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Purchasing a home below its market value essentially means that you would buy the home for less than what it is actually worth. There are different reasons why a home might sell for less than it is worth, ranging from bank foreclosures to generally unfavorable property locations. This process can save you thousands of dollars, but there are also considerations to be made before committing to a particular purchase.
Foreclosures are the most popular methods of purchasing homes below market value. This is partly due to the fact that the most recent recessions spawned thousands of home foreclosures in which the previous owners couldn’t afford the payments. Many banks are willing to sell these homes at low prices in an effort to gain some money without the property becoming a total financial loss to them. Finding foreclosure prices is easier in some locations than others. For example, there are statistically more home foreclosures in Florida and Nevada than there are in other parts of the country. A good start to seeking out foreclosures in your area is to find a real estate agent who specializes in them.
Short sales are often confused with foreclosures, but they are significantly different. Banks sell foreclosures to potential buyers, while the current owners of a home might still live in it during a short sale. Short sales occur when a seller works with the mortgage company to sell the home for less than the market value. The bank may agree because there is not enough equity involved. Keep in mind that when making an offer on a home being sold in a short sale, you might want to make your offer slightly higher because there can be a great deal of competition among buyers associated with these types of sales.
Homes that are in certain locations are often priced below market value. Older neighborhoods or ones that are further away from desirable parts of town will all feature cheaper homes. This is due to the fact that many buyers might not want to live in certain locations. Owners of these particular homes may list their properties below market value, since they know that there listing will be competing against listings in more popular neighborhoods. There is no doubt that the prices of homes listed in generally undesirable neighborhoods are extremely affordable. Before buying such homes, consider both potential short-term and long-term problems. If you’re buying the home to live in,r rather than as an investment, the obvious question you need to ask yourself is: Do I actually want to live in this neighborhood? You also need to consider whether you plan on keeping the home for the long-term. Don’t expect to purchase this type of home and be able to sell it at a higher price right away, but homes in ‘up and coming’ areas may eventually increase in value.
Some sellers list their homes below what they are actually worth because they realize that there is a great deal of work that needs to be done. Such homes are older, and many of them have also been neglected. These types of properties appeal the most to buyers who not only want good deals, but they also enjoy renovating homes. Before you commit to purchasing a fixer-upper, you should always have an inspector come by and check out the property with you. Although you might notice some obvious things that need to be fixed, there may also be a few hidden dangers lurking behind the walls. For example, mold, plumbing and asbestos problems are all difficult to detect from the outside of the walls. You want to ensure that such problems don’t exist in your home of choice. You should also estimate the costs associated with renovating the home. If the total amount will cost more than buying a brand-new home, then it is best to choose the latter option. Only experienced do-it-yourselfers, or extremely dedicated beginners, should choose this affordable home purchasing option. Simple mistakes can end up costing a great deal more than the original anticipated expenses.
Author Bio: Jennifer D’Angelo writes for Right Residential, a company in the Chicago suburbs that sells already renovated homes that were bought for below market value.