Why is there cheap real estate? Is it just that some sellers don’t know what their property is worth? Sometimes this is the case, but only rarely. More often a seller is willing to sell for less because it means selling faster or more easily. In other words, sellers will trade a little equity for a fast sale or peace of mind, as in the following situations.
1. Death – After the death of a loved one, family members may want to sell any real estate cheap to be quickly done with the bad memories, or to get their inheritance faster.
2. New Job – A job transfer or new job can give a person a lot of motivation to sell fast, and therefore sell cheap. Often, the seller will end up with two payments, and you will be helping by taking one off his hands.
3. Divorce – When people divorce, sometimes they need to sell to settle things, and the faster the sale, the sooner they get to be done with it all. Also, sometimes neither one can afford a home that was being paid for with two incomes. A fast sale prevents late payments and credit problems.
4. Behind in Payments – If a seller is already behind in payments, he or she is facing possible foreclosure. Selling to you at a discount is preferable to losing a lot more equity in a foreclosure.
5. Back Taxes – In most places an owner has to be more than a year behind on property taxes before he faces losing the property. If he is close the the deadline, however, you may get a deal. Just be sure you take into account the taxes that have to be paid.
6. Absentee Owner – It is difficult to deal with a property from a long distance, especially rental units. These sellers often get to the point where selling fast and regaining peace of mind is more important than getting full market value.
7. Income Problems – Whether due to a lost job or declining business, a seller may no longer have the income necessary to keep his home or other real estate. He may need to sell fast to avoid further financial problems.
8. Negative Cash Flow – It doesn’t make sense to lose money on real estate every month, so sellers with negative cash flow may drop the price to sell fast. Just be sure that you have a plan to increase that cash flow once you own the property.
9. Damage – This is one of the most common reasons for cheap real estate. The walls have holes, the roof needs replacing, and the cats peed all over the carpets. Fixer-uppers always sell for less, and the scarier they are the cheaper they get. But be sure you know what you are getting into.
10. Sudden Cash Requirements – Sometimes a seller has a better investment or other reasons to need cash fast. For example, selling fast might prevent him from losing another property to foreclosure, or it might mean getting into an investment that will make him far more profit than the little bit of equity he loses selling cheap to you.
Other reasons people sell below market value include sickness, partnerships gone bad, bad tenants, excess debt, and any number of changes in people’s lives. Remember, however, that the immediate reason for a lower price is to get a faster or easier sale. To get cheap real estate, then, make offers that close fast and easy.