An abandoned property is no longer under the possession and maintenance of its original owner. Abandoned properties are typically in bad shape and pose a public health and security risk. In addition, the property is usually subject to liens such as outstanding tax or mortgage payments. The process of acquiring one is much like a short sale where you buy at a discounted price, preferably in cash, following extensive negotiations with lenders and the seller. The process is arduous and involves numerous potential pitfalls. Research the property thoroughly before purchasing and consult with professionals at every turn.
Locate Abandoned Property
Finding an abandoned property may be as easy as walking past it in your neighborhood. If you do not readily know where to find one, search the classifieds and online property listings. Look for keywords such as "below market value" or "take immediate possession." There are also specialized websites for abandoned properties. Your local lenders, real estate agencies and county tax collector’s office are also a great source of abandoned properties pending foreclosure or auction sale due to default in payment. Consult with contractors and real estate professionals to get advice on the possible costs of restoration and prevailing market rates to determine whether the property is a viable investment before deciding to buy it.
Trace the Owner
To conclude a deal for an abandoned property, you need to trace the owner. Visit the county recorder’s office to find out the details of ownership and any existing liens over the property. Owners usually abandon their property due to financial difficulties. If the property had a mortgage, contact the lender on record to determine whether foreclosure proceedings on the property are underway. If not yet, you may be able to negotiate with the seller and the lender to purchase the property. Alternatively, you can acquire the property through an auction sale. Retain a real estate attorney to negotiate on your behalf because the process is lengthy and involves numerous formalities.
Consider the Cost
Purchasing an abandoned property can be a very costly affair because in spite of the considerably low purchase price, there are other expenses that drive up the cost. You will need to conduct an appraisal of the property and inspect it for pest, lead and other public health risks. In addition to the appraiser’s and inspector's professional fees, you might incur legal fees, back taxes, title insurance and financing costs. Other expenses include travel costs to and from the property, calls and of course everything involved with actually rehabbing the property. Carefully consider all these costs before taking on abandoned property.
Purchase the Property
A cash purchase is ideal, but if you have to obtain a mortgage, you need professional financial advisers, a willing lender and patience for a time-consuming and often frustrating process. The first step is to obtain a preapproval letter indicating how much the lender is willing to lend. While the letter boosts your chances when bidding for the property, it is not a commitment to lend. To protect yourself, have your attorney make the bid "subject to financing" because the preapproval is usually conditional upon property appraisal, making the property habitable, location and other lender criteria. You only get the mortgage finance once you meet the conditions. If required, you might still need cash to make an earnest down payment. Confirm that you are getting a free and clear title.