What is the average discount on foreclosure after 1 year vacancy

[Account Closed]

Anyone know what the usual discount is on a foreclosure that's been vacant for a year?  I'm looking at one in Bakersfield right now, weeds 6ft tall, but the house (on the outside) is in decent shape.  If this inside needs paint/floors/cleanup it could be a good deal.  Zillow estimates the place is worth $117k, but that's subjective.  I'm thinking of calling up the holding company and, after inspection, offering $50-60k.  Thoughts anyone?  I'd appreciate your perspectives.

[Adam Johnson]

The asking price has nothing to do with the value nor does it have anything to do with what you should offer, in my opinion.  Maybe it is worth $ 200,000 as it sits now, maybe it is worth $ 2,000 as it sits now.  I place very little trust in Zillow estimates, though others may disagree.

I'm going to assume this is a single family home that you plan to rehab/sell. First you need to determine the after repair value based on recent, real, and comparable sales near the property. That is the most you will likely sell it for and it is also a number you never want to see as your cost basis! I always like to discount the ARV a few percent because I want to be the first to sell, not the last. That is my top line number.

Now determine an accurate repair cost by looking at the property and putting actual costs to it.  Finally, determine your holding costs and resale costs (property taxes, interest cost, marketing cost, realtor fees, etc.).

Now that you have those numbers, subtract them from your discounted ARV, then subtract how much you want to make on the project. That determines the offer price. It might be near your number in your original post, or it may be miles away. That is a real number, though.

Your method places too much trust in the original asking price.  Holding time doesn't always have much to do with what it will sell for.  I have had offers accepted for less than half the asking price a week after it hits the market, and I have had offers rejected for almost full price after it has been on the market for a long time.

Always use YOUR numbers to analyze the deal, not the seller's numbers.

Best of luck.