Is An Underpriced Home Always A Red Flag?

Posted by Gurpreet Ghatehora on Monday, August 10th, 2015 at 10:04am.

This is tough, because, generally speaking, no – you can’t assume that there is something wrong with a place because it is undervalued; but, in some cases there may be. You really need to investigate the circumstances surrounding the property before you decide.

Reasons For Undervaluing – The good

A home may be sold on the cheaper side of things if a seller is trying to snag a quick sale and the profits aren’t necessarily the most important part of the equation. This can happen if the homeowner has passed away and the family is trying to unload the property quickly. It can also happen if a home is under threat of foreclosure and the owners are trying to right the ship before it’s too late. Quick sales are also important in situations where homeowners must sell based on a timeline, such is the case when moving for work reasons.

Reasons For Undervaluing – The bad

Not all under-valuations occur because there is something wrong with the property itself. In fact, some sellers may price low to snag a quick sale because they don’t like living with a homeowner’s association (HOA), or they’re having ongoing problems with their neighbours. These things may be particularly true in condominiums, and so it may be worth investigating any property management companies associated with a condo you are considering, if its priced seemingly low. In other cases it is because there is something wrong with the property, but this may be disclosed upfront, or easily discerned by a home inspection. Major foundation issues, water damage or issues like outdated plumbing/wiring may all drive down the price of a home that would otherwise be out of reach.

You have to weigh all of these things carefully. If you can’t afford immediate renovations, move on. Updated wiring and plumbing is necessary to secure homeowners insurance. If you can’t afford an overhaul, don’t buy a home that needs major repairs to be livable.

 

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