My comps are out-of-whack - Posted by osirus

Real Estate Investing
1

Posted by osirus on March 06, 2000 at 22:05:58:

“That means, you do NOT consider the Foreclosure, Bank Owner, REO, or other types of handyman homes in your FMV; you consider, if possible, only homes in the same subdivision (where I live, 5 blocks could be the difference between $300K homes and a trailer park); and you consider size and number of rooms/bathrooms.”

I normally use free online sources for comps. These services give the date of sale, address of property, and price. It does not give type of seller, number of bedrooms, bathrooms, and square footage. I look up bedrooms, bathrooms and square footage separately for each property and “‘weed out’ any ‘weird’ comps”, as you put it, as I go along. Until now I have been confident in using this method. However, I usually have know way of knowing if the seller for a comp was a foreclosure, bank owner, REO or handyman unless I take a time consuming trip to the courthouse to look up the last owner. The only clues are usually a low selling price.

My target house is a 5 bedroom/ 3 bath. It is unlikley that I will find a home in this neighborhood with the same number bedrooms and bathrooms. Is it ok to compare it with 3 bedroom 2 bath houses?

“If your target house is the same size, etc. as the comps you looked at, that’s a good indication of what yours would go for, somewhat adjusted for things you can’t change - such as location (a cul-de-sac or lake-front lot is more desirable than a main-street location, etc.) or won’t change (adding siding, etc. to make it “equal” to the others).”

I understand what you are saying. However, things you mention that can affect saling price such as type of siding and the property being located in a cul-de-sac are things I can only know if I visit the property. This is something I want to avoid since it is time consuming.

How do I make adjustments for things like this? Is there a standard dollar values assigned to various features of house.

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My comps are out-of-whack - Posted by osirus

Posted by osirus on March 05, 2000 at 22:47:20:

The target house is a REO 5 bedroom, 3 bath, 2364 sqft concrete block home located on a corner lot in a one of the more desirable neighborhoods in town. The asking price is $57900. I found 20 houses houses sold with thin the last 6 months to use as comps to find FMV. The price range are high at $127000 to a low of $27500 and all price ranges in between. All houses are 1/3 of a mile or less from the target house. I began weeding out some comps since I had such large price range and that is when things got confusing.

For example,the lowest priced house is a 2/1 with 1280 heated square feet and sold last month for $27,500. It is located abot five blocks south of the target house. The third highest priced house is also a 2/2 with 1175 heated square feet and it sold last October for $110000. It is located 5 blocks west of the target house. These two houses are simalar in size, age, square footage, neighborhood and the number of berooms and bathrooms. Yet there is a $82500 differnce in price! There are numerous other examples of this. In general there was conflicting correlation between the final selling price of the homes and the size and number of bedrooms and bathrooms.

This morning I drove by the top 4 highest saling priced houses and I must admit they were alot more aesthetically pleasing than my target house. They were located at more secluded sidestreets and had better landscaped yards. Also, the highest priced homes were either wood, vinyl sided or crushed stone set in concrete. The target house has painted concrete and other unaesthetically features.

Could aesthetics alone account for such drastic differences in home saling prices? How can I determine FMV in a situation like this?

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Here’s the Deal … - Posted by Rick W.

Posted by Rick W. on March 06, 2000 at 17:10:55:

You seem to be somewhat misguided on what a TRUE comp is. That’s not uncommon, because a lot of Realtors don’t even know for sure. I teach Bootcamps for Ron LeGrand, and at our training seminars we delve quite deeply into the “What is a comp” question.

A “COMP”, or comparable property, is one that has similarities to the subject property you are dealing with. Those similarities are: a) same number of bedrooms and baths; b) same basic square footage (within 200 square feet plus or minus in most cases); c) same type of construction and style of design; d) about the same age; e) similar type neighborhoods.

Once you have looked at each of these values for the properties and compare them to yours, the price range is determined. One method is to divide the number of square feet into the price the property was SOLD (not listed or asking price) for. That gives you the $$$ per square foot, which you then multiply by the number of feet in your subject house.

However, you also need to take into consideration the condition of the subject property. We teach our students to calculate the “After Repaired Value” of the property, that is, the value of it once any necessary repairs are completed. Using that as the standard, you can compare it to other properties that are in good saleable condition, not the ones in various stages of dis-repair.

Hopefully that will help you out. If you have any other questions, please e-mail me with your questions and I’ll get back with answers.

GOOD LUCK!!!

Rick W.

PS - I noticed you might have been witness to the mutiny attempt at a REIA meeting last Thursday night. Let’s talk!

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Re: My comps are out-of-whack - Posted by CarolFL

Posted by CarolFL on March 06, 2000 at 08:35:44:

One of the things an appraiser looks at is the circumstances of a sale, and whether or not it might have been distressed for some reason (estate, divorce etc).
HOw about the state of the properties inside? Age? Length of time on the market?
When I read the appraisals our guys do, these are all included.

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Re: My comps are out-of-whack - Posted by Carmen_FL

Posted by Carmen_FL on March 06, 2000 at 08:06:14:

I’m not an appraiser, but as a realtor, in order to do a CMA (Comparative Market Analysis), you have to “weed out” any “weird” comps that come up. That means, you do NOT consider the Foreclosure, Bank Owner, REO, or other types of handyman homes in your FMV; you consider, if possible, only homes in the same subdivision (where I live, 5 blocks could be the difference between $300K homes and a trailer park); and you consider size and number of rooms/bathrooms. If it’s a “planned community”, you also try to consider homes with the same “model”. If your target house is the same size, etc. as the comps you looked at, that’s a good indication of what yours would go for, somewhat adjusted for things you can’t change - such as location (a cul-de-sac or lake-front lot is more desirable than a main-street location, etc.) or won’t change (adding siding, etc. to make it “equal” to the others). Sounds to me there were special circumstances for the house sold at $27K - fire damage perhaps? Transfer between family members? When I do my comps, as a rule of thumb I try to stick with the “median” prices - I don’t consider the highest or the lowest; I try to see what the “average” price is for a house of about the same square footage.