what to bid at sheriff's sale? (or REO)

[William H.]

Hello all. Longtime lurker/listener, first time poster (woohoo me).

Anyway, I'm looking to purchase a personal residence in NJ either at the sheriff's sale, or potentially after it is taken back by the lender and sold as an "as-is" REO, but this question could very well apply to buying an investment property. I know all of the pitfalls and risks of the auction itself so my question isn't about that. My question is:

How much would you bid? I've seen a 2/3 of pre-repair value rule of thumb floating around, but not much else.

Simple question, right? Well here's where it gets tricky. The market value in perfect condition is about $375k. When I tried to buy it as a short sale (which didn't work, long story), I had a contractor walk through and give me a detailed estimate, which was $150k in repairs to get it to market value. So based on that, pre-repair value would be $225k, and using the 2/3 rule would be a bid price of $150k.

Follow up question would be: Would this same bid of $150k apply to making an offer on the house if it becomes an REO?

Thanks all!