Could someone give me their method for computing comps. I have a general gist I just want to make sure I’m computing them right. Any and all help would be appreciated.
computing comps to come up with the (ARV)? after repair value?
i work the MAO formula which is universally known and understood by most investors…
this is:
after repair value - repairs - assignment x 65% = MAO Maximum offer
Have you realtor pull SOLD comps on your subject property.
Make sure the comps are similar to what your subject property is.
3-2-2 1500sqft subject property
comps should be 3-2-2 1400-1600sqft within the same neighborhood, ideally on the same street.
Get an average price/sq ft for all the comps.
Multiply your subject property sqft by this price/sqft.
You now have your ARV for your subject property.
Thanks for the replies… pete_houston, you hit pretty much what I was looking for. I know we want the latest and most comperable. If one prop sold for say, 150K and another with the same number of beds and baths sold for 60K do I use the average of those two along with any others in the same ballpark? One bought for so cheap was probably bought by another investor. I don’t want to seem ignorant I just want to make sure I’m calculating things correctly.
Thanks again and I’m open for any/more suggestions.
Hi,
All things being equal and if both homes were sold within the same period 90 days then obviously one home is market value and the other home was a distressed property requiring a large amount of rehab and having a lot of deferred maintenance.
Ideally homes in the same subdivision or same square block or blocks is the best match to your subject home and some recent sales will show the exact same square footage. Now if your home is 1600 sq. ft. and three close (1/4 mile) sales are 1800 sq. ft. and 1400 sq. ft. respectively then you can take the per square foot sale price of both properties, add them together and divide them by 2 and come up with an estimated sq. ft. value for the 1600 sq. ft. home.
There is only one pristine, great condition, updated, with no deferred maintenance home! Everything is evaluated from this number, not asking price as a seller could be offering their home for say 10% below FMV because they know and understand their home needs updating and a few deferred maintenance items repaired.
Comps should be gotten for the current 90 day period and within 1/4 mile, however 90 days and within 1/2 mile is ok if no others exist or 180 days and either 1/4 or 1/2 mile can be used if nothing else is available, for say a specialized property like a duplex you could go out 1 mile and 90 or 180 days old.
If in doubt ask your agent if their broker would do a BPO (Brokers Price Opinion) even if it costs you it is well worth it to see what a broker see’s around you in your target market or area. There is certainly a need for perspective when viewing comps and reading between the lines and you will get better at it as time passes.
Never compare a 4/2.5 against un unequal home as they are not comparable, at the very least make sure your close to the same say 4/2.5 to a 4/2 as this scenario gives you a chance to adjust value up or down by $3,500 to $5,000 for the 1/2 bath!
Obviously when you have multiple sales I generally disregard the highest and lowest sales so I am working with the median area of the sales market as when you have 5 close by sales your better comps will be the middle three.
Obviously when a sale is really low in comparison to market that home is distressed and has issues as $60k can not be market when the average area sales price is $160k.
Compare apples to apples even if it’s red apples to green apples but never try to compare oranges to apricots to apples as they are not comparable and do not match, equal square footage, equal bedrooms and baths, equal lot sizes, equal garage size, equal spaces, equal deck sizes in theory, same type roofs, same pool or no pool, same basement or no basement, same finishes, etc.
I hope this helps! Good luck!
GR
what happens when you cant find a similiar house to compare comps?
for example,
subject property 7 bed 4 bath
ALL sold comps
4 bed 3 bath
theres only 6 comps in the area on redfin. help
Hi,
An appraiser can use comps or cost approach, you can safely figure for example each additional bedroom is worth $15k to $20k or more, a half bath may be worth $3.5k to $5k or more while a 3/4 or full bath may be worth $7.5k to $15k depending on size and finishes.
If you have a 4 bedroom / 2.5 bath selling for $120 per sq. ft. and your subject home is 7 bedroom / 4 bath and ??? sq. ft. larger you can take $120 per square foot times your larger homes size.
2500 sq. ft. x $120 = $300k
3500 sq. ft. x $120 = $420k
This will get you close? But remember you could search 1 mile, 2 miles or 3 miles out for a 7 bedroom / 4 bath as an appraiser would providing they can support the fact there’s nothing closer and the comparable property is less than 3 to 6 months old!
GR
The easiest thing to do is just use comp websites.
Which ones are you referring to? The usuals (Zillow, Trulia, etc) or do you have others that you use?
Thanks
Don’t make this harder than it should be. Formulas will throw you off your game unless you are rehabbing the property. You can do this either one or three ways:
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If all you are doing is wholesaling the property as is. The best resource for you to run comps is find an investor friendly realtor in your area. Build rapport and a relationship with them. Then at some point ask if they will run comps for you.
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Seek out Realtors in your area let them know you are interested in putting in offers with them and they should go ahead and run comps for you.
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Realtors have what you call a guess-assistant, that allows them to sign a one person up, so they can have access to the MLS. The fee is $100.00, or you may get some realtors that may try to charge you more just cause…either way if they agree to it the fee may be worth it.
Hope this helps :smile