A local government condemns a building when it is no longer fit for human habitation. When a building is condemned, there is still a chance for it to be renovated and brought back up to code. Because of this, homeowners don’t always have to move and sometimes investors can buy these properties for profit.
If your home is condemned, not all is lost. On the flip side, if you're an investor, condemned houses may be your ticket to a fruitful portfolio.
What does it mean when a building is condemned?
When the local government decides that a certain property is no longer fit for human habitation, it condemns it. There is a long list of housing code violations that could cause the condemnation of a home.
You are not allowed to live or work inside a condemned building. The only way it would be possible to reoccupy the home is if all the violations are corrected to the local government's standards with plenty of documentation. If you are not able to fix these problems, you have to move out immediately and permanently.
Here are just a few of the reasons that the local government might choose to condemn a home:
- The home is vacant and has been abandoned / completely boarded up for at least two months
- There are currently no utilities connected to the home, like running water, electricity, etc.
- An inspector makes a report citing other specific hazards in the home, such as dangerous materials or locations.
- A home is “dilapidated” which means an inspector qualifies it for condemnation without citing a specific hazard.
What happens if your house is condemned?
If you get a notice that the home you live in (or own!) is going to be condemned, there are still things you can do to prevent this from happening. Usually, you can create a contract with the local government agency to negotiate a timeline for the rehabilitation of the property.
Once you complete the repairs, you just need to set up a time for the local inspector from the housing authority to take a look and confirm that you fixed all the code violations.
Here is a small list of the things that you usually need to have in working order for the inspector to reverse the condemnation status:
- Hot water
- Light fixtures
- Safe electrical outlets
You will also need to make sure that the home does not have a pest problem and that it’s structurally sound. This means making sure any porches, balconies, and railings are in good condition as well.
What is eminent domain?
Sometimes, the local government will condemn your house when there is absolutely nothing wrong with it. Most people know this as eminent domain. Housing authorities are within their rights to take over homes when they are within publicly designated areas. Usually, the government will use this land for things like a freeway, park, or other public facilities.
With eminent domain, the government doesn’t just swoop in to take you and your neighbor’s homes away. First, they try to negotiate a good settlement. The government must always pay homeowners for the use of the property.
The offer is usually based on the home’s assessed property value. You may know this as a pro-tanto award. If you think it is too low, you are always welcome to have your own property assessor take a look, so you can make a counteroffer.
How do you buy a condemned building?
Buying a condemned building often comes with a steep discount. You are able to purchase these homes typically for little more than the cost of the land they sit on. This is because there is typically no competition to purchase it.
However, before you buy, you need to think about the true cost. Is the amount of profit you stand to make from buying this condemned property worth the time and effort it will take to make it sale-ready?
There is a lot of bureaucratic red tape to cut through when you purchase a condemned home. You purchase the property from the bank. However, the reason for the home’s condemnation could significantly stall the process.
For example, if the previous owner never paid their taxes, you could have a lot of paperwork waiting for you. It’s the same thing for other specific code violations.
There might be certain liens attached to the home that you need to clear before moving forward. And, certain lenders might not even be willing to finance a condemned property.
Because of this, many people choose to work with a private lender.
In any case, you still need to partner with a Realtor throughout the process. In fact, purchasing a “specialty” property like a condemned property is actually one of the situations in which using a Realtor would actually be the most beneficial. Even if you are a seasoned investor, having the knowledge and experience of a Realtor in your back pocket would be highly beneficial.