porch. If you find a seemingly abandoned house, research the address online and try to get in touch with the owner via phone or email to get information on the property.

Search For Online Listings

You can search for abandoned homes online, but this might involve digging through an extensive list of non-abandoned properties to find the one you’re looking for. To simplify the process, try searching for real estate listings with keywords like “foreclosure,” “immediate possession” and “must sell.” You might be able to find houses being sold as-is for below market value.

Visit The County Clerk’s Office

Your county clerk’s office will be one of the most valuable resources for finding and buying an abandoned house. They’ll be able to provide a list of abandoned properties in the county and the information you need to track down the owner. You can also use the county’s public records to research delinquent taxes, which may indicate additional abandoned properties in the area.

Attend Property Auctions

If you’re looking to avoid a lengthy home search, consider attending a property auction. This method provides the ability to gather information on multiple properties at once. It also gives you the potential to buy a house at a significant discount.

Unlike the traditional buying process, buying a house at auction means making a significant investment with limited information. This can be particularly dangerous with an abandoned house because you may not be able to get a home inspection. Going without an inspection can be the difference between a money pit and a profitable investment.

Connect With A REALTOR^®

A knowledgeable REALTOR^® – a licensed real estate agent – who’s familiar with the local market may know about abandoned houses in the area. At the very least, your agent will be able to direct you to any new foreclosures. You can also consult the realty company’s website to search for foreclosures or other hints that a property has been abandoned.

Consult With A Bank

When a borrower defaults on their mortgage, the bank or lender uses the lien on the house to repossess the property because it was used as collateral on the loan, evicting the former homeowners. Banks are often eager to resell foreclosed properties, so visit your local banks and ask them to provide a list of homes they have repossessed. You might get lucky and be able to buy the property directly from the bank.

Step 4: Confirm The Property Is Abandoned

Once you find a property you want to buy, the next step is to determine if it’s really abandoned. The local county clerk’s office will have public records of property ownership you can utilize to identify any current owners. You may discover the property is vacant – not abandoned. In this case, your best course of action might be to contact the property owner directly with a purchase offer.

But if the previous owner has forfeited their rights, the clerk’s office will also be able to tell you if they owe any back taxes on the home. If they do, the home may soon be auctioned at a tax sale.

Step 5: Inspect The Property

Before you can figure out the home’s worth, you need to determine the extent of the property damage and the repairs needed to make it habitable. This makes a thorough home inspection crucial. A certified inspector will examine both the interior and exterior of the house to identify any major issues with the house. You can use the information revealed to decide if buying the abandoned property is worth the investment.

Step 6: Calculate Your Offer

Then, calculate the estimated cost of repairs revealed during the inspection. Use that number alongside your mortgage preapproval to make a competitive offer on the property. Be sure to figure in other planned expenses, such as appraisal fees, pest and lead inspection fees, title insurance and closing costs. Use your real estate agent to help navigate any uncertainty. 

Step 7: Buy The Abandoned Property

Depending on the specific property and situation, you may be making your offer to an individual homeowner, a bank or a government entity. A real estate agent is particularly helpful at this step of the process. They’ll be able to leverage their expertise to assist in the negotiation. They’ll also be able to walk you through the extensive legal paperwork involved with the purchase.

Pros Of Buying Abandoned Property

There are a few advantages to buying an abandoned house, including:

• Lower sales price: Abandoned homes are often sold at a significant discount. If you’re lucky, you may be able to buy a home for less than the market price.
• Less competition from other buyers: Abandoned homes aren’t right for everyone. So even in a competitive market, you’ll be less likely to encounter bidding wars for these properties.
• Potential to work with the bank: If you’re buying a foreclosed property, you may be able to work directly with the bank that repossessed the home. This can simplify the home buying process.
• Potential for high return on investment: The right property in the hands of the right investor could earn a significant profit.

Cons Of Buying Abandoned Property

Any financial investment is going to involve some risk. When you’re buying an abandoned piece of property, consider the following disadvantages:

• Expensive renovations and repairs: Many abandoned homes will need significant work to be made livable. This goes much deeper than a fresh coat of paint. It may involve replacing all the major home systems, including plumbing, electrical and the HVAC.
• Unexpected latent defects: In addition to paying for planned repairs, it’s likely you’ll encounter a few latent or hidden defects in the home as well. Issues like structural damage can be both expensive and time consuming.
• Outdated building materials: Older, unmaintained properties run the risk of having discontinued and unsafe materials that need to be replaced. Removing asbestos and lead paint is not only an additional cost – it can also drastically slow your renovation plans.
• Additional legal considerations: Without the help of a title insurance company, you might unintentionally take on existing liens or back taxes left on the property from the previous owner.

Buying Abandoned Property: FAQs

These frequently asked questions and answers can help you learn more about buying an abandoned property.

How much does it cost to buy an abandoned house?

The cost of abandoned properties varies. It will depend on how many years it’s gone without maintenance, and the degree of renovations required to make it a livable space. Do an online search or visit your local government office to get an idea for how much abandoned properties cost in your area.

Can you buy abandoned houses and live in them right away?

Before you move into an abandoned home you recently purchased, it needs to be inspected. If it doesn’t pass, it will need renovations or updates before you can move in.

How can I buy an abandoned house with no money?

If you want to buy an abandoned property with no money down, you should seek down payment assistance. But know that you can’t buy a house for free. You’ll need to acquire financing of some kind for the purchase price itself or the renovations it needs to become safe and livable. Speak with your lender or real estate agent to look for other forms of financial assistance.

The Bottom Line

If you have the spare time, money and energy, buying an abandoned property can be a great real estate investment. It can even serve as a blank canvas to create your ideal home.

But make no mistake – transforming an abandoned, derelict property into a home isn’t for the faint of heart. Take the time to build your budget, define your goals and consider all the pros and cons before diving in.

If you’re intrigued by an abandoned property in your neighborhood, get the ball rolling. Start your application with Rocket Mortgage^® to find out how much you can spend on an abandoned home.