I found a SF home that I'm interested in purchasing from the Cuyahoga County (Ohio) Land Bank to rehab and sell. The County owns these properties and sells them to recoup the delinquent taxes. The home is in University Heights, Ohio. They want $32,000, estimates $35,000 for repairs and eappraisal.com quotes $98,000 for ARV.
What are the pros and cons for purchasing from a Land Bank? Would you purchase it?
Monitoring this thread. I'm interested in this, too. My county has about 2500 properties in the Land Bank but 90%+ of them are vacant lots.
The county land bank is difficult to deal with if you are a new investor and haven't done any rehabs from them before.
If you do manage to go through their application process and get your bid accepted, be aware that you will not be able to use conventional financing until the project is done. The land bank holds your deed in escrow until it inspects and approves all your rehab work, which means you technically don't own the property until they give the green light.
interesting.. they make it kind of tough.. cash and carry and with no security.. I guess they give you permission to work on the properties and how do materialmen perfect their lien rights? just curious. I guess from the cities stand point they want to make sure if you buy a property from them that it indeed gets rehabbed... I guess you could run into issues with city inspectors not liking your rehab as well.. Sounds like they make it pretty tough and there is a niche for those in the know
Originally posted by @Jay Hinrichs:
interesting.. they make it kind of tough.. cash and carry and with no security.. I guess they give you permission to work on the properties and how do materialmen perfect their lien rights?
That's just the thing, Jay. You can't encumber a property you don't own. The land bank executes a deed to you but leaves it with the title company "in escrow" along with the purchase agreement and any earnest money. That deed isn't valid until it's delivered to you, and you're only secured as against the land bank's subsequent conveyance when the title company records. Essentially, your lender is forced to take an unsecured position.
The closing doesn't actually happen until the land bank approves the work, which happens after all municipal violations are taken care of. It's a risky program to try out if you're not an experienced rehabber.
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