Foreclosures: 50 Cents on the Dollar

Valuing Foreclosures in 3 Easy Steps

Based on showing dozens (hundreds?) of foreclosed properties to clients the last year or so, I've developed the following, "ball park" formula for pricing them:

Step 1: determine their peak value (usually, sometime in mid-2006).

Step 2: Subtract 50%.

Step 3: Add or subtract 10% for above or below average condition.

The only caveat in applying step 3 is that "average condition" for a foreclosure isn't the same thing as "average condition" for a traditional (non-bank owned) home.

With the former, you can expect to find damaged and/or dirty floor coverings, deferred maintenance (interior and exterior), and 2-3 small plumbing "projects."

On a $150k foreclosed home, addressing those items could cost anywhere from $5k to $15k.