December 31, 2018
Does it Ever Make Sense to Buy Condemned Property?
The prospect of purchasing a condemned property comes up from time to time in our discussions with clients. We tell them up front: it’s not for everyone. But there are some instances in which a condemned property may indeed make for a good real estate purchase. For the most part it depends on what a buyer’s intentions are for the property, and what forms of financing they have available to them.
A condemned property—whether in Rhode Island, Massachusetts, or Florida—is one that a responsible authority has determined to be uninhabitable in its present condition. Whether that authority is on the municipal, county, or state level depends on the state in which the property is found. But the reasons for the property’s lack of habitability can vary. Sometimes it’s just that utilities have not been provided for a while, or the property has been abandoned and left empty for a period of time (often 60 days) during which time it has gone uncared for. Or its owners have failed to pay their taxes. Other times an inspection has been performed that exposes structural defects, such as a severely deficient foundation, roofing in a state of compromise, or a septic system that has ceased to function. Generally, once the determination has been made that the property is not habitable, its owner is permitted a period of time in which to make repairs. During this time, the authority often also levies fines. Once the grace period has passed and the property has gone unrepaired, the authority generally will order demolition and removal of the deficient structure.
So why might one want to purchase a property in a state of such crisis? And who can pull it off?
First of all: condemned properties, being in such disrepair, will almost never pass a lender’s muster. So mortgages are generally (though not always) off the table. This narrows the field of potential purchasers to those who have cash available to buy the property wholesale—generally investors, whether individuals or groups. These buyers get the property for a steep discount, but will often have to pay the fines levied on the property, plus any unpaid taxes that may have accumulated, and then they will need to absorb the cost of renovating—and sometimes of rebuilding entirely—with plans to recoup enough from the property’s sale to make the overall investment worth the combined costs. It requires a great deal of planning, and a solid knowledge-base about the ins and outs of real estate investment.
And anyone who buys a condemned property will absolutely need to purchase title insurance.
If you’re looking to invest in a condemned property in Pensacola, Florida; Providence, Rhode Island; Duxbury, Massachusetts, or any other city in one of these three states, give us a call. Here at Topouzis & Associates, P.C., we’re experienced at title searches and title curative services, and we are supported in supplying title insurance by numerous underwriters. We’ll put our vast experience to work for you, ensuring clear sailing through the closing process and beyond.