Something I don't get about doing comps - Posted by MO

Posted by Paul Ness, MAI on August 11, 2003 at 09:59:37:

There is always a range because the market is not perfect, but there must be reasons for a wide range. If you have one or two out of line with the others there could be hidden reasons such as seller paying substantial closing costs and building them into the price, or family-to-family purchase, distressed sale, etc. Or there could be other quality and condition differences. If you really want answers to these questions you need to call each realtor or owner involved. If it’s only for due diligence and not financing, you can get an appraiser to do the work for you and complete a “limited” appraisal for around $150-$200.

Something I don’t get about doing comps - Posted by MO

Posted by MO on August 11, 2003 at 08:33:56:

There’s something that’s been nagging me since I got started a few weeks ago. I’m trying to purchase, rehab, and flip some properties … but having some difficulty doing comps. If the sales vary from, for example, $84,000.00 to $114,000.00 (on houses within 1/2 mile, same square footage, year built, BR/BA, etc.), how do I go about determining the comp value for the property that I am interested in? This has come up several times when I ask my realtor to provide the comps on a property. The range in sales price is so great and without knowing what the inside looks like, I don’t feel very confident coming up with an ARV to use. On houses in this price range, $5000 either way is signficant.

If you really want to know… - Posted by rm

Posted by rm on August 12, 2003 at 07:58:49:

Pricing property is about 90% and 10% science.

Every few years, some smarty-pants real estate group does a study. They ask an appraiser, a builder, an architect and a realtor how many square feet a home is.

Each of them produces a different number.

If “experts” can’t agree on what size a home is, do you really expect razor precision when “appraising” a home?

IF you really want to learn a particular area, print out the sold property listings, and drive by. If it’s a recent sale, I’ve even door-knocked and asked questions about the home of the new owners. Tell them you’re thinking about buying the home over on ____. You wouldn’t believe how easy it is to get into somebody’s home!

By driving by and seeing a few homes, you’ll come to appreciate the subtle differences that can’t be explained on paper.

If you don’t want to learn the area, the adjusted average per square foot works reasonably well, but you’d best have a margin for error.

If you’re pricing for yourself, take the average.

If you’re pricing to determine your offer, take all the lowest comps.

When you’re pricing to re-sell, use all the high comps.

Best of luck.

Answer: It doesn’t matter. - Posted by Jack

Posted by Jack on August 11, 2003 at 23:26:33:

If you are wanting to find fixers and make offers without seeing the inside first (kind of like Steve Cook), then the variance you are speaking of doesn’t matter. Throw out the high and low, make sure you aren’t including any bank repos or other weird sales (outliers), and make your market value estimate. Then, make your offer with some room to negotiate.

It’s AFTER you get a counter offer that you can go and pay more attention to inspections and final estimates. If the place is in worse shape than you guessed, reduce your offer accordingly.

Market value is not a set number that you can calculate if you’re smart enough. It’s an opinion. You’d be surprised how many refinances go through without a hitch for more money than the house is worth. Appraisals just happen to fit to a tee. Can you guess why?

A cold hard fact - Posted by JD

Posted by JD on August 11, 2003 at 21:32:22:

some people can easily quantify the intagibles that influence value, such as lot location, upgrades, condition, etc…, most just never will be able to.

Re: Something I don’t get about doing comps - Posted by Mike G

Posted by Mike G on August 11, 2003 at 13:08:14:

Doing comps is both art and science. Make sure you are looking at sales price PER SQ FOOT to come up w/ an avg price per sq foot which you then apply to your subject property. Depending on how many comps you have, it generally is better if you can eliminate the highest and lowest outlyers. You also need to make sure you are dealing w/ sales involving warranty deeds, not tax, quit claim, special warranty, etc.

Get to know what simple features influence price in your area. For example, here in S FL, a pool adds about 10k in value.

Even though TAV has little to do w/ value, I always analyze the sales price as a % of its TAV for all my comps as a check. I have found that most neighborhoods fall w/in a reasonable range (for most of my areas, b/tw 120% to 150%), and those that are way out of whack I eliminate. Sometimes this is the only way to value condo’s as the sq footage is often not readily available in the public records (and condo’s w/in the same complex almost always TAV the same).

The more info you can collect, the better.