Why is that house so cheap?

House with words - why is that house so cheap“Why is that house so cheap?” asks the puzzled home buyer. Is there something wrong with it? Is it a trick to drive up the number of offers or the price? Is it a bad area? Is it too good to be true? Bargain hunting home buyers may delight in purchasing a home at a low price, feeling that they got a great deal.

Often, though, the great deal is a reflection of a defect of some sort – and the defect may or may not be easily fixable. When they go to sell that property, they may find that most buyers aren’t interested and that when it’s sold it’s a great deal for the next owner.

Today we’ll look at the 3 categories of reasons why certain properties get bargain basement prices and make consumers ask “why is that house so cheap?”

  1. strategic pricing by sellers and their agents only, nothing wrong (except a deceptive price)
  2. property problems (that can be mitigated)
  3. location problems (that cannot be mitigated)

Why is that house so cheap – when the list price is a marketing tactic only

We’ve written about the strategy of a price mirage here before. If you didn’t see that article, it comes down to this: a home is priced lower than it’s worth, lower than the seller will accept, in order to get a dozen or more offers that will drive the price sky high. It’s risky to underprice a home in a declining market especially. If the buyers don’t jump on it, it is not that easy to convince later home buyers that it’s worth more than that initial list price.  This can work but it is a gamble, and for that reason we don’t recommend it.

By the way, a tool which can sometimes be useful for pricing is Realtor.com. They offer 3 “auto comp” valuations on the listing page of homes for sale. If a property is close to a boundary (zip code, school district, area), it may be off because it seems to just pull sales from 1 mile in all directions. It can also be off if the home is in very poor or extremely excellent condition. Here’s more information on their system: Realtor.com estimates

Defects with the home can make the house so cheap when it sells that you may wonder what happened

A number of problems within the house or yard can cause the home to appeal to fewer buyers, and that will make the home sell for less  when it does sell. Since these are in the home or yard, though, they are likely fixable in most cases. Whenever you ask “why is that house so cheap?” you also want to ask “if I buy it, is the problem fixable?”
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