By now you MUST know that we bought Main Street House. No? Well then you should be following along! Subscribe to get updates when a new blog post is up!
I think we got a pretty good deal on Main Street House. Even though we weren’t too concerned about getting an amazing deal because we plan on holding the house for a while, it’s still fun to find a steal! I constantly watch the local market in my area and I haven’t seen anything like it come up for sale. We lucked out on a few newbie realtor errors and we also happened to be in the right place at the right time.
Now, keep reading to find out how we got MSH for so cheap and tips on how you can find a cheap house to buy at a steal!
The 5# Reasons We Got the House so Cheap
It Was a HUD Home
Main Street House was a HUD home, meaning the government took back the house because a homeowner defaulted on an FHA loan. Not always, but usually HUD homes are a good way to get a house for cheap. (But read this post about how the purchase process for our HUD home went… I’ll give you a hint, it was an awful-terrible-no-good-very-bad experience!)
So why can you usually get a good price on a HUD home? First, the government doesn’t want houses! What are they going to do with a bunch of vacant houses? So they get rid of them. While they do stick with some kind of unknown formula for accepting offers (and a lot of times it isn’t logical because the homes sit vacant and uncared for and depreciate in value) they usually come around and accept an offer of less than market value just to get the houses off the books.
Another reason HUD homes can be a good deal is because a lot of the homes they put up for sale in the first place were either not well cared for, left vacant for too long while the house went through all the red tape or burglarized (sometimes by the previous owner) of all the copper in the house. Needless to say, the homes usually need work and therefore have great sweat equity potential! I love sweat equity.
We Could Put the Offer in as Owner Occupant
The fact that we could put an offer in as an owner occupant always has it’s advantages when putting an offer in on a HUD home. The government believes that homeownership strengthens the economy so they favor offers where the offeree’s will be living in the home. Luckily we’re going to live in Main Street House for a few years and then rent it out so it was a perfect match.
When HUD homes go up for sale the first 30 days is reserved for bids only from people who intend to live in the home. This is so cash rich investors don’t come in and swoop all the properties up like they do with auctions and bank sales.
The Number of Bedrooms On the Listing Was Wrong
A huge “lucky break” we encountered was that someone didn’t know how to count – the number of bedrooms on the listing sheet was wrong! We still decided to look at the house even though it was only a two bedroom because we were thinking we’d be able to add a third bedroom by converting the attic. Well the house wound up being a three bedroom and we’re now adding a fourth bedroom and a second bathroom to the attic, our future master suite! The weird thing is, even on Zillow to this day Main Street House is listed as a 2 bedroom.
We lucked out big time because when people (even Realtors) do a search for homes they often mark off 3+ bedrooms or whatever, right? So because of that this house was excluded from a lot of people’s searches from the getco. So it may not have even been on the radar for a lot of buyers!
It Was Listed as a Home Without Air Conditioning
Another really big oversight on the listing agent’s part was that Main Street House was listed as a home without air conditioning. However it turns out that it does in fact have air conditioning (and according to our heat & A/C guy, it works)
The funny thing about the A/C was we didn’t even realize it had air conditioning the first time we went to the look at the house. After we pretty much already decided to put an offer in we went back to the house to complete our own 3 hour inspection. During the inspection we were outside and noticed a condensing unit one the side of the house. We were baffled because there was no sign of any A/C in the house. Well it turns out this type of A/C runs right off the heater, I had never seen that before! So that mistake right there adds at least $5,000-$10,000 in value.
It Was a Stale Listing
Lastly, it was a stale listing, sorta. I’m not exactly sure what the whole deal was with Main Street House. But apparently it had been listed 6 months earlier and someone snatched it up after being on the market for only a few weeks. From what I understand these people kept asking for an extension for closing until HUD was finally like “fuck you, we’re re-listing the house since you can’t close.” So the house was re-listed but by this point many investors had already moved on thinking the house was sold.
So we were able to swoop in, offer less than what they were asking and negotiate to a price we felt okay purchasing it for.
So how can you apply these reasons we got Main Street House for so cheap to your house hunt?
It’s easy! First, don’t rule out a home just because of the number of bedrooms or because it doesn’t have air conditioning (unless you’re absolutely positive the listing is correct). Second, look for homes that are listed as HUD homes (or bank owned homes can be a good option too!) And lastly, look for homes that have been on the market for a while.
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