For the past several months, I’ve been fielding about an inquiry every two days about homes appearing on the Phoenix real estate market for under $50,000. These homes, though, aren’t always the deal they appear to be. Here are a few of the reasons why:
1) Financing. As you drop below $50,000 you’re approaching the lowest level where a mortgage can be obtained. And getting that mortgage depends on the condition of the home. No stove? No FHA loan. No air conditioner and other major repairs needed? No conventional funding available either.
2) Condition. When the median price for a home in Phoenix is well over $100,000 and you are looking at homes at one-third to one-half that price, might there be a reason? Often the key is condition – homes under $50,000 almost always are going to need some work. It’s just a matter of how much and how much it’s going to cost. In some cases, by the time you’re done with the repairs, you paid far more than you ever expected to pay.
3) Location. Sub-$50,000 homes are available only in a handful of locations. Steak tastes on a meat loaf budget isn’t going to work.
4) Competition. Few homes under $50,000 receive less than one offer. Most are getting multiple offers in the door the first day or two the home’s on the market, and many of these offers come through sight unseen. Buyers are firing the offers first, getting a home secured, and then using the inspection period to find out what they bought.
Truthfully, this phenomenon stretches well about $50,000. I have a couple closing on a house in Queen Creek tomorrow that we secured on our 14th or 15th contract.
The bottom line with any real estate, but particularly with these homes, is you get what you pay for. If you’re searching for the lowest sector of Phoenix real estate, you’ve got to expect the homes aren’t going to be pristine and aren’t going to perfect (and they’re not going to be in Scottsdale.) If they were in better condition, they wouldn’t have bargain prices attached.
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