Dear Real Estate Adviser,
A slumlord bought the house next door and rented it to shady characters. The police told me they sold meth. They stole bricks from my garden to block up a neighbor's car to steal his wheels and repeatedly damaged my fence. There was a fire and now the house must be demolished. I'd like to buy it and tear it down. I just want to prevent more bad people from moving in and hurting our neighborhood and property values. Can I try to add it on to my mortgage?
-- R. Johnson
So much for "good fences make good neighbors," eh?
Search for low mortgage rates at Bankrate.com.
But I digress. You'll almost surely have to take out a separate loan to buy that burnt offering, assuming the distinguished Mr. Slumlord is willing to part with it. To begin with, banks don't like to combine loans on residential properties, usually insisting that every property stand on its own merit. Plus, since you probably have an FHA-insured loan, you couldn't add a property that didn't meet minimum FHA health-and-safety standards anyway.
Cash-out refi option
To buy the lot, your best bet might be a cash-out refinance on your home. First, though, check with the owner, if you can, to see if the lot is actually for sale. Assuming the slumlord was insured and made out well on the claim, as is often the case with investment-home fires, he may be willing to part with it cheaply if he has no plans to rebuild. (You may want to quietly check with police, though, to make sure there's no suspected arson.) Be cool when you talk and skip any judgments about the dicey tenants because he may react defensively. Just say you are thinking about expanding your lot but only if the price is right. Of course, there's always a chance the bank owns the place now. In any case, check with your lender and discuss what you'd like to do.
Pressure the lot owner
If the house remains an eyesore, call the city to see if there's an ordinance requiring the teardown of uninhabitable or condemned properties within a certain period. Hint: Callers who report people living in or regularly entering such a house are more likely to see action.
Mr. Owner, tear down this house
You really don't want to own land with such a shell of a house still standing. Even if it's fenced in, you could be liable if someone got hurt. By the way, the demolition of a 1,500-square-foot house can cost from $5,000 to $6,000 to more than $20,000 if there are any environmental issues (such as possible meth contamination). Ideally, the owner or the city, or both, will fund any demolition.
Details of buying it
Cost of such a parcel can vary widely, but on average its 10% to 20% of the property's value unless it's in a highly desirable area. So check with the city or county tax assessor to see what the property's pre-fire value was. Also realize you'll be assuming responsibilities such as new property taxes and monthly payments and mowing and weeding. You may not need a Realtor in such a deal, but you may need an attorney.
You may even have some competition for the lot. Some opportunists seek out such burned houses for cheap investment land. Are you willing to outbid such folks if need be?
Again, you will need to check with the city, your lender, ideally the owner of the house and possibly the police and an attorney -- and certainly your spouse if you have one!
Good luck. The neighborhood is relying on you.
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