You have to know the territory, and you have to know the numbers. So how do you learn the numbers?

First, let’s rake a look at appraisals. We know appraisals can be a bit tedious, and they cost money - about $400 per appraisal. This is an amount that many people do not want to spend. Who would want to spend money for an appraisal on a property they might not even buy? Nonetheless, we recommend it if the lender owning the property will permit access to an appraiser. Even an exterior-only appraisal, which usually costs less, is very valuable to you.
An appraisal takes the form of a wrirten document on a standard form called the Uniform Residential Appraisal Report, six pages long. Almost every detail about a property is there on the form. On the second page, the form lists the subject property, then lists three comparable properties that have recently sold. Each comparable is adjusted up or down in dollar amount as compared to the subject property components. For example, if the subject property has one bath, and the second has one and a half baths, the appraiser makes an adjustment to offset the half bath. At the end of the report the appraiser determines a value by these adjustments. In other words, an appraisal is an expert opinion of value prepared by a licensed and certified appraiser and is generally prepared for a lender to be certain the property is worth financing. Appraisals also may be ordered by a probate court or by individuals wanting to know what their property is worth. As you’ll see, very few sellers really want to know what their property is worth. Most sellers use another way to get an estimate of what their property is worth. It is called a market analysis. All residential real estate agents do market analyses routinely. They pull three or four comparable properties from the Multiple Listing Service and do their own unofficial appraisal. (MLS is the information system typically owned by die real estate firms or their association. It gathers and provides members with sales price and listing prices on properties in their area.) This report is not considered to be an expert appraisal for a lender or anyone else - it is an estimate, but an estimate is a way to get numbers. When a market analysis is done for a potential seller, the real estate agent sometimes has a bias toward a higher number to secure the listing. In your discussions with a real estate agent, from time to time you will ask for a market analysis.

Although agents will sometimes perform these analyses for free for clients, if you offer to pay for a market analysis you actually want to buy, the agent is more likely to take you on as a client, since that way she knows she will be paid. But if you put that agent through a lot of time for nothing, you will lose. And you had better believe that agents can spot users.
Another way to do market analysis is to learn the numbers yourself, either by studying real estate appraisal or getting sales prices from a title company. Whichever way you choose, “You gotta know the numbers.” Why is thai such a big deal?

Here’s why. if you don’t know the approximate current value and approximate future value of a piece of property, you will never buy anything for fear of making a mistake or, in this case, losing money.

Once you know the numbers, you’re ready to consider buying some foreclosed property. To do that, you need to understand exactly how a foreclosure works.