The October issue of Realtor Magazine (our industry magazine) had an interesting article about dispelling myths while educating first time home buyers. The third point was about the realities of "bargains".
There are absolutely some bargains in the market... But, often those properties that are the real bargains are NOT the ones that have rock-bottom prices.
The HECK you say...
Really... I have been in some pretty cheap properties in the last few months. It seems that a house priced at $25,000 in a neighborhood or $150,000 homes would be a slam-dunk, right? That deal starts to look WAY less attractive when the issues get added up...
- floor coverings
- plumbing fixtures
- electical fixtures
- copper wire
- copper plumbing
- landscaping (not to make it pretty, but to stop water from washing away the foundation)
- driveway paving
Seriously, I looked at a house that needed all of that. It would be faster, easier and probably cheaper to bulldoze the house and start over. Since the lot would be worth about $10,000... and it would take about $15,000 to clear the lot and get it ready for a new building... This wasn't a deal.
Of course, most aren't that severe...
However, there are a lot of times where one house will be significantly cheaper than another for sale, but after correcting its issues, it actually ends up costing more. It might be simple things like carpet and appliances, or maybe something more involved, like a roof or HVAC.
This often ties back to "I need to see all of the options", presented earlier. In this case, we just want to get a look to make sure that it really is in that bad of shape.
I have looked at a lot of "bargain" properties and have a pretty good feel for them. There are some great deals, but they are usually not the first ones to present themselves... They are generally in much better shape and slightly more expensive.
Remember that the deal properties often still need work. And it is probable that the buyer will have to come up with cash for that work, in addition to downpayment and other closing costs... it isn't something to bootstrap.