My wife and I had to go to our local grocery store on Saturday to pick up some basic items – bread, milk, tomatoes, etc. The store is closed on Sundays so Saturday afternoon they always reduce the price on selected perishable foods. It’s very tempting to pick up some of these cheap items until one realizes that there’s a good reason they are so heavily discounted.

That discounted loaf of bread has already reached its “sell by” date. Before we can use the whole loaf it will most likely become moldy and we’ll have to toss half of it. That gallon of milk is also about to expire; by the time we get through half of it, the milk will probably sour. And that shrink-wrapped package of six tomatoes? They’re already getting soft – how fresh will they be in 2 or 3 days? Ugh!

There are times when cheap really is “cheap” (as in cheesy). The property market can be very much like the grocery market – there’s always a reason that a bargain is priced well below the normal market value. Discovering why a cheap property is heavily discounted is critical. Without additional information it is impossible to determine if it is really in your best interest to pursue. Seeking the advice of a well qualified buyer’s agent is a very wise move to make before jumping on a cheap home.

The reasons that most cheap properties are discounted can usually be classified in a few categories:

1. The Handyman’s Special or “Fixer-Upper”

Many homes that have fallen into disrepair can be purchased at prices well below the local market price of well maintained properties. If the current property owner is unwilling or unable to make necessary repairs their only option would be to offer it for sale at a bargain price.

If the prospect of investing “sweat equity” (i.e. manual labor) is particularly unappealing, you may want to avoid this type of cheap home. Likewise, if paying someone else to perform the necessary repairs is out of the question – walk away. However, If the prospect of doing the work yourself doesn’t make you uneasy, these fixer uppers can be an excellent choice.

2. A Less Than Desirable Neighborhood

It’s become a trite saying: the three most important aspects of real estate are location, location, location. Well, although trite it’s also true. Property values can vary significantly, depending upon the neighborhood. This can make homeowners in an upscale location very happy indeed. However, it can be financially devastating for a homeowner in a neighborhood that has been deteriorating. Contrary to many people’s mistaken belief, property values do not always increase over time.

In urban locations, some neighborhoods that have declined are gradually being revitalized through the renovation of individual homes. As these improvements spread, the potential value of homes in the immediate area can start to climb. Your buyer’s agent should be able to give you an idea about the direction that prices are moving so that you can make a well-informed decision about the potential value of cheap properties that fit this category.

3. “Priced to Sell Quickly”

Circumstances may arise when a homeowner is under pressure for a speedy sale. The seller may need to liquidate assets for immediate cash in hand. He may be facing a deadline relocate for employment purposes, or he may need to stop paying double mortgage payments if he has already committed to purchase another home.

This category of cheap homes provides the best value. However, often times these bargains are not available very long since a quick sale is the goal that the seller had in mind in the first place. The best tactic for finding these opportunities as they arise is to have your buyer’s agent notify you when new property listings hit the market. Most agents have access to automation tools that can notify you via email the same day that a property that meets your requirements is listed. Without that edge, it’s very likely that you’ll miss out on these prime opportunities.

4. The Unknown Reason

This is the “mystery” category for homes that don’t seem to fit in any of the three earlier categories. They entail the most risk and should be approached with extreme caution. Don’t forget, there is always at least one reason for a house being under priced. If a reason is not apparent you may have to do some in depth investigating before even considering a purchase. Sellers are obligated by law to disclose any information that affects the home’s value. Your buyer’s agent will come in very handy by making sure you ask the right questions.

Obtaining the advice of a buyer’s agent and investigating the reasons that “bargain” properties are priced so low are the keys to discovering the true value of a “cheap” home. These deals can look very attractive at first but, only after further evaluation, will you have an idea if a property may turn out to be a “money pit” or a fabulous opportunity. You won’t regret performing your due diligence.

Jim Navary has been a researcher and freelance writer for more than thirty years covering a wide range of topics. He is also a licensed real estate agent in the Commonwealth of Virginia specializing in Fort Lee VA real estate and Colonial Heights VA homes for sale.

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