One type of property that shows up at tax sales is the unfinished house, meaning a landowner had a dream of building a new house, and never completed the job.
Something happened: Loss of job, injury, death, legal trouble, divorce. Weeds grew on the lot. Taxes went unpaid.
BUYING AN UNFINISHED HOUSE
Can you buy an unfinished home? Is it a good idea to bid on a partially completed house? If so, how high should you go?
This is a case where it’s critical to get a good look at the house. The two biggest factors to consider are age, and percent completion.
- Is the roof complete?
- Windows and doors?
- How long has the structure been exposed to the elements?
In a warm, wet location with high humidity, exposed components won’t last long. A dry climate is more forgiving.
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HOW TO VALUE AN UNFINISHED HOUSE
The assessed value might not be a good guide.
A county employee might have appraised the house when, by all indications, it would be completed soon. In that case, the assessed value might be close to that of nearby lived-in homes.
Rarely does anyone notify the assessor when a construction job is abandoned. The high value stays on the books, even as the elements take their toll on the true value.
Do not be overly optimistic in your value estimate. Imagine what would happen to your own house if you were to leave the doors and windows open for months on end, maybe years.
Animals would take up residence. Termites might invade. Squatters and vandals might pay regular visits. What would the house be worth to you at that point?
The reality is that unfinished houses quickly lose value. Before long, it would be more prudent to bulldoze the remains instead of resuming construction.
Here is a picture of the first one:
This house had a good roof, and most of the siding was in place. Construction was very recent. The mother of the young owner bailed him out, and redeemed the house from the tax sale.
SELLING AN UNFINISHED HOUSE
Is it hard to sell an unfinished house?
The second unfinished home that I bid on was in similar condition, except that it had some weathered wood around the roof line.
It sat on five acres, and I picked up the property for $6,000 at the auction. The land was worth more than $6,000.
The owner had legal problems and did not redeem.
As soon as I had possession, I listed it with a local Realtor. Within a few weeks, we found a buyer at $17,000.
The county had the place assessed at slightly over $100,000, apparently because the assessor believed that the construction was farther along than it actually was.
Again, the main lesson on how to sell an unfinished house profitably is to avoid overpaying when you buy it.
Realistically, can you sell an unfinished house? Yes, however, unfinished houses have more issues than finished ones, and they are harder to sell.
Here are other examples of unfinished homes that I’ve seen in my travels:
What are they worth to you? Would you bid at all?
Is that unfinished house for sale a good deal or not? Selling an unfinished building is more difficult, so there are things you need to know before you buy.
It’s imperative to take a look at the house to learn what’s not completed and to assess the condition and true value of the property.
A home sitting there for a long time without a roof or windows, exposed to the elements, could be ruined. The house could’ve been vandalized or become a home to squatters or even wild creatures, so it’s important to look at the property.
You can’t rely on the county’s assessed value of the home because they may have appraised it based on the value of the homes nearby while under the assumption that construction would be completed.
Before buying an unfinished property, be sure to know exactly what you’re buying, how much it’s really worth, and how much you could sell it for. Know your exit strategy before you buy.
Ted Thomas’ method is to buy low, sell low, and move on to the next property, and Ted is famous for teaching investors, both experienced and inexperienced, how to earn 6-figure incomes within a year of completing his training.
Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing, has been teaching students for over 25 years.
Tax lien certificates pay outrageous interest rates, as much as 36%, and tax deed auctions are brimming with opportunities to pick up mortgage-free properties for 10, 20, 30 cents on the dollar.
There’s no one more qualified than Ted to educate you on tax lien and tax deed investing.
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