When To Invest In A Foreclosure | Part Three

Banks don’t list their REO properties at the accurate value but at discounted prices so it’s important for you to use real estate comps to make your own calculation of the property’s value. Taking advantage of your InvestorComps account to study real estate comps in the area will help you valuate. Evaluating the worth of a property can help you avoid missing out on a good deal and/or protect yourself from over paying for a property.

Guys, most REOs just need a little tlc. For properties with major mechanical issues, you need to weigh the costs and timing of repairs against the asking price before proceeding. You should never rely solely on the estimates given by the banks because they often include only the cost of repair for a property to be in working condition.

If you have started looking at properties with plans of selling them you need to know how you can estimate the repair costs. Here are a few tips to become good at estimating repairs if you don’t have a background in construction.

  • Practice looking at properties. It takes practice to have a knack at estimating cost repairs. The more properties you look at, the better you will become accustomed to the problems that houses have and the things that commonly go wrong with them.
  • Document your findings. Keep a record of what you learn as you estimate costs and make offers. Check back with rehabbers you sold the properties to and find out what the repairs really cost them and determine how close you came in your estimates.
  • Regularly visit home centers and building supply stores. You should be familiar of the cost materials such as lumber and plywood, sheet of drywall, roofing material, kitchen cupboards, flooring, and plumbing fixtures.
  • Know estimates of “major systems” repair costs. You should know the average cost of replacing a major room in an average home in your area. How much would it take to update an average size kitchen? How much will it run to add a whole heating system?
  • Document the cost to repair a property to the point it can sell at top dollar and then deduct that amount from the sale price charged by the bank. Use your documentation to negotiate a deal with the banks. It will help you ensure that the REO you are eyeing is a profitable investment. Keep these tips in mind and you will have many successful transactions in your REO investment future.

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