Wildfire-damaged homes hit market, what to know before buying damaged properties

In the aftermath of the devastating wildfires in Los Angeles County, an increasing number of homeowners are choosing to sell their damaged properties at below-market prices rather than rebuilding.

According to real estate market reports, a four-bedroom lot in Pacific Palisades, previously valued at up to $2.7 million after being purchased for $1.54 million in 2005, was recently listed for just $999,000. Within ten days, the property received over 60 offers, ultimately selling for more than $1 million.

Real estate experts note that many homeowners are walking away from rebuilding due to insurance payouts falling short of construction costs and rising building expenses. Given that rebuilding can take an average of three to five years, many are opting to sell rather than face uncertainty.

However, professionals caution that purchasing fire-damaged properties requires thorough due diligence to accurately assess the extent of the damage. With careful inspections, such properties could present lucrative investment opportunities as values appreciate post-recovery.

Chris Yi, president of the California Korean Construction Association, emphasized that “without clear guidelines for reconstruction yet in place, actual rebuilding efforts could take significant time. Buyers must do their research before making commitments.”

Experts recommend checking key factors before purchasing a wildfire-damaged home or lot.

Structural safety evaluation
Buyers should have a structural engineer assess whether the foundation and load-bearing elements have been compromised. If the foundation remains intact, rebuilding costs and timelines may be more manageable. However, significant damage to walls, wooden framing, or the foundation itself requires a detailed assessment before proceeding.

Zoning and permit restrictions
Some properties may carry a “red-tagged” designation, indicating the need for additional safety measures and environmental cleanup. Historical preservation districts or other regulatory zones may impose additional limitations on rebuilding.

Insurance adjuster’s estimate
Obtaining an insurance adjuster’s estimate can provide an accurate assessment of reconstruction costs, helping determine whether the purchase is financially viable.

How to find damaged properties
For those actively searching for fire-damaged properties, specialized methods are necessary. Buyers can use Multiple Listing Service (MLS) keywords such as “As Is” or “Tear-down Opportunity” to filter relevant listings. Other avenues include auctions, tax lien sales, and direct negotiations with homeowners.

BY HOONSIK WOO [woo.hoonsik@koreadaily.com]