You’ve probably seen condemned signs on houses. But how do properties become condemned, and what do you need to know as a buyer or seller?
There is likely a condemned house somewhere in the neighborhood you live in. Some are so far gone that demolition is the only answer, while others just need some good TLC (and a solid investment) to bring value to their owner. Here’s what happens when a house is condemned, and what it could mean in terms of buying, selling or simply owning that property.
What Is The Definition Of Condemnation In Real Estate?
A property is considered condemned when a government entity deems it unsafe or no longer fit to live in. Once a home is condemned, it may not be inhabited again until it has been rehabilitated and inspected, if that’s even possible.
In many cases, condemning a home does not necessarily mean it is a lost cause forever. Whether or not you can un-condemn a property depends on why it was condemned in the first place.
What Are Grounds for House Condemnation?
Most condemned homes are only condemned after they have already been abandoned and the owners or residents stop maintaining the property.
According to the US Department of Housing and Urban Development (HUD), there are currently more than 10 million abandoned residences in our country. Many of these will be well on their way to being condemned if no one steps up to maintain their care.
Regulations can vary based on municipality. Generally, a home may be condemned if:
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- The house has been abandoned for an extended period of time; in some cases (and depending on the condition of the property), this could be as few as 180 days.
- It is dilapidated and/or deteriorated to the point where it’s no longer structurally sound.
- It is considered unsafe or unsanitary.
- The house does not have adequate utilities, such as power, water, electricity and/or sewer.
If a home is condemned, it is no longer legally habitable. If the problems are not fixed within a specified period of time usually stated on the condemned house notice, the home’s occupants will need to move out.
A home can also be considered condemned when eminent domain powers are exercised. This means a perfectly safe home may be forcibly acquired and modified — or in some cases, even destroyed — simply because of its location.
In cases of eminent domain, public authorities seize private property, such as a home and land, if it is in an area that is to be used for certain public projects. That means if your state wants to build a highway or airport through your backyard and you don’t want to sell, they can still condemn your property. (Yes, you’ll be compensated.)
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How Long Does It Take to Condemn a House?
The length of time necessary to condemn a home depends heavily on its condition and why it’s being condemned. The specific regulations also vary from one municipality to the next.
Generally, the process of condemning a house or building takes time and involves notifying the owner and/or residents that the property is in violation of health and safety requirements. This often means receiving citations about the property’s violations, sometimes in a pattern lasting weeks, months or even years.
If the owner doesn’t correct the violations, the property generally goes before the courts for a formal legal hearing, at which time it may be declared condemned. The owner may then have a specified period of time, often between 30 and 60 days, to correct the violations, request new inspections, and apply for new permits before the property is declared uninhabitable.
In some cases, condemning a house can be much faster. If the property is determined to be structurally unsound, for instance, it can be condemned immediately and the residents forced to vacate with little or no notice.
How to Sell a Condemned House
If your property has been declared condemned because of code violations or lack of upkeep, you may decide that it’s not worth repairing. In this case, you can choose to sell your condemned property, though there are a few important things to keep in mind.
The first is that, generally, without making the required repairs, you will be unable to sell the condemned house as a structure. Instead, you can sell the lot the home is on, drawing in buyers who would plan to demolish or renovate the property themselves.
This is common, said Glenn Phillips, the CEO of Lake Homes Realty, a multi-state real estate brokerage based in Alabama. “We operate real estate brokerages in 33 states, and more often than not, we will see buyers purchasing a condemned home mainly for the lot. Once the sale is complete, the home is demolished and construction of their dream home begins.”
Expect a limited buyer pool for condemned properties. Buyers will have a difficult time getting a mortgage lender to approve a loan for a property that contains a condemned, even as a fixer-upper. Instead, you may have better luck selling to a buyer with cash or an investor who has the backing of a hard money lender.
There are also a number of companies that buy homes , often “in any condition.” Depending on the location and value of your land, you may get a fair offer even with a condemned house still on the property.
Buying a Condemned House
If you are simply looking to demolish the structure and build on the land, your biggest hurdle will be finding a lender. If possible, buy the property in cash. You can also borrow from a hard money lender like Kiavi or LendingOne, but you’ll still need to come up with a down payment.
If you’re looking to rehabilitate the home — either to live there yourself or even flip the house — you’ll want to do your due diligence and determine what you can afford.
Once a home is condemned, there are added steps in order to facilitate a purchase. For instance, if the property was condemned because of safety violations, you work with a code enforcement entity when making your offer. If the property was foreclosed on, you deal with a bank rather than an owner.
In this case, having a good real estate agent on your side can be very valuable.
Additionally, many lenders will only approve a mortgage based on the value of the property as it stands. This means that the land value and the condemned structure’s current value are factored in, but you may need significantly more money in order to actually demolish or renovate the property.
Having a partner investor or working with a hard money lender can be a good way to purchase the property and also have the cash necessary to complete your project.
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Where to Find Condemned Properties for Sale
Was the property eventually condemned because it was abandoned, or was the property abandoned because it was declared condemned?
No matter which came first, condemned and abandoned homes frequently find themselves on the path to bank foreclosure. And once these properties are foreclosed on, it can be easy to locate and move toward purchasing them.
You can also check with your city or county to see if they keep a list, or even a website, with local condemned homes. These condemned house lists can give you a great place to start looking if you’re interested in buying a condemned and abandoned property.
Your area may also hold auctions for abandoned and condemned properties; your county clerk may be able to direct you if such auctions exist in your town or county. These auctions can be a good opportunity to find a good deal on a property, though they may only be held periodically.
Lastly, if you come across a home that appears to be abandoned or has been declared condemned, one option is to contact the owner about purchasing the property. You can often reverse-search addresses through your county tax assessor’s office, which will give you information about the owner of the home. Then, you can contact them directly to see if they’re interested in selling and how much they’re willing to take.
Can You Fix a Condemned House?
A condemned home may initially seem doomed, that its only future involves demolition. However, you can often fix a condemned house and restore it to a beautiful property.
“The main benefit of buying a condemned home is the value,” Phillips said. “While some people will perceive very little value in many of these properties, they often have the bones necessary to create a wonderful home. Often, architectural elements from condemned structures can be saved and incorporated into an updated home.”
A home’s condemned status can be reversed, as long as the reasons it was condemned in the first place are corrected. If the home was condemned because of code and safety violations, that usually requires a significant investment into the property to bring it up to date.
The issues could be serious and structural in nature, or something as simple as electrical wiring. Be sure to get copies of the original condemned orders as well as a trusted home inspection before you buy, so you know what you are getting yourself (and your bank account) into.
Once you complete any necessary repairs, you need to request inspections from local authorities. If the renovated property passes those inspections, the condemned status can be reversed.
But does a stigma remain attached to those once-condemned homes, even years later?
“After a home has been renovated or replaced with a better version of itself, the stigma goes away and the homeowners will have a house they love,” Phillips said.
Final Thoughts on Buying and Selling a Condemned House
While many of us think of boarded-up eyesores when we hear “condemned home,” the truth is homes can be condemned for many reasons.
Whether you’re looking to sell a condemned property, build on a lot with a condemned home or plan to renovate a previously condemned house, it’s important to go into negotiations knowing what sort of value the property retains and how expensive your project will be. Buying or selling these properties may involve jumping through a few hoops, but the value that can be found in a condemned lot can be well worth the extra work.♦
Would you consider investing in condemned properties? Why or why not?
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This article originally appeared on Ownerly.com and is republished here with the author’s permission.
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More often the not, condemned home requires extensive research to make it profitable again and ROI may take longer than usual because of the massive expenses to bring the home back to life. But who knows… there may be experts on buying condemned homes for a living!
Buying condemned properties seems like a good niche if you can figure out the local rules and quirks. Thanks for the tips!
Absolutely Jerico!
This gave me a positive outlook to condemned homes. I thought it’s only a liability.
Glad to hear it Jastin!
I thought condemned houses are haunted houses. 😂 Does anyone flip haunted houses? I bet it’s a fright! 🤣 Kidding aside, thanks for the enlightenment! I wasn’t aware condemned houses can become an asset!
Interesting topic! Do you have a case study for converting condemned house into a rental? I saw a condemned house while driving for dollars.
Great question Reagan. Unfortunately we don’t have a case study written up at this time, but the biggest hurdle is just getting the local municipality to remove the condemned status and issue you a use and occupancy permit.