November 16th, 2010 4:01 PM

Lots of people are asking the question, "How much should I offer on a foreclosure?".  I wish there were a simple answer that would be the absolute answer on all foreclosed properties, but I've not found that any of the get-rich-quick-seminar-type of answers are realistic or productive. 

Instead, I think it's best to employ the tried-and-true methodologies that any good realtor should advise you to use: SOLID RESEARCH. 

For starters, how much are other properties selling for in the area?  Don't look at just the raw sales price, but look instead at the PRICE PER SQUARE FOOT.  It's always best to include seller's concessions in the price per square foot analysis, if you can (for example, how much closing cost assistance did the seller on the property across the street have to make?).

Next, you need to be realistic about the condition.  It amazes me how sellers always underestimate the costs of repairs while buyers almost certainly always overestimate the costs.  Try to be as objective as possible when evaluating the condition--Is the house in need of a few cans of paint or should the main tool used to improve the property be a BULLDOZER?   

Now ask yourself, "Do I want this property, and if so, how much do I want it?".  There are lots of properties out there that are going for MORE than list price because the house is a great deal, in great condition, and appeals to more than one or two buyers.  It's a supply and demand world out there, so draw a line in the sand for where you're willing to go with it, but don't be surprised if the price moves up because other buyers are also making offers.

Finally, GET YOURSELF A GOOD REALTOR who knows how to (and has a reputation of working hard to) protect their clients' interests and is plugged into what's going on in the area.  Buying a foreclosure can offer an amazing opportunity to get a great deal on a home, but it's not the time to "go it alone".   

Happy House Hunting!

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