In the United States, there is an oversupply of low-quality real estate. But you can only buy it if you accept those conditions and live in disadvantaged cities. Once, they were super prosperous, but due to the loss of economic importance, they turned into ghost towns consisting of abandoned houses. Local authorities cannot simply demolish everything, so they come up with profitable (or not so) programs and promotions for their sale. In this article, we’ll figure out why buying a house for 1 dollar is disadvantageous, even if it seems so promising.
What real estate in the USA is not worth investing in?
Urban Homestead program
This government program sells abandoned properties for one dollar on the condition that the new owner lives there for at least three years and fixes all building code violations within 1.5 years. Repair costs can reach up to half a million dollars, which repels potential buyers. This program was launched by city authorities about 40 years ago to stimulate the restoration and development of some city regions. Still, no more than ten people use it every year.
The one-dollar cost is just the starting price. Owners will be required to repair and rehabilitate their homes within a certain period, which may involve significant financial outlays. In addition, the homes that are sold under this program are usually in a derelict and undeveloped state, which can lead to additional costs for their restoration and repair. Many do not cope with the program’s conditions, and some still manage to adapt. They see it as an investment in the long run.
Discounts for couples on empty lots
Several years ago, on February 14, Newark’s municipal vacant lots began being sold for $1,000 to couples in honor of the holiday. The program was launched to stimulate the recovery and development of certain city areas.
However, it should be noted that the price of $1000 is only the starting price. Owners will be required to repair and rehabilitate their homes within a certain period (usually a year and a half), which may involve significant financial outlays. In addition, the homes that are sold under this program are usually in a derelict and undeveloped state, which can lead to additional costs for their restoration and repair. On top, you will have to live in the house for another five years. A real test for two lovers, isn’t it?
Dollar Home Program
The ‘Dollar Home Program’ in Baltimore is a house-for-one-dollar sale program launched by the city to encourage recovery and development in some regions. As part of the program, the City of Baltimore sells abandoned homes in certain areas for one dollar, provided the buyer agrees to repair and restore the house within a specified period (usually 12-18 months).
Home buyers must be U.S. citizens or permanent residents, pay property taxes, and assume all costs associated with restoring and repairing the home. After the house is completely restored, the buyer must use it as their residence for a minimum of 3 years. The process of buying a home under the program includes pre-selection and application. After the application is approved, the buyer will be required to enter into a contract with the city authorities, which will spell out the terms of the program and the timing of the restoration of the house.
However, it is essential to understand that purchasing a home through the Dollar Home Program can involve significant financial outlays for repairs and refurbishment. And also requires a careful assessment of the area and future resale potential. Therefore, before making a final decision, it is recommended to study all the program conditions carefully and evaluate the opportunities and risks.
State housing program
Gary, Indiana, has a one-dollar abandoned home sale program. It was launched by city authorities to attract new residents and stimulate the restoration of some city areas. However, it should be noted that the price of one dollar is only the starting price. Owners will be required to repair and rehabilitate their homes within a certain period, which may involve significant financial outlays.
Also, homes sold under this program usually need more work, which leads to more costs. It is believed that it is cheaper to repair a ‘house for a dollar’ in Gary than a regular one. City officials say it will cost up to $30K, compared to an average home in Gary that costs $50K.
A participant in the program, under the terms of the deal, must:
- Earn at least $ 35,250 a year
- Bring the house to habitable standards within a year
- Live there for at least five years
Cons of cheap real estate in the USA
US dollar house sale programs can be attractive to those looking for affordable real estate.
However, there are some downsides to consider:
A house for 1 dollar often needs major repairs and upgrades. Restoring a home can be a significant investment of time and money.
Dollar houses tend to be in areas with high crime rates, low employment rates, and dilapidated infrastructure. Therefore, the buyer must carefully study the area and understand what they are going for.
Dollar house programs often provide restrictions on the use of the home. For example, the buyer may be required to use the home as their residence for a certain period. Which may be inconvenient for those planning to use the property for rental or resale.
Taxes and other expenses
In addition to the purchase price, the buyer must pay property taxes, insurance, and other costs associated with owning the property.
Such programs usually attract many buyers, so high competition for homes can make the buying process difficult.
House for 1 dollar. Conclusion
The desire to save money is natural. Especially when it comes to such a large purchase as real estate, it is not always necessary to go to extremes and try to buy a house for the minimum cost. It is better to contact a mortgage broker and find the best loan for your financial situation. Try it — sign up for a consultation at LBC Mortgage.