Whether we are talking about a pair of jeans, the lowest price for gas or an item in the grocery story it is important to feel like we are getting a bargain. This mindset especially applies when we are house hunting. All buyers want the perfect property, in a prime location at a discount. Even if we love the property there is a natural tendency to search for a bargain. The reality in the world of real estate is that not every bargain is a good deal. Price is always a factor but should never be the sole reason you make an offer. A heavily discounted property is often fools gold and can be much more trouble than it is worth. Here are four reasons to look beyond price when making a real estate purchase.
Hidden Defects. Any time you see a discounted property you need to find out what you are missing. For every ten discounted properties nine will be full of hidden defects that aren’t initially apparent. These defects can be minor and cosmetic, but they can also be large scale and pricey. Issues to the installation, structure, roof, electric or plumbing can add thousands to your budget and instantly change the way you view the property. Most of the items can be discovered with an inspection but if the seller is desperate there may be more than meets the eye.
Location. Everything in real estate revolves around location. We have all heard about the three most important factors when buying a house…location, location, location. This isn’t just a corny cliché to say to your friends, it’s the truth. If the property is in the middle of rural area thirty miles from the middle of town you need to weigh price verses convenience. For some buyers this is exactly what they want, but for others this is not what they bargained for an in short time want to move. Selling a property in a rural area is not as easy as one in a populated area. If the location is not what you desire, you should reconsider the property.
Reduced Upside. A real estate purchase is the biggest financial investment you will ever make. Many buyers fair to acknowledge that they are in fact making an investment. With any investment it is important to realize a return. You don’t have to keep a running tab on how much your property is worth, but you should look for properties that have a fair amount of upside. Properties in poor locations that require a substantial amount of improvements need to be bought at a price low enough to make it worthwhile. If the price is too high or the location is poor, you will never realize the upside you want regardless of the work you put in.
Delayed Closings. In the real estate world if you think there is a catch, there probably is. On a discounted property there is almost always a reason for the discount. The property may be going through foreclosure or possibly a short sale. It may have to go through probate or there could be inspection and appraisal issues to deal with. This doesn’t mean you can’t get a discount, but you can’t expect to close in 30 days. You also need to acknowledge the possibility of pursuing the property for six weeks only to have something with the offer fall through that forces you to start all over. If your goal is to by something in the next few months a deep discounted property may not be for you.
There are plenty of valid reasons why an owner may drop their price, or a property is offered at a discount. With a real estate purchase, you should listen to the advice of your real estate agent and rely on their experience to see if you are getting a discount or a good deal.