Cheap Houses - Why so Cheap?
By Steve Gillman - 2006
Why are there cheap houses for sale? There are many reasons.
Knowing what they are, and what they mean, can help you save
thousands buying your next home. The following are six common
reasons that a house will be selling for less than others.
You can almost always find heap houses in bad neighborhoods,
but are they a good buy? Not if the neighborhood is declining
- that could be the worst investment in town. In a real estate
forum recently, an investor explained how he 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, if there are clear signs that the neighbor
hood is improving, a cheap house there could be a great investment.
By the time improvement is noticeable, things are usually changing
fast, so you might see a huge jump in the home's value in a few
Homes That Need Work
You may need to pass on by these cheap houses, if you don't
want to deal with getting things fixed. Of course, these homes
are often a way to build equity fast. Since they scare away most
buyers, there is less competition and often a real opportunity
for a low price.
However, a seller may think that if it needs a $10,000 in
repairs it is worth just that much less than others. Don't buy
this reasoning! Dealing with a fixer upper for no gain is no
deal. If a home needs $10,000 in repairs, it had better be worth
$20,000 more when you are done.
Sellers That Need To Sell Fast
If a seller needs to move soon, or has to sell quickly for
any other reasons, make a low offer. Don't assume you're taking
advantage of someone in this situation. You might not buy the
home otherwise, right? The seller can always say no. Perhaps
it is worth it to him to sell for a few thousand less to get
it sold now. Why not let him decide?
Cheap Houses With Hidden Problems
If you can't find any other reasons why the price is low,
there may be hidden problems. This is especially true if a seller
is an investor, real estate agent, or seems knowledgeable about
real estate. Maybe there are foundation cracks hidden behind
paneled walls, or a highway coming through the front yard in
Identify the problems. If they can be resolved, estimate the
cost to see if the house is still a good deal. Of course, if
the seller was hiding anything important, there may be more surprises,
so have inspection contingencies in the offer if you buy these
types of homes, and get those inspections done.
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I once lived near a house that was shaped like a flying saucer.
Some homes have insanely steep driveways. Others are built underground.
If the unique features they have are in demand, these homes can
sell for a premium. If not, they become cheap houses.
A home that is unique in ways that buyer don't usually value
will be hard to sell, so it may not be a good investment. But
what if it fits your needs and you will be living there for a
long time? Suppose you pay $335 less per month to buy a "unique"
home, and you live there for fifteen years. You'll pay out $60,000
less in payments. That could be sufficient compensation for a
difficult sale, right?
Low Priced Homes
Wouldn't it be nice to find a seller who just doesn't know
that his house is worth $220,000 - and he priced it at $180,000?
Okay, this is rare, but it happens. Actually that much of a deal
may leave you feeling guilty, but you certainly don't have an
obligation to educate a seller or pay more than the asking price.
He may have other reasons for his price that you don't know about
(a wish to be generous or a need for a quick sale?).
What's the bottom line? When cheap houses are good houses,
don't worry too much about the reasons. Just buy one.