We all know someone who’s amazing at finding the best deals around. They don’t have to wait until Black Friday to score a cheap television, and they shop at thrift stores but always look like a million bucks. Is there a way to do that with real estate? How to find cheap houses to buy and save thousands of dollars in interest and fees?
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Lauren Rosin, a real estate agent in Arizona who works with investors looking for deals, advises buyers looking for cheap houses, “Partner yourself with someone who’s in the market, not someone stuck on the multiple listing service (MLS).
“Most of my investments are off-market, and by the time they hit the MLS, they get bid up,” she adds.
If you’re trying to figure out how to find cheap houses to buy, take a look at some of our tips and use them to form a house-hunting strategy.
Finding cheap houses: Off-market homes
Lean on your network and put the word out that you’re looking to buy a home. Word-of-mouth can tell you who might need to move before they’ve even listed their home. Keep an ear open for life circumstances — like a job offer in another state or a divorce — which could lead to a move. Sometimes you can make an offer before the seller ever lists their home.
Door-knocking is another tried-and-true method for finding off-market homes. Pick a neighborhood where you want to live and drive around, looking for homes that might fit your criteria. Introduce yourself to the owner and see if they are willing to talk about selling or are thinking about moving in the next year or so. Even if they’re not open to selling, they might know a neighbor who is planning a move.
Finding cheap houses: Short sales
Short sales are home sales where the seller is headed toward foreclosure. The current owner has worked with their lender to arrange to sell the home at either a loss on the mortgage or for the current amount outstanding.
Short sales can be risky, particularly if they’re bank-initiated. If the seller refuses to move out, you might have to incur the eviction costs after closing. Banks sometimes collect and hold on to several offers, trying to get the most out of the property and leaving you in limbo for months.
To find short sales, search court records for “preforeclosures” in your area. They’re sometimes listed online, or you might have to go into the county clerk’s office. Contact agencies who specialize in representing short sales and ask to be added to their mailing list.
When making an offer on a short sale, you might have to deal with both the current owner and the bank who owns the mortgage on the house. Negotiations can get tricky. Before deciding to look at short sales, find a real estate agent who’s experienced with these unique sales.
Buying a House This Year?
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Finding cheap houses: Foreclosures
With a foreclosure, the bank owns the home. It’s often the step after a short sale fails, and one of the advantages of buying a foreclosure over a short sale is that the previous owner has already moved out.
Finding foreclosure auctions varies by city, county, and state. Some cities list foreclosures for auction on the town website. Others require that banks publish auction listings in the local newspaper. If you attend a foreclosure auction, you need to have proof of funds and be able to pay cash for the property.
There are some serious drawbacks to purchasing a foreclosure. You have to vet the property in advance, and you often won’t be allowed to tour the property before the auction begins, so you won’t know what it’s like inside or if it’s a good deal beforehand. It’s also not uncommon for homeowners in foreclosure to strip out everything of value, down to the copper pipes, when leaving.
If you win a foreclosed home at auction, you can have a home inspection done, but you can’t negotiate the price after the inspection. Your only option is to either proceed with the sale or walk away, and you won’t be refunded the inspection fee.
Rosin advises that you familiarize yourself with the local laws before bidding on a foreclosure. “There are trustee states and judicial states,” she says. “In a trustee state, we bid on the house, put $10,000 down, and the next day the money is due, and you’re done.”
On the East Coast, judicial states require more steps to foreclose and a redemption period. Redemption periods of up to six months after the foreclosure decree allow the previous owner to reclaim their property, so you’ll want to be careful of this.
Banks refer to the homes they’ve repossessed in foreclosure but have not sold at auction as real estate owned or REO. Search for this term plus the ZIP code where you want to live to find bank-owned properties. Because bank-owned properties have already gone through a foreclosure auction but didn’t sell, you may be the only interested buyer.
There will be less pressure when buying an REO than when buying a home at auction. You’ll have time to tour the house and potentially obtain estimates for any needed repairs before you make an offer. Enlist the help of an REO agent to experience a smooth, seamless purchase process.
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