Comps have confused me even more! - Posted by Jim Beavens

Posted by PBoone on April 19, 1999 at 01:56:15:

Boy am I glad you saw the house that sold for 36K, just goes to show you it can and is being done.
On one of your post it was queried about war zones well you are about as close as it comes in Portland (in my opinion) but just a few blocks away is a very nice neighborhood called Piedmont. In Piedmont houses sell fast and real good money to be made.

Comps have confused me even more! - Posted by Jim Beavens

Posted by Jim Beavens on April 16, 1999 at 18:58:51:

So after hounding one of the realtors I’ve been dealing with to pull some comps on his listed properties, he finally did some CMAs, and sent me the raw data. There is a much wider range in the prices than I anticipated, and now I’m clueless on what to offer. Each comp basically has 3 criteria: # of bedrooms, total SF, and sold date, so I narrowed down the list to those that came close to my target property in 2 out of the 3 criteria (unfortunately the comps don’t have the year of construction, which would probably help more; the property in question below was built in 1915). Here’s one example of a narrowed down list (Netscape is probably going to screw up my formatting, sorry…)

Property | #Bed | TotalSF | Sld/date | S/Price

Target | 5bd | 1764sf | N/A | N/A (Listed at $110,000 w/~$18,000 repairs roughly estimated)
Comp #1 | 4bd | 1470sf | 4/15/99 | ??? (pending: List was $129,950)
Comp #2 | 3bd | 1450sf | 2/23/99 | $120,000
Comp #3 | 3bd | 1433sf | 3/25/99 | $125,500
Comp #4 | 2bd | 1482sf | 9/17/98 | $136,500
Comp #5 | 3bd | 2000sf | 11/25/98 | $154,000
Comp #6 | 4bd | 1720sf | 1/21/99 | $164,900

I was planning on making my offer so that it wouldn’t matter if I was off by several thousand dollars in my various estimates, but it seems like I could be off by $10-20,000 in my ARV. What would you experts make out of these comps, and what would you estimate the ARV to be if you had no prior knowledge of the market in this neighborhood? (which I don’t). The only drawback to the property is that it’s on a pretty busy street (5 lane thoroughfare…Lombard for you folks in Portland). I’m probably going to stick to my conservative guns and structure an offer based on a lower value (~$130K), but I thought this would be a good exercise to show us clueless newbies how to analyze comps. I’m tempted to go higher since the comp #6 is the closest to the target property, and it sold for so high. However it’s the only one even close to that high. Any thoughts?

Thanks for everybody’s help so far!

GIGO - Elements of an appraisal - Posted by John Behle

Posted by John Behle on April 22, 1999 at 19:12:11:

GIGO is a computer term that stands for “Garbage In - Garbage Out”. If you don’t have good comps, you can not sufficently establish a value.

Not only do you need good comps - you need more information. It is hard to tell from what you have which are the best ones.

What an appraiser does is select many comps and then weed out ones that are in-applicable. There are many factors they take into account.

(Not in order, just as they come to me)

  1. Sale date - as close as possible
  2. Days on Market - Houses selling too quickly or over too long a period of time bring suspicion. The appraiser is looking for “Average” comps.
  3. Bedrooms (and size as was mentioned)
  4. Baths - - Based on the square footage, too many or too few bedrooms or baths may make the comp out of line.
  5. Square footage - as close as possible. Within a few hundred
  6. Style, age and condition. These can totally affect the value.
  7. Proximity. As has been mentioned, a street or two difference can make tens of thousands of dollars. You need to know the area, what’s happening and what direction it is going.
  8. Terms of sale. All cash? Low down contract? Pre-foreclosure? etc. They make a difference.
  9. Lot size. Sometimes people overlook the value of the land. Of course a small lot can be very un-appealing and lower the value - even drive prospective buyers away. A large lot can make a difference. Zoning is an issue too.

Along with those things, an appraiser looks at FES. Functional, Economic and Social obsolescence. These are all factors that contribute to or detract from value. An example is the floorplan, style of home, etc.

It is very hard to get any accuracy without many details about the comps. The MLS is almost always the best source because you have a lot of data. Some MLS systems have both a public and private section. The membership/private section gives much more in the way of details. You must drive the comps to have any certainty.

One of the advantages an appraiser has is that they know the area and have demographic data. Follow the hundred house rule and go out on weekends to the open houses until you have seen a hundred houses. You then develop an intuitive sense about the values in an area.

A CMA or RMA gives you a range of value only. An appraiser takes it from there and makes adjustments to value of the comps based on square footage, condition, proximity, 2 car garage vs. carport, finished basement, etc.

Sometimes even the number of bedrooms is not a good indicator. We did a deal last year where the original appraiser did not count bedrooms because of unfinished closets, no baseboard, etc. A 6600 square foot house gets appraised for $154,000 as a 2 bedroom. A little wood, a few nails, some sweat and the same appraiser pegs it at $260,000.

As mentioned, the agent may not be the best source of comps and may want the price to look better. Most agents are not that well trained in appraisal. Selection of the comps is the most important. That’s why I used the term GIGO. You find many comps and weed out the less applicable ones. You need more data to do that than most agents know to provide.

Re: Comps - Posted by rudy-austex

Posted by rudy-austex on April 17, 1999 at 07:44:57:

when in doubt Order a before and after repair appraisal. it’s only $300 or so…rudy

Re: Comps have confused me even more! - Posted by Tarun_md

Posted by Tarun_md on April 16, 1999 at 23:46:09:

This is what I do to get my comps. Before I even decide to go look at a property, I type its address on the yahoo website to find out if any other properties sold on that street during the past 6 months or so. If I cannot find any properties that sold on that street, then I look on the map for streets closest to it and try and find out if anything sold on that in the past 6 months or so.
Yahoo, will only give you the sales price and not bedrooms/bathrooms etc. To get that, I simply type the addresses(that I got from yahoo)into the tax assessors website and that gives me sqft/assessed value/year built etc.

Finally, when I go look at the subject property, I also look at some of the properties that I got from yahoo to compare them. Also, I try to call any fsbo’s or listed properties around to see what they are asking. That gives me a general idea.

Finally, I ask the realtor to fax me the comps. BEWARE, a lot of realtors will fax you comps that are high for obvious reasons. You need to do your own research also.
The last property on which I made an offer, the realtor’s comps told me that it was worth 75k. My own research told me that it was not worth more than 47k. So be careful about realtor’s comps, especially if you don’t know them. They will try to fax you HIGH comps.
Hope this helps you!

Re: Comps have confused me even more! - Posted by JPiper

Posted by JPiper on April 16, 1999 at 23:15:44:


As a general comment I think it’s safe to say that there’s more to evaluating comps than looking at the number of bedrooms and square footage?..especially in older areas which I presume this one is since the subject property was built in 1915.

Trying to evaluate comps in an older area based on looking at numbers on paper is virtually impossible in my opinion. It’s important to “drive” the comps?ie drive by each comp and look at it, try to decide what it is about that particular property that caused it to sell for a particular price. Some other important factors are things like the number of bathrooms, the condition of the property when it sold, does it have a garage, what’s the surrounding neighborhood like. One house could have a newer roof, updated wiring and plumbing, new siding, new furnace and AC, etc. Another may not. An older home without a garage in an area with limited street parking could sell at a large discount. I see spreads in older neighborhoods that are huge, and don’t seem explainable from looking at pieces of paper. I always drive the comps, look them over. Sometimes I call the listing agents, ask what the condition was. In other words, it’s not as simple as looking at square footage and number of bedrooms.

Having said all this, and being at a disadvantage of having seen the area or the comps, comp #5 and comp #6 look like they’re closest to the subject property. I would be interested in knowing what the condition of those particular properties was when they sold, and what their other features were. The other comp I’m interested in is comp #4. Why did a 2-bedroom sell at such a high price? What’s the story behind this one? I would want to know the answer to this. The reason is that perhaps this one was rehabbed to the hilt, or had some other special qualities.

Throwing out the 2-bedroom makes the other comps fall into line in my view. Assuming locations are somewhat similar I think the subject property might be worth $150K-$160K. If the 2-bedroom sold in mint condition, I might take a look at the possibilities for putting the subject property in mint condition?.especially if comp #5 and #6 were not in mint condition when they sold. The implication would be that a larger home in mint condition could sell above the highest comp.

One other thing. Bedroom size makes a difference. Sometimes more bedrooms are squeezed into the same square footage. If this is the case with some of these comps, I’m not at all sure this adds value. Particularly depending on exactly what the profile of the typical buyer is.

Hope this gives you a few thoughts.


Sales Comps Jim… - Posted by BRnBA

Posted by BRnBA on April 16, 1999 at 22:51:55:

not listing price. I hope this does not confuse you more but who cares what the list price is. You need to look at what properties have sold for.

Re: Comps have confused me even more! - Posted by PBoone

Posted by PBoone on April 16, 1999 at 20:35:20:

This property really will depend on the portion of lombard the house sits. There are areas off Lombard within 2 blocks that are sold at retail within days after listing, but that same house ON Lombard you cannot give it away. The difference is in the surrounding businesess and neighbors.

No, no thought - Posted by Robjan

Posted by Robjan on April 16, 1999 at 20:04:02:

I have no thought, sorry, only the same questions. I am a newbie and we made 3 bids on ugly rehab properties today and felt like we just were winging it when it came to ARV. I will be watching your post to see if you get any good answers. Good luck to both of us. Good question!

Re: Comps have confused me even more! - Posted by Cathy (SEA)

Posted by Cathy (SEA) on April 19, 1999 at 15:54:18:

I don’t have access to a tax assessors web page so here is a method that I have used on occasion to get comp info. I go to the experian website and type in my target house address. It then selects the best comps from its database and gives you the option to choose from them. When the option to choose comes up, some of the info it gives you is street name and sale date. I then go to the Yahoo site and type in the street name and look for a sale date that matches Experian’s output. Using the two websites together usually allows me to get the # of bedrooms, sq ft, sale price and the address of the comp for a drive by. The drawback is that I don’t have access to sales within the last few months.


Great advice as always - Posted by Jim Beavens

Posted by Jim Beavens on April 18, 1999 at 21:18:03:

I’m glad to say that your advice spurred me to action. I had thought of driving the neighborhoods to look at the comps, but this conflicted with everything I had heard about wholesaling…find as many houses as you can, make as many offers as you can, as quickly as you can. ie, play the numbers game. But your post made me realize that if I’m going to work this area of town, I’d better get a heck of a lot more familiar with it than I am. So I went out this weekend (with my wife as navigator) and drove by the comps. I learned quite a bit.

I found that with most of the houses I was interested in, within 5-7 blocks or so would be an area that…well…just has a nicer “feel”. I can’t really explain it; it’s all the same neighborhood, but there are some streets that just seem more upscale than others. The houses are better maintained, better landscaping, etc. The example I gave in my original post was a good example of this. The house I was looking at was off of 17th street, while comp #6 was on 24th street and several blocks south, which was simply a much nicer part of the neighborhood (btw, I made a mistake about this one being on a busy street…I was thinking of another listing I was looking at of similar size). That 2-bedroom was on a large corner lot with pristine landscaping, and it just looked fantastic. In fact 3 of my comps were in this area that I just didn’t think could be compared to the area of the target property. This basically left me with comps #2 and #3, which are very close to the target property. Here’s a more thorough comparison based on my observations:

Property | #bed | #bth | TotalSF | #gar | sld/date | S/price | Notes

Target | 5bd | 1bth | 1764sf | 0car | N/A | N/A | Corner lot, no garage but plenty of street parking
Comp#2 | 3bd | 1bth | 1312sf | 2car | 2/23/99 | $120,000 | Needs roof, otherwise OK, back-yard fence
Comp#3 | 3bd | 1bth | 1433sf | 0car | 3/25/99 | $125,500 | Good condition, back-yard fence

The only other thing to note from the listing is that two of this property’s 5 bedrooms are in the basement, which implies that the main difference between this house and the other comps is that its basement is finished. Now what the listing agent’s definition of “finished” is in a junker house, I’m not sure. =) There are several cases where a big difference in square footage is due to the basement square footage being included in the total square footage. At some point I’m going to have to get myself inside a few of these houses and try to get a feel for what would cause an agent to include the basement in the house’s size on the listing. Any comments on whether there’s any rhyme or reason to this, or does each agent simply like to treat the basement differently?

For now, I’m going to assume that this target property “could” have two additional bedrooms in its basement, but since I haven’t seen the basement I don’t think I’m going to factor this into the value estimate. However it should be worth a “little” more than the others, and I plan on having this house look fantastic when it’s done, so I’m estimating an ARV of $130,000 (versus my previous estimate of $135-140K based on just looking at the comps on paper).

I hope this followup helps other folks who are struggling with this. I realize this is a lot of work to put into an offer that most likely won’t be accepted, but I do have a much higher confidence in the prices I am offering. It’s my hope that after doing this for a little while, I’ll be able to look at those comps on paper and immediately focus only on the ones that make sense. This kind of falls in line with the thread below, where the point was made how hard the first deal is, after which it gets easier.

So anyway, thanks again for your advice, Jim.

I know… - Posted by Jim Beavens

Posted by Jim Beavens on April 16, 1999 at 23:09:30:

There was one comp that was only pending, and hadn’t closed yet. The CMA only gave the listing price for the pending sales. I included it as another data point that was fairly close to the target property, but I really only looked at the closed sales and their actual sales price.

Thanks for your input. You’re right, the listing price is totally irrelevant to me. What I find a bit curious is that this one realtor has 4 different listings, and when I’m done constructing my offers, they range from $13,000 below list to $38,000 below list. I really wonder where they come up with these asking prices.

More info… - Posted by Jim Beavens

Posted by Jim Beavens on April 18, 1999 at 21:37:58:

Hi Pat,

As I mentioned to Jim above, I was mistaken about this particular listing being on Lombard. However, the listing that I was thinking of that is on Lombard has some interesting comps as well. I drove and looked at them this weekend, and was amazed. Two houses away from the target property is a comp that sold in August of 1998 for $134,000, and is in BEAUTIFUL condition, with a 2-car garage and everything. But the house next to it that’s between it and the target property? It sold in May of 1998 for $36,000 (and is still in crappy shape). You can’t get much more divergent than that! :wink: (btw, I mentioned in my last post it’s off of Albina, which I’m sure you realized is a few blocks east of I-5, and not MLK as I indicated).

Like I mentioed in my post to Jim, the reason this is listed as 5 bedrooms is because two bedrooms are listed as being in the basement. Do you have any experience with bedrooms in the basement of houses like this in this area? Will an agent see a few walls put up in the basement and simply indicate that there are rooms there, or would they have to be finished as well as the rest of the house? Or are they inconsistent on this point?

Anyway, there are 3 comps that are a block or two off of Lombard, two of which are smaller and sold for less than $134K, and one of which is bigger and sold for more than $134K, so I’m probably going to stick to my original ARV estimate of ~$130K.

Thanks again for your help.

Re: Comps have confused me even more! - Posted by Jim Beavens

Posted by Jim Beavens on April 16, 1999 at 22:15:57:

It’s on Lombard close to Albina street (several blocks east of MLK, I think). Some of the neighboring houses did look a bit trashy. I’m going to put in an offer for $63K…if they take it I’ll let you take it off my hands for $68K. =)