10 Smart Tips for Finding Cheap Houses (Yes, They Still Exist in This Country)
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.
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.
- 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
Another 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!)
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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!