Around Halloween, that usually-forgotten, abandoned house down the street may draw second glances. And while the kids might be looking for a spooky spot to host their holiday festivities, Mom and Dad may be considering a permanent move.
Given that the median price of a new home sold in America these days tops $320,000 — and the popularity of television programs like HGTV’s “Fixer Upper” — many would-be homeowners may wonder if abandoned houses are a worthy option.
So how can you tell if it’s got “good bones” or a pack of skeletons hiding in its closets? And how do you find abandoned houses in the first place?
What to know before buying an abandoned property
The first thing to understand about abandoned property is that it was probably abandoned for a reason. The previous owners may have faced foreclosure or other financial struggles, which usually means the property is in some level of disrepair.
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But there’s a difference between a house that needs a paint job and one that has experienced extensive water damage. Either way, you want to know for sure what you’re getting into before you sign a mortgage.
If you can find a diamond in the rough, you could get a great property for less than market value, not to mention the opportunity to fix it up to your exact specifications. Here’s what you need to know to sleuth out the difference between an opportunity and an error.
Is an abandoned property worth it?
Although it’s difficult to get a firm sense of an abandoned property’s value and long-term potential as an investment, there are a few factors that usually work in your favor, says James McGrath, a licensed real estate broker in New York and the co-founder of home-shopping website Yoreevo.
For instance, if the property is in a historic district or an up-and-coming neighborhood, that could boost its resale value in the long run. For one thing, you know there’s a market for homes in that area.
What’s more, historic homes — those built 50 or more years ago — often have a more solid construction style than those built over the last 30 years. As an example, McGrath points to the brownstones that line the streets of Brooklyn, some of which still have beautiful facades and yet interiors haven’t been touched in decades.
Even if you can’t tell 1980s construction from 1890s construction, however, you should still look for red flags around the property’s exterior. If you see obvious water damage or dilapidation on the outside, chances are the inside isn’t going to be much better — and the cost of necessary repairs may outstrip whatever short-term savings the property could offer.
Buying abandoned? Build in a cushion
Even in the best of cases, a home that’s been abandoned for a while will almost always require a good amount of renovation. That means you should build in a budgetary cushion on top of the purchase price — and a pretty lofty one at that.
“Assume nothing works,” said McGrath, and “plan to replace the plumbing, rewire the entire house and put on a new roof.” While you should certainly get a complete estimate from not one, but multiple, inspectors or contractors, be aware that these repairs could easily run hundreds of thousands of dollars.
You’ll also need an inspector’s expertise to rule out potential health hazards, including lead paint and asbestos. In some cases, the value of the home itself is negligible, and the value is really in the underlying property. (That is, you’d basically be starting from scratch.)
This is where it’s important to do your research ahead of time and fully think through your decision. If you’re going to purchase a home for $100,000 and pour $200,000 into renovations, it may make more sense to just buy a $300,000 property in the first place — particularly since it’s notoriously difficult to appraise an abandoned home’s actual value.
Which leads us to the next potential fly in the ointment.
Getting a mortgage on an abandoned house
Even if you’ve found the fixer-upper of your dreams, you could run into hang-ups when it comes time to take it to the bank. Because the value of an abandoned home is more predictable than one traditionally listed at market, you may find yourself having to renegotiate your original terms with your lender if an appraiser finds it’s worth less — or more — than you thought.
For example, you could wind up having to increase your initial down payment offer if the value turns out to be higher than your original bid.
Abandoned homes may also have undergone foreclosure, which may mean there’s an existing lien (or liens) on the property as well. In some cases, foreclosed status may make it impossible to get a professional inspection before purchase, which makes for a risky buying experience.
How to find abandoned houses available for purchase
If you’ve still got your heart set on an abandoned property, it could be worth the risk … but you’ll need to shop around to find the right one. Some abandoned properties may officially be listed on the market at below-market-value prices, which means they’ll show up in a traditional real estate search, but if you happen across one in your travels that intrigues you, you may have to do some investigating.
You can find more information by accessing records through the county clerk’s office, which may also have insight on existing appraisals and potential tax issues. Contact information for the current owners may or may not be listed, but if it is, you could reach out directly and ask if they’re thinking of (or willing to) sell.
That said, if you’re looking for a way to pay less for the privilege of having a roof over your head, you don’t necessarily need to move into a spooky shack to do so. Refinancing your current mortgage can be a great way to lower your monthly payments or save in the long term on interest — and it doesn’t require hiring a contractor. (Or an exorcist.)
This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.
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