Need Help With Some Numbers - Auction Price compared Assessed Value

[Vincent Forte]

Ok, I've gone back over the foreclosure sales at the clerks office since beginning of the year and have seen this so far. Of all of the properties that were sold to 3rd party bidders the sale price was averaging 102% of the assessed value. I'm looking only at single family homes in a particular town. I'm assuming the 3rd party bidders are the everyday investors in the area.

Now after seeing that I went and computed all non-distressed sales in the area in the same time frame. Sales have been for about 126% of assessed value.

So there is a margin of about 24% from buying at auction and fair market value. Is that right?

I would like to know everyones thoughts on how this compares to your market and if based on those number I should be able to be profitable with rehabbing and flipping properties in this area based on those figures. Hopefully their is some logic to what I'm trying to figure out.... Thanks!

[Eric M.]

That seems about right. I don't love the idea of comparing to assessed values though. It makes you dependent on those assessed values being accurate and in my area they can vary widely for similar properties.
Assumming the govt is efficient is dangerous.

Over many properties, the averages might work out, but the problem is that you are going to try to cherry pick the "best" deals where the values diverge the most. Those are the exact ones where there is likely to be an unusual issue that causes the divergence and increases your risk in the transaction.

Be careful.