There is enormous potential in investing and profiting from abandoned properties. With the crash in the housing market, the number of abandoned properties and vacant homes in disuse has been increasing steadily.

According to our ForeclosureInsight^TM Databases, there are now approximately 40% more abandoned properties compared to the level during the early 1990s real estate bust.

Some of these abandoned properties are bank-owned, i.e., properties which banks have foreclosed upon and were unable to sell. On the other hand, there are other properties abandoned by builders. How do we find these properties?

There are proposed bills in states like Florida which seek to establish an online registry to list abandoned or preforeclosure properties statewide. Property owners, both investors and lenders, would be required to register the properties.

However, until the registry is put into place, investors have to do some research into court filings to identify abandoned properties, and more importantly, “freshly abandoned” properties. For example, a court order by a bankrupt builder may inform investors that:

“IT IS ORDERED that the interest of the Chapter 7 Trustee in the property listed in Exhibit A is abandoned pursuant to 11 USC § 554 and no longer property of the Estate.”

In some other cases like John Laing Homes, the home builder might actually announce early in bankruptcy proceedings its intention to abandon certain properties. The question is: how do we find such lists of abandoned properties?

In February 2009, John Laing Homes stated in Chapter 11 bankruptcy proceedings that it intended to reorganize around selected projects in their Southern California and Laing Luxury divisions. The bankrupt builder had closed their non-core divisions in Northern California, Colorado, Arizona, Texas and Florida and had either exited or had been in the process of exiting their operations in those areas immediately.

It was also in the process of shutting down certain construction projects in the Southern California division which were not economically feasible to maintain. This was not surprising since John Laing Homes had not been profitable and haemorrhaging cash. It was dependent upon the financial support of its parent, Dubai-based Emaar Properties, to maintain liquidity and mitigate ongoing losses.

Prior to the bankruptcy, the builder had also decreased its 1,100 person workforce by 90%. Given the manpower shortage, it was only a matter of time when the builder discontinued more projects, especially if bankruptcy proceedings dragged on and it was unable to successfully restructure.

The builder expressly listed projects it clearly intended to exit, filing an official list of “Abandoned Projects” in a motion regarding payment to utility providers in the bankruptcy court. Basically, the idea is to reduce utility charges by shutting off utility services to abandoned properties.

This means that it is not merely a simple task of searching for keywords like “Abandoned Properties”, “Abandonment”, etc, in a bankruptcy docket. On the contrary, investors should be looking into motions on utility service, motions relating to contractors (a builder wouldn’t need contractors to continue work on abandoned properties), etc.