Real Estate Investors and Property Code Violations

Most property investors and real estate agents would agree that buildings or vacant lots which are clearly deteriorating, run-down, or otherwise undesirable are tons of extra work and effort to buy and sell, and they will pass them up for prettier properties. In some cases this would be the right move, but oftentimes an ugly lot or house just needs some quick and cheap TLC to get it back into salable condition. Having the wrong attitude regarding unwanted properties can mean missing out on a huge profit which will eventually be scooped up by a savvier investor.

Many of these properties are vacant because owners had been cited for code violations and did not have the desire or means to bring the properties back up to code. Sometimes they are homes that were inherited, but the new owners live out of state and cannot afford to travel to maintain the property. Whatever the case, the fact is that there is much potential in these types of properties.

In most areas across this country, code enforcement agencies do not patrol neighborhoods looking for violations. They generally act at the behest of their local governments, in response to neighbor’s complaints about a property. Once they have been notified that there is a potential violation, code enforcers go to the location and inspect it. There are three types of code violations: building, safety, and heath. Building code violations usually include structural damage, broken or missing windows, broken doors, chipped or peeling paint, bad or missing siding, etc. Safety code violations include missing handrails on stairs or balconies, broken steps, tree roots which causing tripping hazards or trees about to topple, doors or windows that do not close or lock, and improperly grounded electrical outlets. Health code violations cover things such as pest or rodent infestations, standing, untrimmed grasses which could hide snakes and rodents, stagnant water in yards caused by poor drainage, and serious molds.

If a property has code violations placed against it, the owner is notified and given an average of 30 to 60 days to remedy the problems. After the deadline an inspector goes back out to the property and checks to see if it has been brought up to code. If not, the case is scheduled and brought before the local code-enforcement board, which orders the owner to bring the property into compliance within so much time or face daily penalty fees for each day out of compliance past the deadline. If the owner still fails to comply, the daily fees will be enforced. At this point, the code enforcement agency goes to the courthouse and transfers the court order into a lien against the property’s title. With this paperwork in place, the county then has the option to file a foreclosure suit against the lien. It is little known that violations against a property stay with the property through and onto the next owner(s); this is called “running with the title.” I. e., when a lot is sold, the new owner is responsible for bringing the property into compliance.

Sometimes an investor will come across a property that is obviously condemned and in need of demolition. In cases such as these, the owner of the property is ordered to have the building demolished and have the lot cleared. If they do not comply, the county will contract with a private company to do the job and then place a lien against the title of the property for costs accrued in demolition and clean-up. Even such a property has potential for investors, because land is worth money to independent builders, low-income builders, et cetera. These lots are also excellent ideas because they are already zoned for residential or commercial, depending on the demolished structure. Also, never overlook a vacant lot that is filled with trash, debris, and other rubbish. Most people shy away from such properties because they can seem intimidating, but sometimes all they need is a few dumpster-loads and a lawn-mower they are ready for sale again!

Real estate investors have great opportunities here. Whether the property has liens against it for code violations, is about to be – or already is – demolished, or has demolition liens against it, all you have to do is contact the owner and see if they would be open to selling the property (at a huge reduction due to the liens). Often you will meet the most motivated of sellers in these situations, because usually they live out of town and could not care less about the property, or they are simply sick and tired of being pestered by the county and are ready to get rid of the property. Take care though, and make sure that before you make an offer on a property, you verify with the code enforcement agency for that district exactly what violations exist against the property and what needs to be done in order to bring it into compliance. This way you can make an accurate appraisal of how much money you will be putting into the property to bring it to code upon purchase.

Besides driving around town peering through overgrown brush to look for old houses, there are easier ways to find the properties in your area which have code violations or condemnation orders against them. Local agencies should be able to either provide you with lists or tell you where you can go to obtain lists, which include property addresses, owners’ names and addresses, and information pertinent to the code cases such as the nature of the violation(s). This is public information and should be easily obtainable.

So the next time you seen an ugly old abandoned building, take a step back and look at the potential of the location, the land, or if all it may need are a few fixes.

I guarantee that there are investors out there who are as able as you are to take such a property and make thousands or even tens of thousands of dollars in profit on it; and they will beat you to it if they are just a tiny bit more willing to do so.