When it comes to finding off-market properties, savvy investors often look for more than just a well-maintained home or a pristine listing. They know that properties with code violations can present opportunities, as these violations can signal distressed owners who may be motivated to sell quickly. Code violations can be an indication that a homeowner is struggling with the upkeep of their property, potentially leading them to consider selling before the situation worsens. Many city municipalities will often fine the code violations and those fines will continue increasing as the property does not get addressed.

Below is an example of a property in Texas that had multiple code violations which was found through our LSP Data code violations platform & Virtual Drive 4 Dollars platform. This presented an opportunity as the property had been unkept and the property owner was no longer living in town. The code violations that were identified were the following:

• Nuisance On Property
• Trash Dumping or Illegal Dumpsite

Let’s dive into why code violations can often lead to off-market properties, with specific examples of violations that could make a homeowner more likely to sell.

What Are Code Violations?

Code violations occur when a property does not comply with local building codes, zoning laws, or safety regulations. These codes vary by state and municipality but generally govern the condition, use, and construction of buildings. Violations can range from minor issues, like a fence being slightly out of alignment, to serious concerns, such as unsafe structural conditions. When a violation is issued, property owners may be required to make repairs, pay fines, or face further legal action if the issue is not addressed. Below is an image from the Harris county, TX with code violations and their potential cost to the homeowner

Types of Code Violations That Can Lead to Potential Sellers

 

1. Unsafe Structural Conditions Structural issues can range from foundation cracks to deteriorating roofing. If these issues are severe enough to be flagged by an inspector, the property could become uninhabitable or pose a risk to the safety of the occupants. Example: A homeowner in Austin might be cited for significant foundation problems. If the repairs are too costly for the homeowner to manage, they may prefer to sell the property rather than go through an expensive and lengthy repair process. A distressed seller may look for a quick sale without listing on the open market, particularly if they are facing legal or financial pressure.
2. Overgrown Lots – Overgrown lawns, neglected yards, and unkempt exteriors can lead to code violations related to property maintenance. Municipalities often issue fines for these violations if the property is not kept in an aesthetically pleasing and safe condition. Example: In Houston, a property owner might receive a citation for overgrown vegetation or an accumulation of debris. If the owner cannot or does not want to address the fine or maintenance requirements. In such case, selling the property off-market could seem like a preferable option for them.
3. Housing Code Violations These violations deal with the safety and habitability of the home. Issues like inadequate heating or plumbing, mold, electrical hazards, or failing to meet fire safety regulations can lead to citations. In some instances the tenants themselves may call the local city and file a complaint which may lead to an inspection. In extreme cases, the property may be declared uninhabitable. Example: A property in Dallas could be cited for faulty electrical wiring, which creates a fire hazard. If the homeowner cannot afford the costly repairs, they might opt to sell the home to an investor who specializes in fixing distressed properties rather than going through the process of addressing the violations and paying for the required work.
4. Garbage (Rubbish or illegal dumping) – At times it’s easy to identify vacant or neglected properties as the general public (specially those that live around the area) are familiar with the vacant condition, and will dump anything from trash, to dead animals, etc..

How Code Violations Lead to Off-Market Sales

For many homeowners dealing with code violations, the thought of paying hefty fines, dealing with inspectors, and completing repairs can be overwhelming. Some may feel it’s easier to sell the property “as is” rather than invest the time and money needed to make it compliant with local codes. This creates an opportunity for investors, real estate agents, and others in the market to find off-market properties.

In some cases, distressed homeowners may avoid listing their property on the open market to sidestep the stigma associated with a code violation. They may seek a discreet sale to an investor who can buy the property quickly and without requiring repairs.

Conclusion

Code violations can serve as a red flag that a property owner is facing challenges in maintaining or upkeeping their home. While some owners may address these issues, others may choose to sell the property to avoid further hassle. For real estate investors, this presents an opportunity to find off-market properties that are often priced below market value due to their violations. Whether you’re looking for investment opportunities in Texas or across the U.S., properties with code violations can be an excellent source for finding potential deals. LSP Leads offers an easy way to identify distressed properties along with the information about the property (i.e. Single family property, 2500 sq/ft), 3 bedrooms, 1 bathroom, date built, etc..) to allow you to easily filter the relevant properties (see image below):

If you’re looking for off-market opportunities, consider reaching out to property owners with code violations or researching public records of citations and violations in your area. With a little research and a willingness to handle the challenges that come with distressed properties, you could find your next great deal.

Below is a video in which will allow you to quickly identify properties that may lead to an off-market deal!