Why are there cheap homes for sale? You can imagine some of the reasons, but taking a good look at what they mean can help you save thousands buying your next home - or help you avoid a disaster. Consider the following common reasons that houses sell for less than others.
A Cheap Home May Have Hidden Problems
If you can't find other reasons why the price is low, there may be hidden problems. There could include foundation cracks hidden behind paneled walls, or the fact that a new garbage dump is about to be built across the road. If you can identify the problems, and estimate the cost to resolve them, the house may still be a good deal. However, if the seller was hiding these issues, there may be more surprises. Put an inspection contingency in any offer for these types of homes, and get those inspections done.
Some Homes Just Need Work
You may need to pass on by fixer uppers, if you don't want the work. However, these houses can be a way to build equity fast. The uglier they look, the more they scare away other buyers, so there is often a real opportunity to get a bargain. Unfortunately, a seller may think that if his house needs $10,000 in repairs it is worth just that much less than others. That's no deal. If you're going to spend $10,000 in repairs, it better be worth $20,000 more when you are done.
Bad Neighborhoods
That you can find cheap homes in bad neighborhoods is no surprise, but are they a good buy? Generally no, if the neighborhood is declining. In a real estate forum recently, I saw a post from an investor who had to sell his Detroit rental house for a loss after twenty years of owning it (who says real estate always goes up in value).
On the other hand, when there are clear signs that the neighborhood is improving, buying a cheap home there could be a great investment. Usually, once the improvement is noticeable, things start happening fast. You may see a big jump in the home's value in a few short years.
Some Sellers Need To Sell Fast
Everyone has deadlines. If a seller needs to move soon, or to sell quickly for any other reasons, and you learn this information, why not make a low offer? You're not taking advantage of someone in this situation, since you might not buy the home otherwise, and the seller can always say no to your offer. Perhaps he'll be happy to sell for a few thousand less to get it sold now, so give him the opportunity.
Unique Sometimes Equals Cheap
I once lived near a house shaped like a flying saucer. Some homes have insanely steep driveways, while others are built halfway underground. When their unique features are desired, these homes can sell for a premium. Otherwise they go cheap.
Remember that an unusual house may be hard to sell when you move someday. However, if it fits your needs and you'll be living there for a long time, why not consider it? You might pay $300 less per month on the smaller loan needed to buy a "unique" home. Live there for fifteen years and you'll spend $54,000 less on payments - sufficient compensation for a difficult sale, perhaps.
Sometimes Cheap Homes Are Just Cheap
Want to buy a house worth $230,000 that is priced at $190,000? It happens - rarely, but why not keep your eyes open. And don't bother feeling guilty. You don't have an obligation to educate a seller or pay more than his asking price. In any case, it's possible he has good reasons for pricing it that way. Maybe he bought it for half that and needs a quick sale.
