Build Your Own House

Home Purchase Inspection - Unfinished House

Summary: When buying an unfinished house get a professional home inspection first and then obtain or prepare an estimate of building costs to complete just as if you were building a complete new home.


I am going to purchase a house where the contractor went belly-up. It has an appraised valued of $420,000. It is on the market (to “dump”) at about $275,000.   Exterior (excluding landscaping) is complete.

The interior has;

  • All drywall up and finished.

  • 90% of the trim is up.

  • *Rough plumbing is complete with tubs set. *

  • *Rough electrical is complete. *

  • *Entire interior primed, but no kitchen or bathroom cabinets and no flooring or interior doors installed. *

Could you give me a ballpark of what the cost will be to complete this home if I performed the duties of the general contractor from this point on?

What are some of the glaring things to look for that could trip me up?

It is bank owned at this point so it will come with no liens on the property. I truly appreciate and value your input. Thanks, Rick B.

Well Rick,

Get a home purchase inspection, and then get a few estimates to complete the unfinished house from General Contractors.

Then prepare your own estimate of building costs just as if you were building a complete new home.

Go to my “Getting Started” page, and using the Cost Estimating Software plug in the answers to the questions.

When you have finished, you will have an estimated (approximate) total cost to build or finish building that new home in your zip code.

Now, subtract or take out those items or categories on the estimate you don’t need or want, and those that are completed. Voila! There you go!

As to what could “trip you up”?

The first “biggie” you may encounter is getting a new home mortgage and/or home construction financing, owner builder or not.

And, most banks will not provide financing on their bank owned properties.

The second “biggie” you may encounter is “assuming” anything in home building, or life for that matter.

It may, or may not have liens. Liens are often negotiating tools of sellers (the bank is the seller in this case) and past due property taxes, etc. may not have been paid by the bank yet.

You are buying what is called an “REO”.

A REO (Real Estate Owned) is a property that was taken back by the Lender after an unsuccessful foreclosure auction.

Go slowly, get expert help with the purchase from a real estate/construction attorney, or at least a Realtor, and make sure your offer to purchase has a contingency clause that allows you time to get final bids, permits, and MOST IMPORTANTLY, a construction loan if you need one, from a lender of your choice.

If you are not in need of a construction loan and will be using your own money, have your money disbursed as work is completed and/or materials delivered.

Employ a Title Insurance company to disburse YOUR money, just as if they were doing it for a bank. This is VERY important. Also be sure you get your own Title Insurance Policy to protect yourself from liens, unpaid taxes, and other potential defects in the title.

I hope I’ve helped, and if you have any more questions, don’t hesitate to ask.

Good luck, Carl Heldmann