Buying an Affordable House: Top Tips

Finding the right door into the housing market

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Are you experiencing sticker shock? Even when the market is down, the number of zeros on a house's price tag makes buying a challenge for most people. Still, with some effort and patience, there are ways to find a good house at a comparatively reasonable price. Here are some proven strategies, from the likely to the "don't try this if it's your first time buying a house:"

Buy a stigmatized or overlooked property. In any market, a few houses get passed over, sometimes because they were simply overpriced to begin with and then got forgotten by buyers, other times because there's something wrong with them -- maybe they smell like cigarette smoke, or were the site of a violent crime. If you can live with or correct the problem and can negotiate a lower price, you may have yourself a deal.

Buy a fixer-upper, cheap. Houses that need work always sell for less, although you'll need to estimate the repair costs carefully to make sure it's a true bargain. Fixer-uppers that need only cosmetic work tend  to get snapped up quickly. Get a contractor to check the place out if there's any chance you'll do a major remodel or it will need foundation or structural work.

Buy a small house with remodeling potential, and add on later. Sometimes a house that suits your needs now can be remodeled later if your situation changes. Before buying, get a contractor's estimate and check local zoning laws to be sure your dreams are feasible.

Buy a shared equity house, pooling resources with someone other than a spouse or partner. This may mean either having an outside person invest in your house and gain a share of the profits when you sell, or simply sharing a purchase with someone who will live with you. It's a trend! For more information, see Cobuying a Home.

Rent out a room or two in the house, or buy a duplex, triplex, or house with a rentable in-law unit. Depending on your local rental market, the added income from rent may offset a good portion of your mortgage. And talk to your accountant: Renting out property is a sort of business, so you'll need to add a Schedule E to your taxes. On the plus side, you can deduct a prorated portion of your home expenses and depreciation from the rental income.

Buy a house at an estate or probate sale. A house that belonged to someone who passed away can be a bargain, usually because the deceased person's family members are eager to get the cash out of the property. However, you may have to attend some court proceedings.

Buy a house subject to foreclosure (when a homeowner defaults on the mortgage). Houses subject to foreclosure or that have been foreclosed on are often cheaper because the homeowner needs to sell quickly, or the bank has stepped in to sell the property, possibly at auction. However, it's a risky way to buy a house, because you can't always do physical inspections, and the current owner may have a right to pay off the debts and reclaim the house within a certain time. For more information, read Nolo's article, Buying a Foreclosed Home: Your Way Into the Real Estate Market?

Buy a house at an auction. House auctions, both live and online, are gaining in popularity. Just make sure you're given an opportunity to inspect what you're buying before you get caught up in auction fever.

For the details on all of these strategies, see Nolo's Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder, and Marcia Stewart.

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