A Fixer Upper Vs Condemned Houses | Baltimore, MD

You know, there’s about 13 thousand unoccupied homes in Baltimore and a majority of those homes need renovation money. Being a real estate investor in Baltimore, I sometimes hear people compare a fixer upper vs condemned houses. So, I figured I would write an article about it. 

Hopefully this guide clears the air for would-be investors, first time buyers, or even property owners.

Anyway, in the off chance that you’re interested in alternative methods for selling your fixer upper please check our next guide. There’s more than way to get your hands off a damaged property after all.

Short Summary

• Fixer-uppers are properties needing repairs and renovations to increase value and meet current standards, offering investment potential and customization opportunities.
• Condemned properties are legally uninhabitable due to safety or health hazards, requiring government intervention and extensive remediation.
• The legal status, financing options, renovation costs, insurance considerations, and resale potential differentiate fixer-uppers from condemned houses.
• A thorough evaluation of a fixer-upper should include inspections, cost estimations, location analysis, and an understanding of local zoning regulations.
• Buying a condemned property requires extensive due diligence, collaboration with local authorities, and a realistic renovation plan.
• Structural issues, environmental concerns, neighborhood factors, and permit complications are warning signs to walk away from any property.

Understanding Fixer-Uppers

In today’s real estate market, the term “fixer-upper” gets thrown around a lot, but what does it really mean? By the way, we’re going to spell “fixer upper” instead of “fixer-upper” at times but we want you to know that the correct way of saying it is with a dash between.

Generally, a fixer upper is a property that requires repairs or renovation to bring it up to current standards and increase its value. It’s not in perfect, move-in condition, but it has the potential to become a dream home or a lucrative investment. 

Common characteristics of a fixer-upper often include cosmetic issues like outdated paint colors, worn flooring, or dated kitchens and bathrooms. You might also see outdated features like old appliances, inefficient windows, or inadequate electrical systems. The house may need minor repairs, such as fixing leaky faucets, patching holes in walls, or replacing damaged trim. These are the kinds of problems a home inspector might point out.

Now, why would a potential buyer consider a fixer-upper? Well, these properties can be fantastic investment opportunities. Often, you can purchase a fixer-upper for significantly less than a move-in-ready house in the same location. This allows you to build equity quickly as you make necessary repairs and improvements. Plus, you get to customize the property to your exact tastes and needs.

Finally, the cost of renovations can vary widely depending on the scope of the project and the materials you choose. For example, painting an entire house might cost anywhere from $2,000 to $5,000, while replacing flooring could range from $3 to $10 per square foot. A kitchen or bathroom remodel can be more expensive, potentially costing between $5,000 and $25,000 or more, depending on the extent of the work.

What About Condemned Properties?

Unlike a fixer-upper, a condemned house is not just in need of some TLC. A condemned building is declared legally unfit for habitation by a condemning authority, usually a local government entity. This designation means that the government has deemed the property unsafe to live in because of significant safety concerns or health hazards.

The official condemnation process typically begins with code violations. If a property is found to have serious housing code violations, such as severe structural damage, fire hazards, pest infestations, or the presence of unsafe building materials like asbestos or lead paint, the local government will issue a notice to the property owner, giving them a specified period to make necessary repairs.

If the property owner fails to address the code violations within the specified period, the condemning authority can initiate the condemnation process. This may involve legal proceedings and ultimately lead to the property being declared condemned. In some cases, the government may use eminent domain to acquire the property, especially if it’s needed for public use.

Now, buying a condemned house comes with significant legal implications. You’re not just buying a house; you’re buying a complex set of problems and potential liabilities. You’ll need to work closely with a real estate agent familiar with buying a condemned property and a real estate attorney to navigate the process.

Furthermore, condemned properties often have liens or outstanding violations attached to them. These could include unpaid property taxes, unpaid utility bills, or fines for the housing code violations that led to the condemned status. As the new property owner, you would likely be responsible for resolving these issues, which can add significantly to the overall cost of repairs and renovation.

Fixer-Upper Vs. Condemned Houses

The difference between a fixer upper vs condemned property are vast. The most significant distinction lies in their legal status and occupancy permissions. A fixer-upper, while needing repairs, is still legally habitable. You can typically live in it while you renovate, or rent it out after some initial fixes. In contrast, a condemned house is legally uninhabitable. Occupancy is prohibited, and you cannot legally live in it until it’s been brought up to code and the condemned status is lifted.

Next, comes financing. Financing options vary between the two. You can usually obtain conventional mortgages or renovation loans like FHA 203(k) loans to finance a fixer-upper. These loans allow you to borrow money for both the purchase price and the cost of repairs. Buying a condemned house is much more challenging. Traditional lenders are unlikely to finance a condemned property, so you’ll likely need to rely on cash, hard money lenders, or specialized financing options designed for high-risk real estate investments.

Insurance is another crucial consideration. Insuring a fixer-upper is relatively straightforward. You can typically obtain standard homeowner’s insurance, although you may need a builder’s risk policy during the renovation phase. Insuring a condemned property is far more complex. Many insurance companies will be hesitant to provide coverage due to the inherent risks and liabilities. You may need to seek out specialized insurance providers who cater to high-risk properties.

The resale potential and typical ROI (return on investment) also differ significantly. A well-renovated fixer-upper can offer a solid ROI, especially in a desirable location like many parts of the bay area. You can increase its value substantially by making strategic improvements. However, resale could be difficult. Transforming a condemned house into a desirable property can yield a high ROI, but it’s a much riskier endeavor with no guarantee that you’ll be able to sell the house.

Evaluating A Fixer-Upper

Before diving into a fixer upper, a thorough evaluation is crucial. Start with critical inspection points. Pay close attention to the foundation, looking for cracks, signs of settling, or water damage. Examine the roof for leaks, damaged shingles, or sagging. Check the electrical system for outdated wiring, overloaded circuits, or code violations. Inspect the plumbing for leaks, corrosion, or outdated pipes. These are the areas where cosmetic issues can mask bigger problems.

Develop a cost estimation framework for renovations. Get multiple quotes from contractors for each major repair or upgrade. Factor in the cost of materials, labor, permits, and potential overruns. Don’t forget to budget for unexpected problems that may arise during the process. A good rule of thumb is to add a contingency of 10-20% to your total cost estimate.

Determine if the location justifies the investment. Even the most beautifully renovated house won’t sell if it’s in a poor location. Research the neighborhood’s schools, crime rates, amenities, and future development plans. Look at comparable sales (comps) of renovated houses in the area to get an idea of the potential resale value.

It’s crucial to pull permits and understand local zoning regulations. Failing to obtain the necessary permits can lead to fines, delays, and even the need to undo completed work. Zoning regulations can restrict what you can do with the property, such as adding an addition or operating a home-based business. Contact the local government to understand and confirm.

Be aware that some cosmetic issues can mask bigger problems. For example, a fresh coat of paint might hide water damage or mold (very bad to deal with). Sagging floors could indicate foundation issues. Always look beyond the surface and conduct thorough inspections to uncover any hidden problems. If something seems too good to be true, it probably is. 

Condemned Property Purchases: Proceed With Caution!

We say this from our experience as cash house buyers.

Buying a condemned property is not for the faint of heart and requires significant due diligence. Before you even think about making an offer, you need to thoroughly investigate the property and its history. This includes obtaining all available records from the local condemning authority regarding the specific violations that led to the condemnation.

Work closely with local housing authorities to fully understand the specific violations and what it will take to bring the house up to code. This often involves multiple inspections, detailed reports, and a clear plan of action that’s acceptable to the government entity. Don’t rely solely on the information provided by the seller; verify everything independently.

The permit process for bringing a condemned house up to code can be lengthy and complex. You’ll likely need to submit detailed architectural plans, engineering reports, and a comprehensive renovation plan to the local government. Be prepared for delays, revisions, and potentially hefty permit fees. Having an experienced contractor or architect familiar with the condemnation process can be invaluable.

Creating a realistic renovation timeline and budget is essential. Given the extensive work typically required, it’s crucial to be conservative in your estimates. You have to factor in potential delays due to weather, material shortages, or unforeseen problems. Overestimating costs and timelines is always better than underestimating when dealing with a condemned building.

Lastly, assess whether the investment makes financial sense. Even if you can purchase a condemned property for a fraction of its potential value, the extensive repairs and renovation costs may outweigh the potential profit. 

When To Walk Away From Any Property

Certain structural issues are almost always budget-breakers. Extensive foundation damage, such as significant cracking, sinking, or bowing, can be incredibly expensive to repair, sometimes costing more than the house is worth. Similarly, a severely damaged or collapsing roof can be a major red flag, as can widespread termite or water damage. If the building is on the verge of being demolished due to its foundation, that may be one of many warning signs.

Environmental concerns can make renovation impossible. The presence of asbestos, lead paint, or extensive mold can require costly and specialized remediation, potentially making the renovation financially unfeasible. Similarly, soil contamination or proximity to hazardous waste sites can create significant legal and health liabilities.

Neighborhood factors can limit appreciation. Even a beautifully renovated house may not appreciate in value if it’s located in a declining neighborhood with high crime rates, poor schools, or limited amenities. Be realistic about the potential for property value appreciation in the long term.

Permit complications can halt projects indefinitely. If you encounter significant resistance from the local government in obtaining the necessary permits, or if there are unresolved zoning issues that prevent you from making the desired improvements, it may be best to walk away. A project stalled due to red tape can quickly drain your resources and leave you with nothing to show for it.

Warning signs that the property requires demolition includes extensive fire damage, a collapsed roof or walls, or severe structural instability. While demolishing the existing structure and building a new house may be an option, it’s a costly and time-consuming process that may not be financially viable.

Final Thoughts

Baltimore’s real estate market can be tricky, especially when distinguishing between a fixer-upper and a condemned house. We hope that we were able to clarify the differences, outlining what to look for in each type of property, the potential challenges and rewards, and when it’s best to walk away. 

Do you have a fixer-upper to sell in Baltimore? Call or message Astute Realty today for a consultation! We have experience with buying and renovating fixer uppers before, we’d love to give you a free quote.