Without further adieu, here are the Top 10 Ways to Know You're Buying a Dump / Money Pit.
10) A thousand cards are on the kitchen counter. The listing agent says he's looking for offers, yet you notice a substantial pile of REALTOR cards on the kitchen counter. It looked good on paper, but nobody felt like doing anything after seeing the house. (Note to Seller: wake up and smell the business cards.)
9) It's a bank-owned property on the market for over 30 days (Substitute the appropriate "expiration" date for your market). Unless this property fell out of escrow with a Buyer who could not perform, beware. Bank-owned properties in many inventory-depleted markets do not last. Caveat: You can ask your agent investigate. If it fell out once because of the Buyer and not because of the property, you may have an opportunity to grab something others have passed up.
8) A $200,000 listing is on the market for over 30 days (Substitute the proper value threshold in your market). Cash is King and in any market, and cash buyer activity is red hot below $200,000 in my market. If you see a house under the threshold getting passed up by the Kings, it's a sign they smell something foul. Perfect segue to ...
7) You have to hold your nose to tour the property, or worse...
- Buyer hits an odor wall and can't go any further, does a 180 and bolts for the exit.
- REALTOR does the same. Now we're talking about a real estate professional whose nose has been around the block a few times.
- Contractor's eyes start to water. He has no olfactory abilities. His nose shut down years ago and now his eyes are complaining at this house.
6) The property is listed 30% below comps. Honey, it ain't comparable. It does not compare. It can't compete. It's screaming for a professional Buyer, so if you're not one, think again. If it's a single family house, you're looking at a sinkhole, parking lot, cracker box, meth lab, land lease, money pit, or animal shelter. If it's a condo, you're looking at an HOA with no reserves (money pit again), high delinquency, high number of rentals, or major lawsuit.
5) Three Lenders Have Told You No To This Property. Did you get a clue when the first one said "Sorry, I can't take your money?" The problem is they have to give you money to make their money, but the collateral isn't there. If your lender isn't interested in the property, you shouldn't be interested.
4) You're an FHA Buyer offering below list and you get accepted! (Has this actually ever happened?) This is one of those times when perverse logic, "If you like me so much, why would I possibly like you," actually makes sense. Sorry FHA Buyers, but if your agent hasn't told you it's rough out there, I'm here to tell you.
OK my list came up short. What can you add to the "Top 10 Ways to Know You're Buying a Dump." I've saved the top three spots for you, so add to the list and send to your Buyers, relatives, and friends.