5 Ways to Find a Cheap House
5 Ways to Find a Cheap House | Been There Done That
Who doesn’t want to find a good deal on a home? I watched my parents scour the market for opportunities to get a good deal on a houses to flip and rental properties to purchase nearly my entire life. I successfully purchased my first house to flip through an auction website called Hubzu.com. And just recently, the boyfriend and I purchased our current fixer upper from HUD. I’m currently looking into sheriff sales as our next method to acquire a house to flip.
1. Look for a Home That Has Sweat Equity Potential
A great way to get a home at a good price is to be willing to put some sweat equity into! This usually means finding a home that needs a little bit of work, maybe a new kitchen or bathroom or it can be as simple as paint and carpet. Find homes that are priced below market and will still be under it’s new market price once you add in the renovation costs.
Sweat equity usually implies that YOU will be doing a lot of the work to save on labor costs but that doesn’t have to be the case. There can still be a little sweat equity to be made if you aren’t handy.
So let’s say you find a house for $150,000 that would be worth $200,000 if it were fixed up. Let’s say it needs about $25,000 worth of material for the renovation work. If you do the work yourself, you’d have $175,000 into the house. With a new home value of $200,000 you will have ‘made’ $25,000 in sweat equity. If you hired a contractor to do the work and his labor costs came in at $20,000 you’d have $195,000 into the house and $5,000 in “sweat equity.”
See why sweat equity can be a great thing?
2. Look For Stale Listings
Either you or your realtor should spend a little time looking for listings that have been on the market for a while. Why? Because you can usually underbid on homes that have been on the market for a while and not have that fear of offending the homeowner. Sometimes you luck out because the homeowner is just tired of the process and willing to let their house go for a little less. You could also luck out if it’s a bank sale because they may just need to get the house off the books if it’s been for sale for a while.
However, you should be a little more careful with homes that have been on the market for any lengthy amount of time. This can sometimes indicate that there’s a major problem with the house (like the foundation for example) or that people walked after home inspections. So just be extra diligent when deciding to put an offer in on a stale listing.
3. Look For HUD Homes
HUD homes can be a great way to snag a home at a good price, especially if you plan to live in the house. HUD homes are houses the government “took back” after a homeowner defaulted on an FHA loan. The government wants to liquidate homes (because really, what are they going to do with a bunch of houses?) So they offer the homes for sale to owner occupants first and then allow investors to bid after an initial period of owner occupant offers only. So bonus points if you plan to live in the house.
HUD homes often need work because the prior owners rarely put any money into the homes because they could barely afford them in the first place. The most typical things needed on HUD homes are heaters and roofs followed closely by kitchens and bathrooms. So you’ll need to have quite a bit of cash on hand to fix these things or secure a 203(k) loan – which can prove difficult.
4. Look for Bank Owned Homes
Bank owned homes are very similar to HUD homes only there is rarely an opportunity for only owner occupants to bid. So this means you’re up again investors no matter what stage of the game it is. Banks acquire homes in the same way HUD does. When a homeowner defaults on the loan, the bank forecloses on the home. Just like HUD, banks don’t want houses on the books they want liquid cash. So there’s usually a deal to be had with bank owned homes as well.
Another term you might hear instead of banked owned home is REO. An REO is a home you can purchase directly from a real estate company or from a bank. So it’s essentially the same thing as a banked owned home.
5. Look for Estate Owned Homes
Truthfully, I’m not sure how a person without access to the MLS would do this without a lot of digging so this might not be an efficient way to find a house. But I’m still going to talk about it anyway. An estate home is a house someone inherited and is looking to sell.
These can be a great way to get a house for a good price because sometimes the ones who inherited the house don’t feel like dealing with the headaches of selling and will accept any old offer that comes their way.
There’s also the chance that if a group of people inherited a house mortgage free, say three adult children inherited their mom’s house, they have no obligations and just see the cash. So offering thousands of dollars less than asking price split three ways doesn’t seem like as big of a deal as one person having to take that hit themselves.
Sometimes estate homes are a great way to find homes that are perfectly habitable but are dated. So these can be great options for people who need something habitable now but that can be fixed up over the years.