Land Bank Property: 4 Things To Know When Considering This Affordable Housing Option
There’s no place like home, especially when you’re able to get a great price when buying. As housing prices continue to rise (as well as mortgage interest rates), some homebuyers are turning to land bank properties for more affordable options.
According to Local Housing Solutions, a nonprofit housing policy platform, a land bank property is one that is acquired and managed by public institutions or charitable organizations. It is then often sold to new, vetted owners in order to cut down on vacant lands or abandoned buildings and revitalize the community.
As noted by the Center for Community Progress, there are currently over 250 land banks and programs that exist around the country. Further, 17 states have passed legislation allowing for their residential use in order to help reinvigorate neighborhoods. Among these states are: New York, Michigan, Ohio, Georgia, Nebraska, Missouri, Tennessee, Alabama, Delaware, Virginia, West Virginia, Indiana, Pennsylvania, Kentucky, Connecticut, New Jersey and Maryland.
Why are Land Bank Properties Kept a Secret From Many Homebuyers?
Land bank properties are usually not the type of houses that a developer or investor is interested in, due to any number of factors. Common factors of this sort include the condition of the house and the amount of repairs it might need, the location of the property — or any possible issues with contractual ownership, per Lifehacker. However, this real estate situation means that land bank properties are widely available to the public at auction-level prices. If you’re handy and don’t mind some elbow grease, a land bank property can be a lucrative investment.
In fact, many of the popular home renovation shows, like HGTV’s “Rehab Addict,” turn to land bank properties for their next projects. Host Nicole Curtis secured one such property in Detroit and has been restoring an abandoned historic home to give it new life and save it from being torn down. The newer HGTV show “Bargain Block,” which debuted in 2021, also eyes land bank properties to rehab in Detroit. According to Lifehacker, the duo building team on “Bargain Block” have purchased houses for as little as $1,000 — with the caveat that they need a great deal of work.
As such, land bank properties are not for everyone. Any interested buyer should know what they are getting into when thinking about purchasing this sort of real estate.
Make sure to know the full costs of the house before investing: As mentioned above, land bank properties may have been abandoned or in disarray (some won’t even have electricity or working plumbing). So, even though the selling price might be very low, you should factor in the cost of all repairs before making an offer. It might be wise to get solid estimates before jumping in. As always, make sure to see the house in person to get the full picture.
Ensure there are no issues with liens or delinquency: Some land bank properties are abandoned because they might be in foreclosure or have delinquent tax records. It’s wise to look at the fine print before making an offer on a particular property.
Know the local ordinances: Land bank properties are local commodities, and as such, are governed by regional legislation. If you’re buying in an area where you are unfamiliar with ordinances and tax code, it’s best to do your research first.
Become familiar with the rules of the house: Land banks all set different regulations, Lifehacker detailed, so you’ll want to know what the governing rules are for the property you are interested in. For example, must it always be owner occupied or can you rent it out? And must renovations be completed on a particular timetable?
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