A fixer upper is the dream of many investors, but what if the home isn't in a livable condition at all? If you're looking at a property that's been condemned, there's a lot to consider. While you can get an excellent deal on these types of homes for sale, there will be some challenges involved in the process.
Financing for an Unlivable Property
Most mortgages will not finance a property that can't be lived in. It makes sense: part of the risk assessment for a mortgage relies upon the fact that people aren't going to walk away from the home in which they live. But that doesn't mean you can't get financing,
There are loans called "construction loans" or "renovation loans" that will lend you not only the money to buy the house, but also the money needed to rehabilitate the house. They're harder to get and rarer to find, though, so you should secure financing early in the process.
Checking the Property Taxes and Liens
Many unlivable properties are also in debt. They may have liens on them because of the prior owner and they may still owe a significant amount in property taxes. You need to make sure that the seller pays these property taxes during the escrow process. The property taxes will follow the house, not the previous owner; if they aren't paid at close, you may find yourself in an uphill battle to get them paid.
Getting a Quote on the Repairs
If you are going to be financing the repairs to the home, keep in mind that you usually can't do more than a small amount yourself. Banks require that you use a licensed contractor to repair a property, because otherwise the property may be restored in a dangerous condition. That doesn't mean you can't do anything yourself: painting and aesthetic repairs are usually fine.
To make sure you know how much you need to finance, you will need to get quotes from contractors. These quotes will be submitted to the bank along with the information about the property, so they can make a financing decision.
If you really want to flip houses, you may find yourself working with properties that are currently unlivable. But you also need to be cautious as this is fairly high risk. You could find yourself with a money pit: a property that would take more to fix than you'll ever get back from it. Your real estate agent can help you avoid this costly situation.Share