Heard of the 3 V’s? Here are the 3 T’s of Vacant Houses
In real estate investing you learn very quickly that vacant properties attract the 3 V’s. A vacant house is a welcome environment for Vermin, Vandals, & Vagrants.
We’re not just talking about a few nuisances here; have you seen the damage a raccoon can do? Well it’s nothing compared to a surly pubescent graffiti artist with an anger issue.
Look, no homeowner wants any of this in their house and although there is a risk of damage, the REAL risk is the 3 T’s… bet you’ve never heard of those huh?
The Three T’s should be a part of the conversation with any homeowner you’re trying to get under contract. They are Taxes, Tort, and Trusts.
Taxes: You are still obliged to pay your property taxes on vacant properties just like any other. There are tax abatements available in certain locales, but typically are few and far between.
Keep in mind this also includes potential HOA fees, community dues, and potential fines or liens against the property. And these liens can eventually bring the state to seize property!
Tort: We are including tort law to represent potential lawsuits brought against the homeowner for anyone injured or suffering a loss while upon the vacant property parcel.
Now typically an owner is protected from a lawsuit if someone is to hurt themselves on their property, but only if the conditions on the property are considered standard. Meaning, if the home has boards with nails sitting on the side yard, and a trespasser falls and loses an eye, they can sue for gross negligence to keeping the property safe. WHAT?! Thats right, tort is important for an owner to consider.
Most homeowners are unaware that their vacant house is not insured as they might think. “But, I have homeowner’s insurance,” says the homeowner when filing a claim. A review of their policy will reveal that homeowner’s insurance requires the home is occupied. For long term vacant homes, the owner is required to have a “builder’s risk” policy that covers empty property.
When you engage with potential sellers – be sure to point out this crucial fact. With the potential of no or much more expensive coverage, the owner will see the liability and may be more motivated to sell.
Trusts: Here’s the real conversation started (and usually the finisher) when it comes to vacant houses. Owners are thinking about their net worth and their whole portfolio. When they inherit a home, need to monetize their estate, or want to pass along property, this is typically done through the mechanism of the trust. Not always, but most of the time for the well-to-do owner.
This conversation is usually the one that is most likely to bring you a potential contract, so its best if you study up before your next call.
Let me sum this up with a very simple fact. If you are an investor, real estate agent, wholesaler or flipper… you need to be aware of the risks and motivations for owners to do a deal with you.
They need your help! Now go out there and give it!
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