The cheap house is very much the unicorn of the property world .... especially after the record house price rises of the last few months. A cheap house is something everybody wants but which is extremely hard to find. In fact, some people would say that cheap houses don’t actually exist.
In the real world cheap houses aren’t like unicorns, however. They DO actually exist .... if you know where to look that is. Here are a few ways by which you can find and buy a cheap house.
Buy a house at auction
It’s often thought that property auctions are a source of houses at below market value.
This research suggests that houses bought at auction are on average up to 40% cheaper than the average house price.
Not all auction properties are necessarily cheap, however. The best way to buy a cheap house at auction is to find one where the bidding isn’t too competitive and so the selling price doesn’t exceed the reserve price by much. Doing a deal on a house that fails to sell at auction because it doesn’t reach the reserve can be another way to buy cheaply.
When buying at auction you just need to bear in mind that the sale is final on the fall of the hammer. Also the sale goes through automatically (usually) 28 days after the auction. You need to have your finance sorted out in advance.
Buy a problem house
Houses which have some kind of problem usually offer an opportunity to buy cheaply. That’s because problems put many buyers off so there may be fewer (or even no) other offers. Plus sellers are often willing to sell at a discount to get rid of the problem.
Problem houses can include houses with structural problems, damp problems, dry/wet rot problems, subsidence problems and Japanese Knotweed problems. Properties with cladding issues also fall into this category.
In many cases, however, it can cost much less to cure the problem than the discount on the price. For example, it’s suggested that houses affected by subsidence typically sell at 20% less than their full value. But the chances are that rectifying the subsidence will cost much less than the 20% you’ve saved. The secret is to know what you’re dealing with and the costs of rectifying it when making an offer.
Buy a house of non standard construction
Houses built using non standard construction methods are usually much cheaper than houses built of standard construction. That’s because they usually don’t qualify for a standard mortgage and so there are fewer buyers for them.
Non standard construction methods typically include so-called system built prefabricated houses with steel frames and concrete panels.
Houses built of non standard construction can be mortgaged using a specialist lender in some cases however, although it may cost a little more. It’s also possible to rebuild houses of non standard construction with standard construction and release their full value in some cases.
Buy a house off plan
It’s usual for new build houses to be marketed and sold before they’re built or finished. In some cases, developers will sell houses off plan at below their market value. This is more likely to be the case before a new development is even started, when the developer wants to prove demand exists for the new houses and to underwrite their investment.
This report suggests that buying off plan could offer a discount of 5%. While that doesn’t sound much it is still £25,000 off a £500,000 house.
The secret is to understand local values and so know when there is a good deal to be had. New build houses are generally sold at a premium so, once a new development gets underway, you could even pay more not less.
Self build a house
Building your own house – or at least project managing the whole thing if you don’t want to be hands on – can be a way to a cheap house. By and large, the cost of materials and labour are far less than the price a developer would sell a similar, ready built house for. There can also be savings to be made on Stamp Duty.
According to this report a self build house will cost between £133,000 and £222,000. That starter figure is only around half the average UK house price. It adds that if you do the work yourself you can lower costs by up to 40%.
To build a house you will also need a plot to build it on of course and these aren’t always easy to find. How much you can save very much depends on the cost of land in the area you want to build.
Buy a house off market
Off market property is a property that isn’t being advertised ‘on the market’, eg. using an estate agent. Off market property can be (but isn’t always) cheaper because you don’t end up in a competitive bidding situation with other buyers. You might also attract buyers who want or need to sell quickly, and can also save on estate agency fees.
Ways of buying a house off market include to advertise ‘house wanted’, ‘property bought for cash’ or similar in the area in which you’re looking to buy.
What’s clear about all these methods of buying a cheap house, however, is that they’re not that simple. Buying a cheap house doesn’t come without some catches. But for the buyer or investor who’s prepared to put the effort in there are ways you can buy at under market value. With the average house in the UK now costing around £265,00 – or in London £510,000 – there are potentially some good savings to be made.