Estimating indoor repairs for a foreclosure

[Rafael Floresta]

I got the gist of foreclosure auction here in my area, but I am still unsure of how I should estimate indoor repairs for foreclosures. I can estimate things like siding, roof, grading by driving by, but most of the time I can't peak inside the houses.

How do you do it?

[Patrick L.]

In that price range I'd probably knock another ~10% off what I would pay in an REO situation assuming I felt I had a pretty good feel of what the house needed. In your situation if you think the house needs $25k in repairs and you'd need to buy it for $100k to make your desired profit then I'd be at $90k max at the auction. If you couldn't see through the windows and really wanted to take a gamble I'd reduce that even further.

There's certain things you can't catch on a quick inspection from the outside like major plumbing or electrical issues. Buying at the auction isn't going to give you title insurance so if there are any title issues that come up or liens that survived that you didn't account for then those would also be on you.

Those numbers may not win you the bid depending on your market but it should keep you from losing money on the deal. Lately in my market people have been paying full retail for a lot of houses in the auctions and I've actually bought REOs for 20% less than what 3rd party bidders have bid at the foreclosure auctions lately (but the bank out bid them either because they didn't have a BPO or there was title insurance or some other financial reason that they had to take the property back). Don't let someone else's overbid draw you into paying more than you want.