A stigma is something that negatively affects the character or reputation of a person or property. It usually has nothing to do with real value, just with perceived value.
Stigma properties cause some sort of fear in people. Perhaps there was a violent crime committed in the home, and buyers believe the house is bad luck, or something similar. A reputation that a house is haunted can discourage most buyers. According to some studies, a registered sex offender within one-tenth of a mile can reduce local property values by as much as 17.4%, but the values bounce right back when the sex offender moves away.
Once you are sensitive to this subject, you will find stigma properties right and left. The trick is to unemotionally evaluate whether the bad reputation is well-deserved, and analyze the long-lasting effect of the stigma. In other words, if you buy at a low price will you be faced with selling at a low price in the future? Or, will the stigma disappear over time? The truth was revealed by a structural engineer's report I ordered before the purchase. That same report also served to erase the stigma when I wanted to resell.
When a structure falls into serious disrepair, it becomes dangerous. The most common reason for disrepair is roof leakage that leads to rotting roof supports and flooring. You might think that your property's condition is your business and no one else's, especially if the property is vacant and has "No Trespassing" signs plastered all over it.
However, you would be wrong because your local government is vitally interested in fixing or eliminating such buildings and other improvements. These types of property become breeding places for rats and other vermin, drug-related crime, fire hazards, and secret playgrounds for unsuspecting children. First responders called to the scene for any sort of problem risk their lives entering the properties. They cannot be allowed to remain in that condition.
If the owner does not repair the property to a habitable condition, the city or other local government will order it demolished - a demolition order. The owner has a certain period of time to conduct the demolition. If he or she fails to do that, the government will tear down all the unsafe improvements, haul off the debris, and place a lien on the property for those expenses. Many property owners cannot afford to fix their buildings or to pay for the demolition.
They will eventually lose everything when the city forecloses its lien. You, as an investor, can become familiar with your local condemnation and demolition ordinances. Once you know how to obtain early warnings, you can research the properties to see if you would like to buy them. Often, a few hundred or thousand dollars to the owner and a promise to the city to make the repairs will put extremely valuable real estate in your hands.
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This article was sent to us by:
Thomas C. Surry at
06282010
1. Investing In Commercial Real Estate
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