Scraping the Bottom of the Market
Every single Buyer has the same worst fear: Buying a place and then realizing that they could have gotten a better deal somewhere else. Knowing what to expect from a given price point and type(s) of home is a big part of the services Buyers are coming to Realtors for, particularly in the house hunting stage of the process.
I keep a long mental list of price points where once would expect to find certain types and standards of homes. It is something that I am constantly updating to keep up trends both current and likely to come. One price point that I bring up a lot when talking to Buyers, especially first time Buyers, is the lowest price point where a typical person with typical standards is going to no longer be likely to find something that suits them.
I don’t go into detail about why I consider the price point to be this certain price and not another. I sum it up as “most places under $xxx,xxx are fixer uppers” and if I can get their ears open enough I will also mention that one or some combination of factors like size, location, noise, small or slanted lots tend to be too extreme for most people. But here I will explore it a bit in hopes of clarifying things somewhat. I suppose this is an echo of a post I wrote a few years back called “What Creates Value in a Home?”
Most Buyers are not handy. To be clear, I am a huge advocate of buying a home that needs some work and making it suit your own tastes. (More on that here and here.) But most buyers don’t have the vision, the time, the patience, the know how. They also tend to feel they don’t have the budget to go beyond a little painting, some light fixtures and maybe some flooring. Everyone is different but from showing many people so very many houses I have gotten a pretty good radar for what people as a group and as individuals are willing to put up with in a home. I usually have a pretty good idea from talking to them but I have a much better idea once I have shown them a few places and how they talk about the property while we are there.
Below a certain point, places can of course become money pits and no matter how handy or ambitious you are it’s simply not a good idea. This is most epitomized by structural issues (which I have seen in all sorts of price ranges by the way). Not to worry though, when I spot those I’ll steer you clear real fast and the Property Inspector is there to look at it more deeply regardless. I don’t want to see you get hurt financially. Believe it or not, not all of us Realtors are evil.
Pro tip: If you have worked as a builder professionally for a number of years just tell me and I won’t be afraid to jump into the deep end with you. I won’t be worried about, getting you in over your head, wasting your time or mine or generally freaking you out by showing you ugly places.
Size of house, lot and number of beds and baths:
I think everyone can appreciate how having higher numbers in these areas adds to the property’s enjoyability and therefore price. The lower you go price wise, the more you will have to compromise in these areas. You might have a tiny bedroom, for example, and it might even get to the point of “Are you sure this qualifies as a bedroom? Should this place really be listed as having just one bedroom instead of two?”
Also pretty self explanatory. That house that has all the things you could possibly want with regards to the criteria above and is available at an unbelievable price is as a rule priced that way for a reason. One of the things that isn’t immediately apparent to people who don’t know the location is it’s proximity to something noisy like a busy road, or perhaps being in the backyard makes you feel like your life is centre stage for all your neighbours to see.
Arduous/risky transaction processes:
The bottom of the market has a lot of foreclosures which is something I’ve written about in detail here and I recommend that everyone who has ever considered a foreclosure read it. They have a tendency to look like great deals on the MLS but once people know the bigger picture, most will realize it’s not the right route for them. Estate sales can also drive people away as well if the probate is not yet done, the flipside of those is that they can often turn into great deals if you can deal with the timeline, or in many cases, lack of a known timeline.
There are many reasons why the cheapest properties on the market are priced that way. If you are okay with making such compromises, and perhaps have no choice due to budget then looking below the usual threshold will make sense for you.