The decision whether to buy a house or build one from scratch is often determined by a desire to save money. Generally, building is cheaper than buying a completed home with an established garden. But if you can find a “cheap” house to buy, you may be able to save yourself a lot of money.
Usually the cheapest houses on the market are those owned by people who are threatened with foreclosure by the mortgage holder, or those that have already been repossessed. Either way, there is often a Catch 22 to these properties; buying “cheap” might inadvertently take you on a very expensive spending spree.
The Reason Houses are in Foreclosure
The reason mortgage holders (usually banks) foreclose on home owners is because they cannot pay their mortgage bond repayments. The reasons this happen are vast and varied, ranging from ill health or divorce, to unemployment. While that’s fair enough (we all face issues in life and often can’t control the way things happen), these are issues that more often than not result in:
- failure to complete a building project, or
- if the house is completed, failure to maintain it.
So before you opt to buy a foreclosure, it is essential to ascertain what you will need to do before you can either move in, or live comfortably. Furthermore, you need to assess what needs to be done to make sure that if and when you decide to resell the property, you will get a decent profit for your efforts. You certainly don’t want to lose money!
What Makes a Cheap House Expensive
When you buy a home that is cheaper than the rest, there’s a reason for the lower price tag. If it’s fractionally lower, it might be because the owner wants to “move” it quickly, rather than waiting for a higher price. If it’s a lot lower, there’s a good chance that it needs a lot of work to bring it up to normal standards.
Here’s the Problem:
A supposedly cheap house may not be so cheap after remodeling, simply because you’re going to have to spend money fixing it up. To assess the fix-up price tag, you need to establish what needs to be done. If the problems are purely aesthetic – and can be fixed with a lick of paint – you could be in for a big win. If fixtures and fittings need replacing, you could still be on a winning streak, depending on what good quality replacements will cost. But if there are basic flaws in the house – with plumbing and electrics for example – then you could end up in a minus situation.
So before you make a decision to buy a foreclosure, assess what needs to be done, and budget carefully.
Should Your Buy a Foreclosure? at MSN Money.
Buying a Foreclosed Home, at NOLO, Law for All.