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.