A-to-Z Guide on How to Buy Abandoned Property

You might be wondering, “If a house is abandoned can I buy it?” The short answer is yes. It is possible to buy an abandoned house. In fact, people buy them every day.

If you and the owner come to an agreement on the sales price and terms, and they have the authority to sell the property, there typically isn’t anything keeping you from buying it.

However, those two conditions are not always black and white, and the rest of this article is dedicated to making sure you go about buying an abandoned property the correct way.

The terms “vacant,” “abandoned,” and “condemned” are frequently used in real estate and are often confused with each other.

There are certainly similarities between these statuses of houses, but they are not quite the same.

What Is a Vacant House?

A vacant house is a property that is not currently being lived in. There are many reasons why it could be empty.

It could be a rental property between tenants, or the owner might have moved out and is waiting for it to sell.

Vacant properties are a common target for real estate investors because it is easy to pull a list of them by using real estate investing software.

Also, the fact that a house is empty would make it seem like the owner needs to sell it.

However, just because a property is vacant doesn’t mean the owner intends to sell it. What you should really be targeting are abandoned houses.

What Is an Abandoned House?

An abandoned house is a property that has become vacant, and the owner has no future plans of using it. Not every vacant house is abandoned, but every abandoned house is vacant.

While vacant houses are sometimes temporarily empty for understandable reasons, abandoned houses will likely remain vacant until a significant change occurs, such as someone buying them and restoring them to a liveable condition.

Most abandoned houses are in poor condition. Otherwise, the owner would not be letting it sit empty and would be using it somehow or selling it.

In most cases, the owner has become so overwhelmed with the property or the rest of their life that they have completely blocked it out of their mind.

You will be offering them a major relief by purchasing it without them having to worry about fixing it up.

What Is a Condemned House?

A house becomes condemned when it is in such rough shape and has become such a public nuisance that the city steps in and deems it unusable.

Most of the time, a house that has been condemned has been sitting empty for years.

What happens with a condemned house will depend on the city it’s in since they all have different regulations and procedures.

In some cities, the government will demand that the property be demolished, while others allow it to be repaired. Some cities exercise eminent domain and take ownership of condemned houses.

Unless you have developed a clear path forward with city officials on getting the property renovated, you should probably avoid buying a condemned house.

Otherwise, you could buy it only to discover that the city is forcing you to demolish the property.

The only cases where this would be okay are if you purchased the property just for the land or if building back a new house would be profitable.

If these properties can be purchased at such steep discounts, you’re likely wondering where to buy abandoned houses.

There are many ways to find them, but some are more effective than others.

Let’s start by looking at how to find abandoned property for sale, meaning homes that are actively on the market.

Before you consider any of the subsequent methods, try to find off-market investment property deals online at the HouseCashin investment property marketplace.

It features various types of deals specifically for residential real estate investors throughout the U.S.

This includes abandoned homes, preforeclosures, short sales, and other distressed real estate sold under market value.

Below are other methods requiring more effort and sometimes additional opportunities.

Talk to Real Estate Wholesalers

In the real estate world, wholesalers are the deal finders. They specialize in real estate wholesaling — finding distressed properties, putting them under the purchase contract, and then selling those deals to other investors.

Like real estate agents, they are middlemen between the seller and end buyer. However, unlike what agents do, real estate wholesaling doesn’t mean marketing properties on the seller’s behalf.

They rather market wholesale real estate deals to investors — the right to take over a purchase contract where the wholesaler’s name is specified as the buyer. So you will actually buy it instead of the wholesaler.

They often find old abandoned houses and offer them for sale at great discounts.

Since wholesalers do the heavy lifting of finding distressed properties, relying on them to bring you deals frees you up to focus on the other parts of purchasing abandoned property, such as raising capital and building a team of contractors.

Not all wholesalers are created equal. And unfortunately, almost every person looking to get into house flipping and other real estate investing strategies starts by trying to wholesale houses.

Because of this, you’ll likely need to talk to several wholesalers before finding one that can help you.

To find real estate wholesalers in your area, you can do a Google search for terms such as “we buy houses [your city]” or “sell my house fast [your city].”

Many of these companies do not buy properties themselves, but instead wholesale them to other flippers and landlords.

However, a better and quicker way to find a reputable professional is using the HouseCashin directory of the best real estate wholesalers in your area.

To get better acquainted with the local wholesalers, ask them questions about their businesses.

You can ask them questions such as, “What are some recent deals you’ve done,” or, “How many deals do you typically do per year?”

You should also let them know what types of properties you’re looking for so they can send them to you when they find something.

Go to Property Auctions

Many properties that become abandoned eventually get sold at auctions. There is a wide variety among these auctions.

Homes with unpaid mortgages get foreclosed on and are typically sold at the county courthouse. Often, the heirs who inherit an abandoned house hire an auction company to sell it.

The process of buying abandoned property can vary significantly depending on what type of auction you attend.

For example, many foreclosure auctions require you to immediately write a check for the entire purchase price.

Also, most of these homes are sold “sight unseen,” so you can easily buy a lemon if you’re not careful.

When a home is being sold through an auction company on behalf of the owners, the rules are often different from a foreclosure auction.

Every company is different, but some will allow you to view the property before bidding.

Some will also give you a reasonable amount of time to perform your residential rental property due diligence after you win the bid.

If you’re looking for how to go about buying an abandoned house and think auctions are your best bet, you should research the type of auction you will be attending to avoid making any costly mistakes.

Also, you should set an absolute limit on your purchase price going in and refuse to go above that number no matter what happens at the auction.

The last thing you want is to get caught up in the emotions and pay way too much for a run-down house.

Work with a Real Estate Agent

Another way to find a house that has been abandoned is to work with a local investor friendly real estate agent.

Since the vast majority of real estate transactions go through the MLS (Multiple Listing Service), your chances are high if you have a good agent on your team.

Unfortunately, there’s no “abandoned” filter when searching through the MLS, and listing agents typically don’t advertise that a house is abandoned.

However, a smart agent can read between the lines and determine which properties appear vacant and distressed.

If you give them the criteria of properties you’re looking for, they can let you know as soon as one that you’ll be interested in hits the market.

Another benefit of working with an agent (or multiple agents) is that they regularly have leads from people wanting to sell their homes, and many of these houses are far from market-ready.

If you let them know you are wondering how to find abandoned houses near you, they can send these properties straight to you before they’re even listed.

The previous section discussed how to find abandoned houses that are already for sale.

While those are great strategies to find a list of abandoned homes, what about the ones that aren’t actively for sale on the market?

There are undoubtedly countless abandoned homes in your market whose owners would like to sell them but just need a little nudge to get the ball rolling.

The benefit of finding abandoned houses that aren’t currently on the market is that you do not have to compete with other buyers looking for the same thing.

Instead, you work directly with the owner to structure a deal that works for everyone.

That’s the difference between buying off-market and on-market properties.

Off-market properties can be purchased for much lower prices because there are no agent fees involved and less hype causing the price to be bid up.

However, locating these properties and contacting the owners takes more work.

How do you find out about abandoned homes in your area that are off-market? Let’s take a look at some of the best strategies.

Market for Your Own Services

If you want to purchase abandoned property from people that don’t have “for sale” signs in the yard, you’ll have to get creative to grab their attention.

There are several marketing strategies to choose from, so you’ll have to try them out and see which ones fit your style and give you the most success.

Here are the most common marketing methods real estate investors use to find off-market properties:

• Real estate investor direct mail marketing: Sending postcards or letters to potential motivated sellers letting them know you’re interested in buying their houses. Various direct mail marketing services for real estate investors greatly facilitate this strategy.

• Cold calling: Calling lists of homeowners to see if they are interested in selling.

• Search engine optimization (SEO): Optimizing your website to show up on the top of Google search results when people search for terms like “sell abandoned house [your city]”.

• Pay-Per-Click (PPC): Running paid ads on Google to show up in the “Sponsored” space for the same search terms as SEO.

• Bandit signs: Placing “We Buy Houses” signs throughout your community to catch people’s attention and have them call you.

Some of the strategies can have abandoned property owners come to you themselves. These people may need cash fast and be willing to sell their property cheap to real estate cash buyers.

You can get their business by mastering the best ways of generating motivated seller leads for real estate investors.

Pulling a List

For outbound marketing strategies such as direct mail and cold calling, you must generate a list of properties to target.

You can use an online platform such as PropStream to filter every house in your market by specific criteria.

The first step is to select the area you want to target, such as your county or a particular zip code.

Next, filter the properties by characteristics such as size and estimated value to fit within your buy box.

The last step is to filter by potential pain points indicating the house might be abandoned. Here are some filters you can apply:

• Vacant Properties
• Code Violations
• Liens
• Judgments
• Foreclosures
• Divorce
• Bankruptcy

Driving for Dollars

Another way to find abandoned homes in your area is driving for dollars, which involves driving through neighborhoods looking for homes that look distressed.

Driving for dollars apps make it easy to plan your routes, note interesting properties, and even instantly find their sellers’ contact information and contact them via direct mail, message, or call.

When you’re driving around and looking at houses, many signs of distress will be obvious: tall grass, damaged exterior, stacks of mail, etc.

However, some signs might not be as apparent, and you’ll have to train your eye to look for them.

Many times the giveaways are more subtle, such as the absence of personal items or open windows that reveal empty rooms.

Bird Dogs

Instead of spending the time to drive through neighborhoods yourself, you can recruit the help of other people that already have insider knowledge.

There are professional real estate bird dogs who work for investors looking for properties for them. They are like wholesalers but they don’t take homes under contract.

Also, mailmen, delivery drivers, and landscapers drive everywhere and often already know where vacant houses are.

If you let them know you want to buy an abandoned house, they can likely tell you where they are. Let them know that if you can work out a deal, you will pay them for the lead.

The next question we must answer is how to find the owner of an abandoned house once you’re interested in buying it.

Luckily, that is much easier to do with today’s technology than it used to be.

So, how do you find out who owns an abandoned house in order to get in touch with them? Here is a list of online platforms that will enable you to do all the research you need.

• PropStream: Use to find information on abandoned homes, such as square footage, estimated value, owner name and address, transaction history, and mortgage balance.

• NeighborhoodScout: Use to research data about the area such as demographics, crime rate, and schools.

• FEMA Flood Maps: Determine if the property is in a flood zone and will require flood insurance.

Real Estate Skip Tracing Software

If your goal is to contact the owners of an abandoned property via phone, you will need to find an up-to-date phone number.

There are skip tracing apps for real estate investors. They exist for that sole purpose. Some of the aforementioned tools — PropStream and driving for dollars apps — include this functionality.

Once you have an abandoned property that you’re interested in buying, you can go to one of these platforms, enter the property address and the owner’s name, and it will search within its network of databases for the most accurate phone number and owner’s physical address.

It does not always give a perfect match, but most of these platforms are very accurate.

Not only can you skip trace a single property you’re looking at, but most platforms will also allow you to run a bulk real estate skip trace on a list of properties.

Simply create a spreadsheet of property addresses, upload the list, and it will populate the owners’ names and phone numbers for you.

Once you have that, you can get to work on reaching out to the homeowners to see if they would like to sell.

When you buy a house that is abandoned, how much should you expect to pay? In reality, that depends on many factors.

The only thing you can be certain of is that you can expect to pay well under market value to buy old abandoned houses.

As with any transaction between multiple parties, it’s all negotiable. And that’s a good thing because you’ll need to make sure you purchase the home at a price that will allow you to make a profit.

Too many amateur real estate investors get caught up in the fact that they’re paying under market value and neglect to properly run the numbers on the deal.

Many investors use the 70% Rule when buying a house to fix and flip.

This means they multiply the After Repair Value (ARV) by 70%, subtract off the repair costs, and that gives them the maximum price they can pay for the house.

While the 70% Rule can get you pretty close, there’s a better way to run your numbers.

Instead of multiplying the ARV by an umbrella factor that accounts for all expenses, I recommend finding the ARV by looking at comparable sales, and then subtracting off each expense along with your desired profit on the deal.

Here are the most common expenses you can expect:

• Acquisition: closing costs when you buy plus any other costs, such as paying a home inspector and agent commission.
• Rehab: total rehab budget.
• Rehab hedge: extra padding in the rehab budget to account for overages and unforeseen issues.
• Holding: monthly costs from holding the property until you resell it, such as utilities, taxes, insurance, pest control, and loan payment.

Once you subtract the expenses and your profit from the price you expect to sell the house for, you’ll then know how much you can pay for it.

As you can see, the price you can pay for an abandoned home depends upon several things, especially the cost associated with renovating it.

For a home requiring a major overhaul, it is wise to include a larger hedge amount for the hidden issues you will undoubtedly find.

Not every homeowner will be willing to sell their property for the price you’re willing to pay.

And that’s okay — just move on to the next one. Knowing your numbers upfront and passing on the deal is better than paying too much and losing money.

You may have heard about adverse possession as a way to take ownership of an abandoned property just by claiming it as your own, without even having to pay for it.

While such practice legally exists, let’s clear things up on this matter.

Adverse possession is a process in which someone can legally take possession of a piece of property by using it for an extended period of time.

Each state has different regulations on the process, but they have similarities. Here are the requirements for someone to gain ownership of a property through adverse possession.

Their possession leading up to the transfer of title must be:

• hostile, meaning it is without the true owner’s permission.
• actual, meaning they are actually in control of the property and using it.
• exclusive, meaning no one else is using the property.
• open and notorious, meaning they use the property normally and openly without trying to hide it.
• continuous, meaning they use the property continuously for the minimum period of time set by the state.

Each state has a different requirement on the time for which someone must hold possession of a property before claiming it as their own through adverse possession.

This time period ranges from three to thirty years.

But is it realistic to gain ownership of an abandoned property through adverse possession? Not really.

If you’re reading this article, you’re likely trying to figure out how to buy abandoned houses for investment purposes.

The timeline is so long that trying to acquire homes that way is not worth the trouble.

You essentially have to trespass on the property the entire time, and the true owner could take it back at any point in the process.

In reality, adverse possession is typically used to clear up title issues in cases where a portion of land is wrongfully included on someone else’s parcel.

You’ll be much better off reaching out to owners of abandoned properties and structuring deals with them to buy their houses the normal way.

Many people believe insufficient money is the one thing holding them back from buying real estate. You might be asking the question, “How can I buy an abandoned house with no money?”

The truth is that thinking you need more money to buy real estate is a limiting belief.

With the proper knowledge and the right types of deals, you can buy as many houses as you want while spending hardly any of your own money.

So, how do you buy abandoned homes even if you don’t have a large bank account? Let’s look at a couple of strategies to make that happen.

Seller Financing

One way to buy an abandoned property with no money down is to structure a seller-financed deal in the form of a seller carry back.

With this setup, instead of paying cash for the house or going to the bank to get a loan, the seller carries the financing and receives payments over time.

Seller financing offers multiple benefits to you as a real estate investor. First, there are no down payment requirements, so you can buy houses for little to no money out of pocket.

Also, securing traditional financing on an abandoned home can be complicated if it is in rough condition.

Instead of jumping through the bank’s hoops, seller financing lets you start the project immediately.

Private Money Lenders

Since working with banks can be tricky, many real estate investors raise money from private investors to fund their deals.

Private money lenders are simply people that have money sitting around that they would like to invest into your projects to achieve a healthy return.

The best place to start is with your friends and family. You may be surprised how many people are interested in what you’re doing and willing to fund your deals.

Like seller financing, one of the primary benefits of working with private money lenders is that it allows you to avoid the red tape of traditional lenders.

If you are looking at buying abandoned homes, many lenders will not even consider them financeable because they do not meet their underwriting requirements.

However, this is not a concern when working with private lenders.

Another benefit of using private money to purchase abandoned houses is that you can buy them without using any of your own money.

Most banks will require at least a 20% down payment on investment properties because they want to see that you have some “skin in the game.”

But if you purchase a house with enough margin, you can have the entire project (including the renovations) funded 100% by private lenders.

Hard Money Lenders

While the term “private money lenders” is often used interchangeably with “hard money lenders”, it’s not the same.

Hard money lenders are lending companies that specialize in financing investors’ deals, including fix and flip, transactional funding for wholesale double closing transactions, financing for buying a rental property, and other real estate investment exit strategies.

Hard money lenders don’t decline loan requests because of a property’s bad condition. It’s literally their business to finance such projects.

Hard money loans take much less time to get approved for and to obtain them. They are often used in urgent situations.

Hard money lenders check your credit but, unlike for traditional lenders, it’s a secondary factor for approval compared to the asset’s value and your project’s viability.

However, these benefits come at a price. Hard money loans are more expensive than traditional financing. Yet using them pays for itself when done correctly.

For example, a hard money loan can be refinanced with a traditional long-term loan when you repair and bring your property up to local building codes.

If you are looking for a hard money loan, use HouseCashin’s loan request form. It will allow you to get quotes from multiple hard money lenders in your location and choose the best offer from them.

Or, read the ultimate hard money loan guide for real estate investors to learn more about this financing option. As well as how to find a good hard money lender and how to get a hard money loan to flip a house.

Abandoned houses can certainly be a gold mine for your real estate portfolio. The most successful real estate investors know the phrase, “You make your money when you buy.”

That’s why it’s crucial to find the best deals out there. And for a skillful rehabber, they don’t get much better than abandoned homes.

Even though it is common knowledge to most people that abandoned properties are often sold at steep discounts, they don’t have the skills or knowledge to actually find and buy them.

There are several parts of the process, such as finding them, getting in touch with the owners, structuring a deal, and funding the purchase — all of which we’ve covered here.

I hope that by reading this article, you have gained a much deeper understanding of how to buy abandoned homes and can purchase one soon!