I like posting before and after pics of the transformation work we do on some of the dilapidated houses that we buy. However, the below pics are the before and after pics that I’d rather not post as they represent the worst case scenario of what happens when the owner of a vacant property doesn’t take our advice and move to sell the house as soon as possible. Unfortunately, I’m forced to post these as a warning to other vacant property owners.
We actually had this house, located in Newark NJ, under contract to buy at one time. We met with the property owner and his wife, agreed on a price, collected the paperwork and proceeded to process everything for a quick sale. Soon after, however, the owner changed his mind for some reason, stopped taking our phone calls and allowed the property to sit vacant for the next two years. And in one of the worst neighborhoods in Newark (we buy in the worst and the best of neighborhoods).
We ended up buying the vacant house across the street. And during one of our recent trips to that property we discovered that apparently someone broke into the original property and caused a fire (the neighborhood is known for drug addicts breaking into vacant homes and using them as drug dens). The house was severely damaged as a result.
This now presents a serious dilemma for the property owner if he doesn’t have vacant property insurance (most vacant property owners don’t) and presents several problems that all vacant property owners should be aware of:
1) Loss In Value: The house is worth significantly less than what it was worth when we or any other investor was first interested in the property. I haven’t been inside since the fire but from our experience and from what we saw on the outside, the owner likely lost about $30k in value. That’s money he could have received had he sold the property before the fire. Now he will have to sell for a lot less.
2) Increased Liability: The house was located just a few feet away from a neighboring and occupied house. Any damage to the neighboring house makes the owner financially and legally responsible. The fire damaged house was a rental for the owner while he lived in another house in a nicer neighborhood. Thus any resulting lawsuit from damage to or on the property of the rental including fire, personal injury or worse – death, can result in a huge judgment and lien against the owner’s personal home and finances.
3) Judgment Against The Owner: Property owners who abandoned a property that is in foreclosure because they no longer want anything to do with it should be careful as well. They already face the prospect of being hit with a deficiency judgment should the house sell at foreclosure auction for less than what they owe. But now because the house is fire damaged, it’s worth significantly less which means they could end up being hit with an even bigger deficiency judgment. A judgment that could eventually lead to wage garnishment and/or a levy against their bank account.
4) Pressure From City Hall: Even before the fire damage, the owner made himself a target of illegal dumpers. Often unscrupulous contractors will illegally dump garbage on an abandoned and vacant property. The city unfortunately makes the owner responsible for the cleanup and will often levy municipal liens against him or her as well as attempt to haul them into court to answer to a judge.
The best advice we can give if you are the owner of a vacant house is to insure and secure the property as soon as possible and make sure the neighbors contact you if they notice any suspicious activity going on. And if the house is not generating any income for you and is instead costing you money in the way of property taxes and insurance costs, consider selling the property to reputable and professional real estate investors who are experienced in buying vacant houses.