Not to mention that so many of the houses for sale now, while the current owners are taking a loss, still have prohibitive prices or costs that are so inflated they still aren’t accurately reflecting what the place is worth. You could be getting a “deal” and still watch your home devalue over the next several years.
And anyway, who wants to pay that much when they don’t have to? Not me.
There are lots of ways to buy a house on the cheap these days.
Starting with the most obvious, foreclosures are good for you because it means that the house isn’t necessarily a junker. There are lots of foreclosed homes in very good neighborhoods that may have everything you are looking for. Anne says to be aware, though, that an owner who couldn’t pay for his house, also probably could not pay for any major repairs that were needed. A thorough inspection will be necessary, especially since most of these homes are also sold “as-is” – meaning the current owner (i.e., the bank or government) will not be making any repairs before handing you the keys.
Another caveat from Anne: "The enticingly low price you see on the listing can sometimes be misleading. Particularly when a foreclosed property is in a desirable neighborhood or otherwise "hot" market, it could sell for well over the advertised price. Banks will sometimes get dozens of bids on a choice property before they accept one -- often for thousands or even tens of thousands of dollars above the list price."
2. Look for short sales
A short sale is a great way to get a cheap house, because the homeowner still owns the home (which means all the normal real estate rules apply), but the bank has agreed to let them sell it for less than their current mortgage. It’s basically designed so that the bank can avoid the trouble of a formal foreclosure. The biggest downside for you, as a buyer, is that you may have to wait a loooong time for the bank to approve your offer – because they are the ones holding the purse strings at this point. Anne says that recently more banks have been pre-approving their short sales to help streamline the process. There’s no guarantee of the discount you’ll get with this kind of a purchase – you might save $5k or you could save $50k. It’s entirely dependent on the current mortgage and the bank.
3. Pick the best location.
There are two ways this can go. You can buy in a transitional neighborhood – this is typically in an urban environment, as opposed to the suburbs, so you have to want to live in the city. There are major deals to be had in areas that the city wants to fix up, or even better, where residents have just started moving in and fixing up places for themselves. You do have to have a bit of a sense of adventure for this option though – you may have to deal with higher crime rates and the occasional unsavory character (I always thought this was part of the charm), and you will most likely not be in the county’s best school district.
You can head the opposite direction as well: home prices are usually cheaper in the country.
You can head the opposite direction as well: home prices are usually cheaper in the country.
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