How to Purchase Homes at Discount Prices
As the housing market continues to come back from its crash in 2007 and
2008, prices remain low enough in most communities to make homeownership
affordable for people with solid finances and good credit. Even with
prices low, many bargain hunters are still hoping to buy a home at an
even deeper discount. This is possible, if you have patience and
persistence as well as good persuasion skills. Purchase homes at discount
prices by paying in cash, buying homes that have been on the market for a
long time or negotiating with builders for properties that have been over
1Set a budget. Determine how much you are willing to spend, and how much
of a discount is acceptable. For example, decide if a 20 percent discount
off the list price is a victory, or whether you will max out at a
2Pay in cash. Avoiding a mortgage will allow you to save a fortune when
buying a house. In 2011, the National Association of Realtors reported
that 30 percent of homebuyers were paying in cash to save money and avoid
years of interest payments.Calculate your savings to understand the
discount you are actually getting. You will be giving up an annual
deduction on mortgage interest, but if you are paying 4 to 6 percent
interest on a loan of several thousand dollars over a 30 year period, you
will end up spending more in interest than on your house.
Get a discount off the purchase price and closing costs. Negotiate a
lower price in exchange for paying in cash and save on all the closing
fees that mortgage lenders insist on, such as attorneys, title insurance,
application fees and loan origination costs.
3Buy a house in foreclosure. On average, houses in foreclosure sell for
about 28 percent less than houses that are not in foreclosure. The bank
holding the mortgage often auctions a foreclosed home.Attend the auction.
Often, it is literally held on the courthouse steps. Sometimes, the
auction is held at the property itself. Bring at least 5 to 10 percent of
a down payment with you and be prepared to finance the rest of the house.
Bid on the foreclosed home. If you have the highest bid, the home is
Be aware that some banks put a minimum on the foreclosed homes that they
auction, which is usually the amount that is owed on the loan. Your bid
will have to be the minimum.
Prepare to bid on the house sight unseen. Some states will hold an open
house before the auction, other states do not mandate this. You will get
a foreclosed home for a discount, but you will not be able to negotiate
any changes or repairs.
4Buy a short sale or a real estate owned (REO) property. These are homes
that have not yet gone into foreclosure. You will be able to negotiate a
price with the bank.Make an offer. The bank might consider accepting a
lower price for the home if the amount covers the remaining mortgage
balance. Work with an agent or broker who specializes in short sales and
REO homes. They will often know what the banks are looking for.
Stipulate that your offer is contingent upon appraisals, inspections and
title searches. This is a benefit of buying a home before it reaches
foreclosure. You get a discount as well as extra insurance as a buyer.
5Target homes that no one seems to want. If you want to buy a home at a
deep discount, look at properties that have been on the market for a long
time. The owner will be more likely to negotiate just to sell the
house.Look for homes that have been on the market for 6 months or more.
Most sellers will grow impatient if the property does not sell after 6
months. Consider properties that need some work in order to negotiate
further reductions in price.
6Consider new construction. Housing developments started popping up
during the real estate boom, and then when the market collapsed, they
stopped selling. This has resulted in a flooded new construction
market.Talk to builders about what they are willing to sell their current
properties for. In a development with more vacant homes than occupied
properties, you should be able to negotiate a deep discount.
Look for creative opportunities for discounts. For example, if you can
only get a builder to go so low on his price, ask for free upgrades in
the unit such as finished basements, stainless steel appliances or no
Remember to be flexible. Closing on a short sale can take up to a year,
foreclosed homes might come with problems and repairs and you might have
to do some research to find the new development with the most vacancies.
Keep an open mind as you search for your discounted home.
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