The latest home sale statistics tell a tale of woe for those trying to break into the housing market for the first time. Prices continue to climb in popular areas, particularly for starter homes, yet available properties remain in very short supply.
“Demand is easily outstripping supply in most of the country, and it’s stymieing many prospective buyers from finding a home to purchase,” says Lawrence Yun, the chief economist for the National Association of Realtors (realtor.org).
Properties at the lower end of the price range are so hard to find, Yun says, “that when one is listed for sale, interest is immediate and multiple offers are nudging the eventual sales prices higher.”
Given the current market dynamics, what’s a buyer to do?
Sid Davis, a longtime real estate broker and author of “A Survival Guide for Buying a Home,” recommends that cost-conscious buyers consider what he calls “stigmatized properties.”
You might be repulsed at the idea of purchasing a place where a murder or suicide happened -- though Davis says he’s worked with some clients who were perfectly comfortable buying such a property. But what about a vacant house that’s developed a bad reputation simply because it’s been sitting unsold for a lengthy period?
“You probably won’t have to scramble with rivals the way you would for a well-staged home that’s not vacant,” Davis says.
Still, he cautions that buyers considering ownership of a long-vacant house should seriously investigate why it’s been sitting unsold.
“Your risk, though small, is that there could be something gravely wrong with that house, like a badly leaking roof or a big radon problem,” Davis says.
Yet in the overwhelming majority of cases, he says the most common reason a property sits unsold for a lengthy period is that it was significantly overpriced when it first hit the market and its owners have been slow to face reality with price cuts.
A property that’s become stigmatized due to overpricing could present purchasers with an opportunity to negotiate a decent deal, even in an area where homes are in short supply. This is especially likely if the place has gone vacant because the owners already had to move.
“Often, a vacant house is a money drain for the sellers. After they’ve moved, most people become tremendously motivated,” Davis says.
Here are a few pointers for buyers pondering the purchase of a vacant home:
-- Search for information on the home’s former occupants.
It’s tough to gain details on a house that’s been vacant for months if its owners have already moved away.
To learn the unvarnished truth about a vacant property, your best sources are often neighbors, says Dorcas Helfant, the broker-owner of several realty firms.
“Neighbors often have an irresistible urge to tell everything they know about a vacant house on their block --even if it’s against their personal interest to do so,” says Helfant, a former National Association of Realtors’ president.
-- Consider doing a “pre-inspection” of a vacant place.
Perhaps the property you like has gone unsold for so long that you’re nervous about hidden defects. In such cases, Merrill Ottwein, a veteran broker who specializes in finding property for those in the military, suggests you have a pre-inspection.
He tells the true story of one of his clients, an Air Force colonel who wanted to learn more about a handsome rambler that had gone vacant nine months before he spotted it. The house was listed at $50,000 below other comparable homes in the same neighborhood and he wanted to know why.
At Ottwein’s recommendation, the colonel spent $200 for a brief home inspection. This revealed that the house had a serious crack in its foundation. As a result, he walked away from the property and bought a two-story place in the same neighborhood that proved a better choice, even though it was marked $30,000 higher.
Why is it sometimes wise to hire a home inspector to check a property before (rather than after) you’ve submitted your bid?
“If you decide to go through with the purchase, a pre-inspection will let you bid based on findings from the inspection. Otherwise, you can back out without complications,” Ottwein says.
-- Review local sales data before making a final offer on a vacant home.
“Don’t put in a bid until you and your agent take a good look at the recent sales history of the area. It’s always smart to be vigilant to avoid overpaying,” Helfant says.
To get a handle on values, you and your agent should examine at least three similar properties that have sold in the immediate area in the past three to six months, adjusting for differences, such as a larger kitchen or a second fireplace.
But Helfant cautions against seeking out-of-proportion discounts to make up for minor shortcomings in a vacant house.
“So long as sellers are in the driver's seat, you don’t want to get picky about little issues like a spot on the carpet or a bathroom painted a color you find objectionable. These days, buyers who let their emotions get the best of them can easily become losers,” she says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)