Reader Question: What Happens to Long-Empty Homes?

On today’s open thread Sweet Pea asks:

My parents have been casually looking to buy their retirement home and have encountered houses that have been vacant for a year or more. Just wondering if there has been conversation on here about what happens to that inventory? Maybe it’s not trashed by vandals like some in other cities, but just slowing rotting

At what point does it warrant a huge markdown, realistically? What are the physical effects of something sitting unused for a year or more?

That’s a great question. That’s something we haven’t really talked about on here before. I know from what I’ve seen on my home searches that the vacant homes that stay on the market for a long time are usually bank owned.

One thing I’ve seen in every single bank owned home I’ve looked at is that they’ve all been winterized. This is a process where they shut off the water and drain the entire system so they don’t have to worry about freezing pipes in an unheated house over the winter.

Winterizing keeps one problem at bay, but obviously wouldn’t do anything to prevent roof leaks, clogged gutters (which lead to leaks) insect damage, animal intrusion, or a host of other issues from developing due to the lack of maintenance.

As for when a huge markdown is warranted, from what I’ve seen banks are often very willing to negotiate on price once a listing has sat on the market for about nine months or more, especially if that includes the spring and summer.

I don’t think there is necessarily a specific date at which a listing becomes “ultra-stale” and automatically warrants a big discount off the listing price, but definitely if sitting empty has caused any of the above problems to crop up, you’re going to have a lot stronger argument for a reduced price.

Have any of our other readers had experience with long-empty homes? What other problems have you seen, and when have you been able to get a big discount?

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    Jesse says:

    They winterized this house and also cut the power, which means that the sump pump isn’t powered, which led to 18″ of standing water in the crawl space. I think it’s been vacant for longer than the 63 days it’s been listed, and I wonder if it’s really FHA insurable.

    Most of the houses we were looking at in that price range, Shoreline and Seattle, were bank-owned. Almost all of them were winterized, but most still had the power on.

  2. 2
    johnny ward says:

    Long time lurker. First time comment. This one is just too tempting… My fiance and I have been renting while we look at REO’s in the Seattle area. Most places we’ve seen are both slowly rotting AND have been vandalized. Including one place where we encountered a turd on a sock. Adding absurdity to gruesomeness, the homes we’ve seen are way overpriced.

  3. 3
    doug says:

    When we first started looking at houses, we saw some that were truly sorry-looking as a result of sitting empty for 6-10 months. Two were covered in rat droppings.

    On a related note, many newly-constructed homes (2006-2007) had settled horribly and looked awful after a few years of regular use. There are some homes out there that are literally going to fall apart in a few years’ time due to the shoddy construction of the boom years.

  4. 4
    redmondjp says:

    If the heat has either been off or turned down low, check for mold on the interior surfaces of exterior walls where condensation can form. Heck, this even happens in occupied homes!

    As has been mentioned already, rodents can roam freely in an empty house, you will see their droppings along the edges of rooms (they don’t like to travel across open spaces). My house was rat-infested before I bought it. It took me five years to discover every place that they were getting in (did you know that they can tunnel underneath your foundation and get into the crawl space?). I won’t even mention spiders (oops) . . .

    My only advice, besides a thorough inspection, would be to get any and all repair work done BEFORE moving in, this will make your life so much easier. Say, for example, that you don’t like the popcorn ceiling – you will really not enjoy getting that removed, drywall work done, and the new texturing and painting done while you are living in the house, trust me!

  5. 5
    ARDELL says:

    Conversely, getting a great deal on the house next door to the “abandoned” house is sometimes a smart move. A great house on market that can’t sell at a high price because there is an eyesore home nearby, is most often better than buying the eyesore house.

    Had a client who did that once and then petitioned the City to condemn the house next door and have it removed. He got the best of both worlds. In that case children had inherited the house next door years before, but lived out of State and never came to it or attended to it for 5 years. It had never been on market.

    He got a great house at a reduced price by betting that the eyesore house would not be that way for long. Then after closing he helped push it in that direction by getting a petition signed by all the neighbors and submitting the story to the media.

  6. 6
    seattle203k says:

    We find that most of these homes sit on the market for one or more of the following reasons:

    1) Overpriced
    2) Property condition
    3) Logistical issues (short sale, bankruptcy, etc.)

    I believe the biggest hurdle is the condition of these properties as it is a two-fold issue. First, it deters buyers for obvious reasons. Second, it usually causes finance issues as the property may not warrant a mortgage due to secondary market guidelines for the loan program (Fannie, Freddie, FHA, etc.).

    Cash and renovation financing is usually the solution. With renovation financing, there’s really only three programs available (HomePath Renovation, FHA 203k and HomeStyle Renovation). HomePath and HomeStyle are both Fannie Mae products. HomePath requires that the home be owned by Fannie Mae and has other limitations. HomeStyle is not easy to find because most (maybe all) of the mortgage insurance companies won’t offer PMI on HomeStyle Renovation loans. FHA 203k is the most prevalent, although it too has limitations.

    Renovation financing is not only widely unknown among consumers, it’s also generally misunderstood by the real estate community. It has acquired a bad reputation almost entirely because it’s been misused. I believe this is a result of inexperience loan officers (specifically inexperienced with renovation lending programs) using their clients as a guinea pig to learn these programs. Most lenders still in business have a solid, general knowledge of mortgage origination, but renovation lending really requires a specialist who can quarterback the process from start to finish. The other misunderstanding is that these loans take forever to close. This is currently an issue with some of the large lenders/investors, but a seasoned renovation lender should be able to tell you up-front exactly how long the process will take from start to finish.

    This is really not meant to be pure self-promotion. There are several very good lenders in the Puget Sound that specialize in renovation lending. Anyone looking to buy a home in need of repairs, upgrades, etc. should seek out a renovation lending specialist for advice.

  7. 7
    Jamfish says:

    Been looking at one on RedFin for a while that’s close to me and has the lot & house size we’re looking for (was built in the late 90s). Has been on the market for 600+ days; on RedFin for 80+ days. Currently Bank Owned, ‘As Is’; a thorough inspection would be wise to know what one was inheriting.

    After nearly two years of little occupancy, what could one expect to find wrong? In spite of the bank’s efforts to winterize?

  8. 8
    EconE says:

    Toxic, health threatening mold?

  9. 9
    Haybaler says:

    RE: Jamfish @ 7 -1) Interior doors will be warped and jambs swollen.
    2) cabinet doors and drawers will not open and close properly. (swollen wood product material)
    3)Formica counter tops installed on pressed wood material will have swollen edges.
    4)Linoleum floors installed on pressed wood underlayments will have slightly swollen edges and spots wherever the linoleum had been gouged or sliced.
    These issues will not remedy by turning on the heat and creating a normal lived in atmosphere….

    —-The Tim, 14 minutes to edit before posting?!

  10. 10
    softwarengineer says:

    That Picture Looks Like the House on the Bates Motel Movie

    All that’s missing is the showdow figure in the window screaming at her son to get back in the house.

    The house next door to me was vacant for about 2 years and listed for $99K, then the bank totally remodeled it, after no sale [after about 8 months listed as a HUD home]….upped the price to $139K after remodel and it eventually sold. If you and I hired a contractor to remodel it that way, we’d have needed at least a $200K price after buying it for $100K, just to break even…..and we’d be using a lot of our own sweat labor too, to keep the break even from the $250-300K range. The sensible thing would have been to toss a match at it.

  11. 11
    David S says:

    RE: softwarengineer @ 10 – WE, all pay retail for everything. THEY get it all at wholesale pricing. That is what makes it easier for the investors and banks and realtors and such. It has to be that.

  12. 12
    John says:

    I just want to thank you all for another useful discussion. I learn so much reading this site every day.

  13. 13
    Kary L. Krismer says:

    By redmondjp @ 4:

    As has been mentioned already, rodents can roam freely in an empty house, you will see their droppings along the edges of rooms (they don’t like to travel across open spaces). My house was rat-infested before I bought it. It took me five years to discover every place that they were getting in (did you know that they can tunnel underneath your foundation and get into the crawl space?). I won’t even mention spiders (oops) . . .

    Rats like empty houses because they don’t like people. So the crawl spaces and attics will be more likely infested in a vacant house.

    I don’t really think spiders care.

  14. 14
    brainiac says:

    Sometimes it is better if homes don’t have people in them.

    Case in point:

    I tried to put this in detrimental listing photos, but never got approved to login (Tim’s a busy guy :).

    Kind of sad really, as there was certainly some mental issues with whoever was living there.

    Props to the agent though, he was pretty honest and even with the scary pics it went pending after 3 days. So much for stagnant inventory …

  15. 15
    Jonness says:

    By EconE @ 8:

    Toxic, health threatening mold?


  16. 16
    David Losh says:

    RE: brainiac @ 14 -I actually like this house. Yes, we do trash these out.The point I wanted to make before is that at $50 a square foot, you can gut this and come out money ahead.We get three or four people from Casa Latina and I drive the 3/4 ton van back, and forth to the dump. When its all cleaned out you, as the home owner have the right to string new wire, replumb, get permits, draw your own plans, and have people help you.In a gut job it makes no difference you know where everything is. Replace the pipes string the wire, put in new outlet boxes.I like to spray the interior studs with oil base primer or latex sealer. We clean with bleach where it needs it.Hiring a sheet rock company is as cheap as doing it yourself, then you have a working shell. You’re half way done. I go to Frank door, and use Milgaurd windows. flooring can be expensive, but there are many second hand places.At a purchase at $50 a square foot, you should be able to rehab for $50 a square foot, or less.In my opinion this adds to the pool of affordable housing. Builders think everything is a tear down. It’s a controversy

  17. 17
    Leigh says:

    By brainiac @ 14:

    Sometimes it is better if homes don’t have people in them.Case in point: tried to put this in detrimental listing photos, but never got approved to login (Tim’s a busy guy :).Kind of sad really, as there was certainly some mental issues with whoever was living there.Props to the agent though, he was pretty honest and even with the scary pics it went pending after 3 days. So much for stagnant inventory …

    Seriously, $149K for that? Was it the pantry?! Must be a location thing. Read “Not Portland.”

  18. 18
    ChrisM says:

    RE: David Losh @ 16 – David, what does spraying the interior studs w/ primer do? Protect against further mold/water damage? Thanks!

  19. 19
    ARDELL says:

    RE: David S @ 11

    It’s more like the economy of scale than wholesale vs retail. They usually hire one person to do many jobs, and the discount comes from the volume.

    Some of my clients do that. They come as a group with friends who are also buying homes. Then they can get the multiple transaction discount which is usually 1/3 to 1/2 off, depending on price range.

    As long as they don’t want the same thing, in the same place, at the same price, at the same time…it works well. I don’t accept two clients who want the same thing at the same time, due to conflict of interest.

    Banks usually don’t hire a cleaner for one job, they hire them under a contract for all or most homes they will list in a given period. That contract reduces the price per home substantially. They do the same with repairs, and to finish homes that the builder left when it was half complete.

  20. 20
    Real World Express says:

    If you’re cynical, you would expect that the banks would want to have these homes rot to the ground before they sell them at market prices.

    Reason? Because the remaining homes will increase in value.

    And, since home prices are not linear, but a step function, at the point that demand exceeds the supply of usable homes, the price would spike.

  21. 21
    David Losh says:

    RE: ChrisM @ 18

    What I hate is having the sheet rock up and a month later smelling the funk of an old place. Especially along the bottom plates where any kind of odor, insect, rodent, or condensation might be we spray a bleach solution and let it dry.
    It depends on the place, but in most cases we spray about 3/4 the way up. I have done only one place complete that had been sitting empty since 1958.

  22. 22
    softwarengineer says:

    RE: ARDELL @ 19
    LOL Ardell

    I did my own contracting on a complete home remodel, you can’t hire plumbers for $10/hr or skilled electricians for peanuts either….and the necessary skilled labor drives the costs through the roof for banks, RE worker investors, anybody….yeah, you can try doing the skilled jobs [like plumbing, electrical, counter corners or floor preparations yourself without the skills] on the cheap and try to get it past building inspectors, but it will look like Hades and I wouldn’t dare use the do-it-youself installed hot-tub, would you?

    Nope, IMO, the banks are losing MASS money on a few foreclosed home remodeling sales in the attempt to keep the whole neighborhood’s home prices from crashing through the floor with the worthless Bates Motel house.

  23. 23
    Leanne says:

    The house we bought was bank-owned and had been empty for more than two years. We got it at a great price, but it was in pretty good condition despite sitting empty for so long. It is a 100 year old house, built with old growth lumber. No moisture problems, no rats, but there were wasps in the attic. The landscaping run rampant caused some problems– when the long grass was cut, a fuel line to the furnace was also cut, and a whole tank of fuel drained before we found it.

  24. 24
    James says:

    Well now, THAT certainly answered ALL our questions…. Seriously? Why didn’t you answer the damn questions?!! This was a complete an utter waste of time for me.

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