The Labor Day weekend is generally a popular time to go house hunting, and in this buyer’s market, this weekend will be no different. In fact, it could to be a good time to get big bargains, but you should do your homework to avoid common – and costly – mistakes.
Gerri Willis, host of “The Willis Report” on the Fox Business Network, appeared on “Good Morning America” today to answer the following five common questions about bargain house hunting:
1. How Can I Get a Good Deal?
Consider foreclosed homes and short sales, Willis said. Foreclosed homes cost 39 percent less than homes that are not in foreclosure, and homes that are being offered on short sale cost 20 percent less, she added.
2. Even if I pay a low price, how can I tell if I’m buying in an area where my property values will go up?
People will be drawn to place where prices have gone down, for example, Las Vegas and Detroit , Willis said. But you don’t have to buy in those places. Her advice? Investigate the local economy. That means you should check unemployment rates to see whether they’ve gone up or down. And make sure local businesses comprise a diverse mix of industries.
3. People often underestimate how much money they’re going to have to put in to a fixer-upper. How do I avoid that mistake?
This is the biggest mistake that people make when they buy a fixer-upper, Willis said. Those who are purchasing a property as an investment must see it firsthand, and they should walk through the property with a contractor who can take a look at the work that needs to be done and provide you with an accurate estimate of just how much the renovations will cost, she added.
4. Can I roll the cost of renovations into my overall loans?
When banks are selling foreclosed homes cheaply, buyers who need financing are often caught in a bind because lenders often will not lend money until repairs are completed, she said. But the Federal Housing Administration runs the 203K rehab loan program - which only requires a 3.5 percent downpayment, she added. This program allows buyers to add renovations costs into the mortgage.
5. I don’t expect to see a bidding war in this market, but could it happen?
Smart people are going to put a really good price on their home if they want it to sell quickly, and that will attract many buyers. If it’s a nice home, people will start to outbid each other, driving up the price. Do not fall for this, Willis said. There are too many well-priced homes on the market for you to ever get into a bidding war, she said, adding that you shouldn’t tell yourself one particular house is your “dream house,” because there will always be others.