Home   »   Foreclosure Resource Center   »   A Foreclosure Buyer’s Guide to Property Repairs


Many investors routinely budget 10% of the purchase price of a foreclosure home for repairs. In a typical scenario, where a property with an estimated market value of $150,000 might be sold during the foreclosure process for $120,000—a 20% discount—that would amount to a repair budget of $12,000. In this scenario, the homebuyer still saves $18,000 on the purchase price, and likely increases the value of the home by doing the repairs. Each property, and each situation, is different. But it’s important to note that a difference of 10% in either the discount or repair costs would dramatically alter the financial outcome.

Example 1 Example 2 Example 3
Estimated Value: $150,000 Estimated Value: $150,000 Estimated Value: $150,000
20% Discount: $30,000 10% Discount: $15,000 20% Discount: $30,000
Purchase Price: $120,000 Purchase Price: $135,000 Purchase Price: $120,000
10% Repair Budget: $12,000 10% Repair Budget: $13,500 20% Repair Budget: $24,000
Total Cost: $132,000 Total Cost: $148,500 Total Cost: $144,000
Total Savings: $18,000 Total Savings: $1,500 Total Savings: $6,000


If you’re interested in buying a foreclosure property, the following tips should help ensure that you’ll really get your money’s worth.

1. Physically Inspect the Property
It’s imperative to physically inspect the property if at all possible. In some cases, such as auctions, there is little or no possibility of an inspection. However, if you are able to negotiate a deal with the property owner directly during NOD, or pre-foreclosure, it may be possible to set up a walk-through prior to conducting the sale. During the pre-foreclosure period, the owner has a chance to sell the property or pay off the amount owed before the property is sold at public auction or repossessed by the bank. You’ll also be able to set up a physical inspection if you purchase the property directly from the foreclosing bank after the property has been repossessed. You can locate pre-foreclosures, auctions and bank-owned properties by checking with the local recorder’s office or through online services like RealtyTrac, which maintains the nation’s largest database of foreclosure properties.

If you’re not able to physically inspect the inside of the property, assess the property’s condition as much as possible by driving by and looking at the exterior. Add extra padding into your repair budget for unexpected problems. When there is no physical inspection of the interior, most experts recommend that you cap your purchase price at no more than 70% of the property’s estimated market value. You can determine a property’s estimated market value using Comparable Sales, which are available through MLS listing from your real estate agent or online through RealtyTrac.