When the pendulum swings from overbought to oversold, bargains abound. It happened last year in the stock market, and it's happening now in some housing markets. The case of the $19,000 condo.
That’s right. A place to live can now cost you less than a car to drive, and not just in Vegas. Around the country, you can find homes that cost less than the sticker prices at nearby car dealers. Fact is, the recession has devastated home prices much more than auto prices.
The National Association of Realtors (NAR) reported last week that “demand for purchase mortgages, measured by application data, declined to near 13-year lows despite low mortgage rates.” Meanwhile, auto sales are rebounding. According to Emunds.com, an automotive website that monitors the industry, “So far in August, Edmunds.com’s monitoring of vehicle retail transactions show some increase from last month, beyond the seasonal norm.”
Of course, when you buy a car for $29,000 – or even $19,000 as in the video above – you’re getting a brand-new vehicle. Chances are the home or condo you get will be “distressed.” That could mean it suffers from some simple neglect or even bigger problems, as the owners deserted the place or the banks foreclosed on it.
Still, if you find an enticing place that’s priced like a car, it may make sense to negotiate just like you would in the dealer’s showroom. Auto experts are reporting that haggling at car dealers is at an all-time high, so perhaps that same approach will work on desperate sellers. Other ways to buy cheap:
- Foreclosures: The least expensive house is usually a foreclosure. Check out our story on how to buy a foreclosure. But be aware that foreclosures are cheap for a reason – they often need major renovation, you can’t do a thorough inspection in advance, and you’ll need all cash to buy one.
- REOs: Another way to snag a bargain is an REO (real estate-owned) home – one that’s been foreclosed, gone back to the bank and then listed with a real estate agent. These homes are listed like any other, but they may be available at below-market prices for a quick sale. Like foreclosures, these homes often need work. Unlike foreclosures, you won’t need all cash. But you will need to be pre-approved for a loan and ready to pounce – they don’t stay on the market long. Best advice? Find an agent specializing in this market. That’s what we did to do the TV news story above.
- Short Sales: A short sale occurs when a homeowner gets approval from their lender to sell their home for less than the mortgage balance. The problem with short sales: It sometimes takes months for the bank to approve the sale price. New rules designed to expedite the process went into effect earlier this year (see this article from the Washington Post) but it can still be a trying process.
- Regular purchase: Falling prices in many markets have made one of the best buyer’s markets in decades. If you don’t feel comfortable with the more adventurous methods of buying above, you can still find a bargain by buying the traditional way. As mentioned above, just be a tough, patient negotiator. Learn the market, look at enough houses to know a bargain when you see one, then find a desperate seller. There’s no shortage of them out there.