It certainly would be nice if you could buy a home for free. I did a internet search and there are quite a few websites that seem to indicate that you can do just that. So if you could, should you? Let's see.
Houses are Valued By the Marketplace
The housing market often seems like the ocean. Sometimes the waves move fast, sometimes the waves move slow. The tide moves in, and the tide moves out. There are currents on the top, and sometimes undercurrents. And sometimes it's very still.
But it's always moving. People are always looking for great deals.
And because people are always looking, truly great deals are hard to find. Usually by the time they get to a truly great deal, someone has already grabbed the property. So if a house is free, or close to free, is it a great deal? Probably not. Here's why:
- Nobody else wants it. Never a good sign if no one else wants it. Probably need to dig deeper to find out why.
- There could be hidden costs greater than the value of the home. If a home is worth 100K, but it has 150K of tax liens on the property that must be satisfied, well, that's not a good deal even if the house is free.
- It needs more work than than it could be worth. This can often be true of antiques. Antique homes can be expensive to renovate and rehab - more expensive than the more standardized construction that appeared in the 1950's. If a home requires 200K of work, but will only be worth 180K when the work is done, that's a problem.
- You don't own the land. I've seen this before - the house was for sale, but the land it was on was not. You were buying all the wood, stone, steel and glass, but someone else owned the land - and could throw you off. Whose going to buy a home where they might have to move the house if the landlord gets grumpy? Not many people.
- There's no rental market. Typically investors will jump in when they can buy the homes and then rent them out for profit. But if the rents are so low in the area that the upkeep and taxes on a home outweigh the rental income, that won't happen. If rents are so are that low and even tenants won't live there, be cautious.
- Impending disaster. On the east coast, there are quite a few homes that are falling into the ocean, or could fall into the ocean. You can't insure these homes, and when that storm hits, it's gone, and so your investment. These homes generally go for very low prices. I'm sure it's a similar situation in the spillways in Louisiana. It would be hard to get much money for a home in an area that could be flooded at any time.
So yes, there are situation where a house has no value or next to no value. But it's often an indicator that the home itself, or the market you're looking in, is very risky, or just not a place where it makes sense to own housing. If a home is free, it might not be worth what you paid for it.
Do Good Things Today!
Matt Heisler
*All information is posted in good faith and is assumed to be reliable, but may rely on third party information sources.
