According to Lender Processing Services, nearly 2.2 million homes in the U.S. were in foreclosure in April. On average, they sell for about 30 percent less than a nondistressed property, Daubenmeyer says.
In April, the median price of a move-in ready foreclosure was $185,000, according to Re/Max. A nondistressed property's median price was about $267,300.
Such deals are possible because homebuyers can negotiate closing costs and price in foreclosure sales, says Elaine Zimmermann, a real estate investor in Memphis, Tenn. Buying a foreclosure typically is faster than buying a short sale, and an investor can buy a home for rock-bottom dollar. The national average of a foreclosure that needs some work may cost around $107,600, according to Re/Max. The investor could rent out the home or resell it after fixing it up.
Investors should expect to spend no more than 5 percent to 10 percent of the purchase price to renovate a foreclosed house, Zimmermann says. "Your time and trouble are worth something, and your energy," she says. "You should come out ahead."