Figuring ACCURATE comps (long) - Posted by osirus
Posted by osirus on January 19, 2000 at 21:25:38:
I have read and understand J.P. Vaughan’s article “How to Determine Market Value”. My problem is that I find strict adherence to rule 3; which say comps should be within 5 years of age and 300 sqft of the target house; tends to eliminate most potential comps. Most of the houses I am dealing with are old wood frame houses built between 1900 and 1960. It is typical for the target house to be built in the 1930’ and the comp houses to be built in the 50’s and 60’s or vice versa. This is particularly a problem in areas being revitalized where homes built within the last 6-7 years ago are side by side with homes built 40-70 years ago. Also it is common for the target house to be 700-800 sqft and 2bed/1bath and all the comps are 1300-1500 sqft and 3/1 or 4/2. In addition, there are somtimes hugh price fluctuations between houses in the same neighborhood. These inconsistencies made me fearful that I would make some critical mistake in figuring after repaired value.
Now, by example of an successful investor from my RE investment club, I simply use the average cost per square foot calculated from near by houses that have sold in the past 6 months. Then I multiply this figure by the heated square footage of the target house to get ARV. I disregard the age and square footage of the houses. The reasoning being that a old fixed up house are as desirable as a newer house. Thus far, I feel confident about the comps that I am generating.
Is this nonchalant method a good for figuring comps?