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How to Find Cheap Houses for Sale: 10 Tips for Smart House Shopping

by Brandon Turner on February 26, 2014 · 30 comments

  
Find Cheap Houses For Sale

“Cheap.”

That’s what I told my agent when she asked me what kind of house I was interested in buying.

I was 21 years old and looking for my first home;  I knew nothing about real estate, but I knew one thing: I wanted to buy a cheap house. At the time I was making barely over minimum wage so I wasn’t buying a cheap home because it fit into some master investment scheme… I wanted a cheap house because it fit in with my budget.

Can you identify with that?

I got lucky on my first deal and found a great, cheap home that I was able to fix up slightly and sell for substantially more money a year later.  Since then, I’ve learned that whether you are shopping for your own personal home or for a house to flip or rent out, finding cheap houses for sale in your market is imperative to securing your financial future. However, depending on what part of the country you live in, this might be difficult with the increasing competition in the real estate space.

How you define “cheap” is obviously relative, but this guide should give you a starting point for finding the lowest-priced houses in your neck of the woods.

(Should you actually buy cheap houses? That’s an important question, but not the subject of this article. Be sure to check out Ben Leybovich’s great post from yesterday called “Newbies Take Note: Why You Shouldn’t Buy Houses for $30,000” to jump into that debate!)

Let’s get started.

Ten Tips to Find Cheap Houses For Sale

1. Sort by Price

This first one might be the most obvious on this list, but many people don’t know this. When searching an online real estate platform like Zillow.com, Realtor.com, or Trulia.com, the properties are often, by default, listed by “most expensive.”  Get into the habit of instantly clicking to sort by “cheapest first” and you’ll always see the cheapest houses for sale listed. Additionally, if you search over a large geographic area, you’ll be able to look for patterns to see where the lowest price neighborhoods generally are.

See the screenshot below for an example of the Seattle market from Realtor.com. While the median sale price for a home in the Seattle area is around $400,000 (source) these properties can be found for under $150,000. Obviously this is not taking into account the condition or neighborhood, but it’s a good place to start.

CHeap Houses Seattle

2. Look at a Lot of Houses

By looking at a lot of houses, you will be able to better sort out the good from the bad and train your mind to find great deals. After all, “cheap is relative” so get a good grasp on your local real estate market by attending as many open houses as possible. Set up appointments with your real estate agent to tour a dozen prospective homes in one day, and take note of what you like and what you don’t like. Or spend your weekends driving up and down streets while your spouse uses a smartphone app to check out local home prices. The more you look at, the better your odds of finding a great deal.

3. Make a Lot of Offers

Many real estate investors abide by the 100-10-1 rule, which says you should look at 100 houses, offer on 10, and get just one accepted. By submitting a lot of offers, assuming most of them will fall through, you increase your odds of getting a really great deal on a cheap house.

As one of my real estate agents is fond of saying, “If I don’t blush when making an offer, it’s too high.”

 4. Consider a Fixer

Sometimes cheap homes for sale are priced low because they require a lot of work.  However, just because a property needs some TLC, it doesn’t mean you can’t pursue it and get a great deal. In fact, every single property I’ve ever bought was some sort of “fixer” and that’s why I was able to get such cheap prices on them.

Fixers, however, carry with them a certain degree of risk and complications – and can be difficult to finance. If you decide to purchase a fixer, keep in mind the following tips:

  • Always get the property inspected by a professional home inspector so you know what you are getting into.Cheap Homes for Sale
  • Always get estimates from licensed contractors so you can accurately estimate the potential repair costs (and be sure to check out The Book on Estimating Rehab Costs from J Scott and BiggerPockets, available on Amazon or for free when you buy The Book on Flipping Houses.)
  • Look for “cosmetic fixers” that need simple fixes, like paint or carpet. Bad smells are also great- because they are easy to remedy but drive away most of the competition.
  • Consider using a rehab loan, such as the 203k FHA insured loan, to wrap the rehab costs into the loan.

5. Look Outside the City

One of the best ways to find cheap houses for sale is by looking outside the busy cities and suburbs and focus more on the rural. I’m not talking about buying a farm in the middle of nowhere, but there are generally low-priced communities within an hour or two of every major US market.  Generally, the further you get from major metropolitan areas, the lower prices you’ll find.

In this same line of thinking, consider buying real estate away from the US Coasts. The Midwest and South generally have much cheaper prices on property than the East or West coast. Obviously there are exceptions, but if you don’t care where you buy, focus on the Midwest and the Southeast.

6. Set up Automatic Alerts

blue-clock-iconAnother way to snag a good deal is by being prepared with the first offer on a property.

Have your real estate agent set up automatic alerts for whatever property type you are interested in so you can jump at any great deals.  If your agent doesn’t do automatic alerts, set them up with a real estate search portal like Zillow or Redfin.

7. Look for “For Sale By Owners”

Often times, in an effort to save money, people list their homes with a For Sale By Owner (FSBO) sign in the yard and hope for the best. However, many times these people have no idea what the true value of their home is, and may consider selling much cheaper than other homes in the neighborhood. Also keep an eye on sites like Craigslist for FSBO sales and jump on them quickly.

8. Focus on the REOs

Almost every property I’ve ever purchased has been an REO (Real Estate Owned.) This means the property was foreclosed by the bank and is being resold. REOs are generally cosmetic fixers and may have been subject to vandalism or neglect for many years, though any title issues have been taken care of. I like purchasing REOs because I’m not dealing with an emotional bank – I’m dealing with a machine. I can offer much lower prices and get better deals on the properties I do purchase.  For tips on buying a foreclosure, be sure to check out How to Buy a Foreclosure: The Comprehensive Guide to Buying a Foreclosed Home.

9. Negotiate Strongly

You get what you negotiate.

Never assume the asking price needs to be the sale price. (Tweet that!)

Although this works better when there is less competition, negotiating with the seller is one of the best ways to lower the cost of your home purchase.  Be okay with losing the deal – and you’ll be on top of the negotiations. For more advice on negotiating a real estate deal, check out How to Negotiate: 7 Real Estate Negotiation Tips.

10. Talk to a Wholesaler

Finally, one great way to find cheap houses to buy is through a real estate wholesaler.  A wholesaler is someone who finds great deals and gives the right to sell that deal to another buyer for a slight markup.  Wholesalers typically find deals through heavy marketing and good negotiation – and can pass on considerable savings to you, the buyer. HOWEVER – keep in mind that most wholesalers only sell to CASH BUYERS so if you plan to use a loan, it might be difficult.  (P.S. – to find a wholesaler, check out the BiggerPockets Forum and look around for knowledgeable wholesalers in your area. You can also call the number on those “I’ll Buy Your House For Cash” bandit signs on the side of the road in your town!)

Conclusion: Finding Cheap Houses

You don’t need to settle for the most expensive home on the street to be happy.  Whether it’s your primary residence or an investment property, you make your money when you buy so go out there and buy a great deal.

Hopefully these ten tips will give you some great places to begin looking for cheap houses. I’m sure I missed some other obvious tips, so I hope you’ll do me a favor and share your favorite tip below in the comments! Also, if you have any family or friends who would benefit from this post, please share this on your favorite social media channel!

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{ 30 comments… read them below or add one }

Mark Ferguson February 26, 2014 at 2:16 pm

Great article Brandon! REOs are great but I have had great luck with short sales and estate sales as well. Looking at the small towns outside the city is also great advice. Much less competition.

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Brandon Turner Brandon Turner February 26, 2014 at 5:38 pm

Thanks Mark! Yes – Short Sales and Estates, both excellent options that I forgot about! Thanks for adding it!

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Lisa Phillips February 26, 2014 at 2:42 pm

You’re a man after my own heart! We all want the “cheapest” house, it just makes sense! But then comes what do you get from that house, what will the returns be, appreciation, and what about the safety, right?

I’ve created my own Leveraged Analysis Technique for finding these properties, and I even give a video demonstration on the biggerpockets blog for anyone interested in learning how to do this effectively, and I take it a couple of step farther than this: First, I ALSO check out the Crime. I ALSO sort by Photo count (the more photos, the less crappy it turns out to be, the more time you save), and finally, I look at the Rents. The Crucial Key Metrics (C.P.R,)

The internet has made it extremely easy to leverage these resources. We just need to smart about when and what we leverage for each price range. (which we now know how, and share, here on biggerpockets). Thanks for addressing what’s on everyone’s mind.

I love the 21 yr old Brandon asking for “cheap.” Lol.

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Brandon Turner Brandon Turner February 26, 2014 at 5:39 pm

Hah thanks Lisa! Yeah, I’m always surprised by those who don’t try to find the cheaper homes in their area. I think there is a stigma that says cheap=bad. Not always true (but sometimes!)

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Lisa Phillips February 26, 2014 at 8:35 pm

Of course, right! That’s when this little thing called “discernment” comes into play, and we use our previous skills and resource to consistently pick the best ones. I mean, I am VERY discerning about my investments, but there are still a ton of low cost, great CF properties to choose from. I mean, isn’t that why we are all here, instead of writing this out, learning how to DISCERN a gem from a rock?

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Joe Luciano February 26, 2014 at 3:15 pm

When making 100 offers, are you making the offer or are you having a real estate agent make these offers? How does your agent feel about that? I suppose it depends what the time frame of those offers are. 100 in a week is much different than 100 in a year.

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Brandon Turner Brandon Turner February 26, 2014 at 5:40 pm

Hey Joe,

It’s more of look at 100 houses (online or in person) and make offers on 10. The idea is that if you are getting more than 10% of your offers accepted, you are probably offering too much. For years, I was getting 9/10 of my offers accepted and now, looking back, I know I should have offered less, lost out on some of them, but I’d have more equity and cash flow today.

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Gerald K. February 26, 2014 at 3:39 pm

Brandon, thanks for the timely article. Seems like with the drop in inventory and increase in prices around here, even the REOs are expensive or trashed and need cash only offers. Getting tough these days! Definitely need to keep the options open. Thanks for the tips.

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Brandon Turner Brandon Turner February 26, 2014 at 5:41 pm

Hey Gerald, thanks! Yeah the MLS is getting tough so we have to find some new sneaky ways to get a good deal!

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Dawn Anastasi February 26, 2014 at 4:02 pm

Regarding making 100 offers and getting one house — I rarely make offers. In the past year I’ve made only 1 offer that got rejected (list price $13,500, offered $14,000, sale price $24,000). That’s because I run the numbers BEFORE I offer so I don’t waste my time or my agent’s time making tons of offers that probably won’t get accepted.

When I visit a house I take into account an estimate of the number of rehab dollars I will need and factor that into my “all in cost”. I also don’t make offers on houses I don’t look at.

I guess I prefer the sniper method versus the shotgun blast method.

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Brandon Turner Brandon Turner February 26, 2014 at 5:57 pm

Hey Dawn,

I agree- I’m actually more on your side with the sniper approach. However, when I look at my past, I see that I had way too many offers accepted, and I see now that I paid too much.

Also – 100 offers is way too much. No agent would do it. What I said was “look” at 100 houses (online, driving by, etc) and then offer on 10. I think a 1/10 ratio for accepted offers is pretty good, and not so much that my agent won’t do it. It takes him maybe 15 minutes to write up and submit an offer, so he maybe has to spend 3 hours on offers for every one deal. I’d say that’s time well spent for him, since most “first time homebuyers” take 3 hours just to submit one offer! :)

As always thanks for reading and commenting! You are a wise person Dawn!

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Shaun March 6, 2014 at 2:40 pm

Different strokes for different folks I suppose.
I personally find it a colossal waste of time to look at a bunch of houses I don’t even make offers on. It takes a lot less time to write an offer than to even do a driveby of a place, forget about actually going inside.
I make most of my offers before looking at the place and see what sellers want to play ball and I will go tighten up my numbers when it makes sense.
I am an agent so I can do this without having someone else do it so that is clearly a big factor.

I am curious at how many houses you looked at and only made one rejected offer on?
To my point above you use a lot more time and effort of your agent looking at a house than offering on it.

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Jordan February 26, 2014 at 6:36 pm

Thanks for the tips Brandon. I’d look outside my city but housing prices are a stupid expensive where I live and in the surrounding areas.

I’m looking to buy soon and think I’ll look for places for sale by owner.

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Ang February 26, 2014 at 9:37 pm

I have a dllema that I should not be having I think it would make a nice blog article for one of you guys to present to the Bp universe. Anyone interested?

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Jorge Caicedo February 26, 2014 at 9:48 pm

good article but I’ve found that trying #7 and 8 are a migraine at best and a toothache at worst for flipping…maybe i just come across jerks w/ those two…

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Jason Mifsud February 27, 2014 at 11:05 am

Hmmmm… as a real estate investor, I’m a little confused by this list. MLS is only a research tool to me to get a quick run down on pricing in an area but I never purchase at retail, only wholesale. FSBO is good just like REO (not so much in Canada.. its against policy for banks to sell below FMV). But Tax Liens and Sheriff’s sales are fantastic.. get the info on the home, perform all due diligence and make an offer directly to the owner before the auction and score a deal without competition.. Also, I never purchase with a realtor but will always sell through one… helps me to automate my system so im doing less. And my golden rule has always been only buy with OPM. And when looking on Craigslist, dont look for the people who are selling houses, look for the people who are selling personal items such as a customized Harley Davidson… there should be no reason other than money issues that someone would sell these items. Have a chat with them and make an offer…you may walk away with buying a house and a bike While helping someone out of a tough situation.. its all about problem solving.

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Ben Leybovich February 27, 2014 at 11:50 am

Jason – are you after my heart? Completely agree with you perspective. Haven’t bought a thing off MLS in 5 years, and I am licensed!

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Frank Iglesias February 27, 2014 at 11:48 am

Great article… I love the Short Sales and Estates option!

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steve February 27, 2014 at 1:29 pm

Jason those are great ideas for the Craigslist leads.

Brandon, I seem to have the most trouble with fha and the 203k. When fha has such strict guidelines for the overall condition of the property how do you convince them a crappy fixer upper will be safe for you?

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Jason February 27, 2014 at 1:35 pm

Hey Ben.. yep… I have only purchased 1 house of the MLS and only because I knew I had no competition. It was a foreclosed remediated grow op that the banks would not finance without health clearances. There were multiple offers on the table but no one could secure financing. I went out and got the Alberta Health Services clearance as well as an updated air quality report. I secured financing prior to making an offer and did an inspection myself so there would be no surprises. I then placed an offer with no financing condition, placed an inspection condition, $5k deposit with an additional $5k on waiving of conditions… oh, and the offer was 35% off of the list price. Offer was accept, house bought, reno-ed and flipped, suited the basement and sold it for 75% over purchase price with 40% net profit… presold before the work was done or the property listed.

I do my best to have the seller approach me as a warm lead without competition rather than chasing down cold leads or MLS listings with loads of competition. This is a more efficient use of my time. I work very hard at being lazy… I am of the work smarter not harder school of hardknox

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Ben Leybovich February 28, 2014 at 3:05 pm

Jason – you are what we call a creative and sophisticated investor; one who creates his opportunities rather than competes for existing. Very inspiring indeed. All real estate used to be played your/my way. With the advent of HUD/REO/MLS/Financial crisis investors have been spoiled and creativity has been sidelined. I believe this will change sooner rather than later and if all one can do is buy foreclosures off of the MLS, one’s business will come to an end. You are on it sir!

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Jason Mifsud February 28, 2014 at 6:29 pm

Hi Ben.. Thanks for the comments. Its nice to know that there is someone of the same mindset out there. Opportunity has to be created.. it is not just sitting around where everyone can see it. The MLS in Canada is where you want to be selling… its a market place and it dictates what people are willing to spend on a home. The keyword in that last sentence is “home”. The MLS is for the emotional buyer and you can never compete against an emotional buyer as they will spend as much as thet believe the home is worth to them. I don’t buy homes, I buy property.. there Is an emotional disconnect that allows me to purchase at my price or walk away. You need to be able to do that in this business… especially if it is how you earn your daily bread.

Brandon – I definitely agree with prospecting out-of-town. The smaller communities nestled on 20mins drive of major municipalities are definitely appealing. A different take on that is look for land… I am currently working with 2 different business partners who have taught me sooooo much. their philosophy is “can’t find a cashflowing or potentially profitable house to buy/sell.. no worries… just build one!” Land owners are very willing to give you the land to develop for free and take payment once the property has been developed and refinanced/sold. Also, as an investor, you get to pay yourself upfront, develop the property and either refinance to hold and rent or sell for profit. Multiple streams of income from one project.

Steve – I’ve found that solving someone’s issues is a very profitable and personally satisfying way to earn an income. I encourage you to browse craigslist and kijiji from mid-month to end of month. The things that are put up for sale wreak of desperation. .trying to pile pennies together to make dollars because rent/bills/mortgage are due. It is very easy to strike a conversation with these people and find out what their real need is. If you can solve a financial issue for them then great! You can do this all day long and build a client base that will come back to you when they have recouped and are looking for a home or, when sadly, thry repeat the same mistakes and get into a pickle again. Some people may frown upon this but nothingppl say can make me feel like ive done something wrong by profiting on someone elses misfortune when all ive done is helped someone out of a terrible situation. Ive just witness a beautiful young family walk away from their home with huge smiles on their faces, excited to start fresh with cash in the bank and zero stress. That lets me sleep at night

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JerryW. February 27, 2014 at 8:28 pm

Brandon, nice blog. I love how you always provide links and I end up reading 5 articles with each blog. I bought a property that was a little of both last fall that I plan to flip this spring. After driving to a neighboring town and looking at about 4 properties, and not looking at the one I wanted to make an offer on. (It went under contract the 3rd day it was on the MLS, the day I drove over to view it.) I passed a house with a for sale sign in the yard about 5 houses down. It looked small and had piles of junk all over so bad you couldn’t get in the driveway. It had all the utilities off, so I had to look at it by flashlight It was only 10 days until the foreclosure auction I got a great deal but we had to race to get it done..

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RoyN March 1, 2014 at 4:29 am

Brandon,

I’m leaning in a similar direction to Ben and Jason here – Yes, I may be a little shocked, but probably not.
Our primary interests are in multiunit / mixed-use properties and, in our local market, when a property hits MLS (actually ICX.ca here), you already know there’s a problem – usually it suffers from serious neglect and/or is way over priced. The real deals – and most which are not really deals – are sold privately. After you get digging in the right ground, you are likely unearthed more than you can reasonable handle {unless you have much more liquid capital hanging around than I.}

Not to completely discard MLS – and other online listings – they are useful when first getting started or looking at a new area. We’ve been doing that with a couple of markets in the U.S.A, but find it not only to be lots of work, but it would be impossible w/o a knowledgeable and trusted pair of boots on the ground to weed the simply “cheap” from the possible.

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Ralph Taylor March 2, 2014 at 2:20 pm

How does an investor make use of 203k?

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Brandon Turner Brandon Turner March 2, 2014 at 4:35 pm

Hey Ralph,

The only way is as an “Owner Occupied Investor”- meaning buying a duplex, triplex, or 4-plex and using the 203k to fix it up and rent out the other units. It’s a lot of paperwork, but it works well!

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Cameron Benz April 5, 2014 at 4:54 am

How long do you have to occupy it?

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jason March 2, 2014 at 6:02 pm

i’m young too 24, and looking to get in real estate and he mentions he did it at 21, how different is it now, is the only way i can get a rental is a conventional mortgage?

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Shaun March 6, 2014 at 2:29 pm

Agree with a lot of your points.
I think the thing that should be emphasized is that it is about VALUE not just getting the cheapest POS on the market.
The most expensive place will probably never be the best value, but I’d guess the cheapest one usually isn’t either. However I’d guess most of the time that best value is in the bottom 5-10% pricewise.

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Dayna March 31, 2014 at 3:27 pm

Definitely consider a fixer, but you can also ask around and/or approach someone who may be interested in selling there home that is not currently on the market.

~Dayna at http://www.flipt.co

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