Saving money is always one of the main things on people’s minds when buying a home. Luckily, there are a number of different ways to go about getting great deals in real estate. You can even do this without too much effort of your part.
So, we’ve put together this list of the top five ways to save money when buying a house.
Buying a Fixer-Upper
Buying a fixer-upper is one of the best ways to guarantee that a house for sale will be cheap. However, you must include the amount of repairs needed in your original budget. If you save $50,000 buying a DIY home, but then invest $70,000 into fixing it up, then you’ve actually lost out on money.
When budgeting for a fixer upper, the more conservative you are, the better. Pad your budget for surprises. This is because if there is anything certain about home renovation, it’s that something will go wrong.
One of the best things you can do when deciding if a fixer upper is worth it is to consider your intentions for the home. Do you intend to live there? If so, what are your standards for living there? This means that as long as the house is currently up to code, would you be comfortable living in a place that’s not exactly your dream home as you complete the more cosmetic projects over time.
If you are a property investor and would prefer to “flip the house,” what is your exact timeline? How much profit do you wish to make? How big of a loss can you afford to take?
Using Short Sales
Short sales are one of the best ways to get a house for cheap. This is because not many homebuyers have the patience for them. If you are willing or able to wait around until the bank that holds the lien against the property in question releases it, then you could score a great deal!
Homes purchased in short sales also tend to be a bit nicer than those purchased in foreclosures because the owners often keep living there until closing day.
Sometimes purchasing a foreclosed home is similar to purchasing a “fixer upper” because the people that leave these homes might trash them before they move on out of frustration.
However, many banks that own multiple foreclosed homes would love to sell them off. This is because they would like to attempt to recoup the money they lost on the ditched mortgage. In this case, it’s likely you will be able to negotiate a great deal with the bank because they will be eager to “dump the inventory” and move forward financially.
Just be wary that what you save in initial fees, you might have to pay in repair costs.
Using Flat-Fee Agents
One of the biggest obstacles standing in the way of getting a good deal on a home is the agents' commission. Currently, the national average for commission from an agent is 6% of the home’s total purchase price. The two agents involved in the transaction (the buyer’s agent and the seller’s agent) then typically split the commission 50/50.
So, let’s say you purchase a home for $250,000. The 6% commission is $15,000, or $7,500 for each agent. While the seller typically pays the commissions, if the seller were to use a flat fee agent instead (like Clever!) they would only pay $3,000 for full service.
That’s $12,000 in instant savings. As a buyer, if you bring a flat fee Realtor to the table, this can give you the upper hand in negotiations. This is because your agent is taking a smaller cut of the final sales price, so you might be able to pull this number down significantly pre-closing.
Saving Through Negotiations
Negotiations are another prime way to purchase a home for cheap. Good negotiation skills are definitely an art. However, they aren’t a skill that goes unrewarded. Often, it’s not what you ask for, it’s how you ask it. You need to create a situation in which your option is the most attractive option.
For example, partner with your Realtor to have a look at the local Multiple Listing Service (MLS).
If the home’s listing has been active for a considerable period of time (at least 30 days) you have a good place to begin asking for a lower price, as it doesn’t seem like the listing is too competitive in the first place. This is especially true for listings active longer than 60 or 90 days.
If a home for sale is in a “bad location” you can also easily negotiate to bring down the price. A bad location doesn’t even need to be in a dangerous spot. It could just be near a major intersection, subject to noise pollution (like from train tracks or a sports stadium), or even near a river or lake that could pose a flooding risk.