Beware Of Free Or Cheap Homes
The average home costs $210,200, so it's understandable people would jump at the chance to get a house for free or really cheap. While you can find opportunities like these if you dig hard enough, it's important to fully understand what you'll be getting into when you take advantage of an offer. Here are a couple of things you should watch out for.
Hidden Liens
Homeowners give away property for free for a variety of reasons, and one of those is because the home has accumulated so many liens that it simply would not be profitable to try to sell it. Buyers will not purchase homes if the titles are encumbered with liens. However, creditors will not release liens until they're paid, requiring homeowners to fork over cash to the lienholders before they can sell their properties.
Thus, the homeowner giving the house away for free may actually just be trying to get rid of property they can't extract any money from in the first place. In return, they get to foist their debts onto an unsuspecting buyer. And, depending on who they give the property to, they may be able to at least get a tax write-off.
It's okay to purchase a home in exchange for paying off liens, but you should know exactly how much you're going to be on the hook for. If the homeowner is not forthcoming about debts attached to the property, either take a moment at the country recorder's office and look up the title (which will list any liens that have been filed) or have a title company do the research for you.
Exorbitant Repair Costs
If someone is giving a home away for free or cheap, chances are pretty good the property isn't in very good shape. In fact, most of the time owners are trying to get rid of abandoned property that no one has lived in for years. For instance, city officials in Detroit are auctioning off homes for $500, but one man who bought property found the house filled with excrement and syringes, among other things.
So, while you can get a house for less than the cost of one car payment, you'll be paying for the home on the backend with hundreds of thousands of dollars in repair and renovation costs. This may be a great deal if you have the money and/or expertise to fix the home up. But you should know that you typically won't qualify for traditional mortgage financing if the home isn't at least livable, though you may be able to get money from HUD to rehabilitate the property.
There are a few other pitfalls you'll need to watch out for when pursuing free or cheap properties for sale. For advice on acquiring property this way or help finding a regular home in an area you prefer, contact a real estate agent.