How to evaluate foreclosure properties

Question

If you can't see the inside of a foreclosed property, how do you estimate the cost of rehab and ARV?

Cheers,

Andrew

Chris Seveney · Answer

@Andrew Diamond

I can see others say assume the worst but before doing that - so you have experience in renovation and construction?

Why - because those with experience can peak in a window and get a good feel for the potential costs and have done it long enough they will know what it will cost

If you have no experience and “assume the worse” - you are guessing. Not recommended.

The outcome will be you will never win or you will win and wish you had not one.

Again no clue on your experience and not saying you are not experienced but for anyone reading this they should take caution with foreclosures.

We own notes and on occasion have to foreclose, it’s easy to see at auction who knows what they are doing.

Kenneth Garrett · Answer

@Andrew Diamond

I’m not a fan buying things site unseen.  At least drive by and see what it looks like.  You can’t assume the condition, you need to get some idea.  Peek in windows.  Although technically that is trespassing without permission.  If it needs a roof, siding, etc your probably already in for 20K without seeing the inside.  Definitely helps if you have expert knowledge in that neighborhood, that way you have a good of at least typical rehab costs.

I have had good luck by buying foreclosures directly from small local banks.  When they foreclose many times they just sit on them until there ready to move the asset.  In this case, I have always been able to walk the property.  The great thing is there is no competition.  It’s great for BRRRR or flip projects.

Bob S. · Answer

Assume it needs everything, You may get lucky and it does not. Happened to me many times. If you do not know the ARV do not do the deal, you are not ready,, Connect with someone that is doing deals in that area. Show them what you have If the numbers are good, they will pay you a fee. Learn then go on your own

Good luck

Eliott Elias · Answer

Assume the worst, and try to assume the mortgage.

Build rapport with the seller and save them from the worst financial thing that could happen to them

Ezra Henderson · Answer

I always do a drive by, as the condition of the exterior of the home can often help you guess what the inside is like. But that’s definitely not always true. One time I pulled into one’s driveway that looked super nice on the outside, (freshly cut lawn, clean landscaping, clean windows and siding, etc) and the neighbor came walked up and said he had the last remaining key to the house and asked if I wanted to go inside. (Looking back, I probably wouldn’t do this again… this guy was kinda shady.)

But I ended up going inside with him and I was so glad I did… because there was some sort of crazy water damage and all the ceilings had caved in and it looked like the whole thing g had been underwater at some point. I didn’t end up buying the property, but I was very thankful the neighbor let me in. I usually just assume worst case scenario… because you really never know. And if it ends up being in great condition then it’s an awesome surprise!

Joaquin Camarasa · Answer

I see two options.

1. If you have experience with a similar property in the area. You then know the layout and can estimate the max labor and materials cost.

2. If you don't have experience with a similar property. Assume the worse, if the numbers makes sense on the worse case scenario, go for it.

How to evaluate foreclosure properties

Most Popular Reply