Do I pull it up on zillow and take 5 or so of close houses that sold in the last 6 months and take an average?
Zillow is very inaccurate and should not be used as a comparative sale. However it can give you a very rough idea if you know the program. For instance a certain town I like to invest in the home values on zillow are consistency 10-15,000 below the real market value, if you can find another pattern like that then it can really be helpful.
Look got a similar listed house near the target house. Chances are the realtor/seller based the price on the comps.
future guru,
If your going to be investing near your home, then I would strongly suggest becoming an expert in your area. Pick a target area and then go look at 100 (or more) houses that are for sale. Look at them inside and out. After you complete this exercise, you will KNOW what houses are worth in your area and won’t need anyone else’s opinion of the value.
This requires a little effort and most newbies won’t do it. I believe that it is a critical step that will help ensure your success.
Good Luck,
Mike
How do I do that? By finding open houses? I can’t have a realtor do it.
FutureGuru,
I am an appraiser. Here are some suggestions.
DO NOT USE:
Zillow
Tax Records
Tax Assessor Data
DO USE:
MLS
Here’s how you do it. First, make a list of the major attributes/characteristics of the subject property. These would be bedroom/bathroom count, square footage, year built, condition (renovated, average, fixer upper, tear down, etc), foundation (crawl/slab vs basement), stories, lot size, and make note of any other amenities (like pools, etc).
Lets say your subject property is a 1-story ranch home built in 1950 and is a 3/2 with 1500 square feet. It is in average condition. It is on a crawl space. It has no pool and is on an average lot size.
Your goal is to locate at least 3 other sales of similar properties within as close a proximity as possible. Oh, and one caveat… these sales you are in search of need to have SOLD, preferably within the past 6 months. Listing prices mean absolultely nothing. I could list the house for a million but that doesn’t mean it will sell @ that. Many people that have their houses listed right now are just testing the waters and hoping a sucker comes along…
Anyways, look at SOLDs only, within as close a proximity as possible. Again, you will be in search of 3/2 ranches on crawls or slabs (don’t compare a home with a basement to one without!) that were built around 1950, are in avergage condition, are on a similar sized lot, etc etc. Once you find at least 3 you will have a range of values. Typically the subject property will be somewhere in the middle (unless it is far inferior or superior to the comps… but then, you haven’t found good comps, have you?).
If the subject is located in a subdivision, run a report for all the sales in that particular subdivision that have occurred in the past 6 months. This will give you an idea of where things are topping out. Subdivisions do have ceilings. Take note.
As a footnote, make sure you look at the financing and concessions for the comparables. You might find that one low sale was paid for using all cash. Or maybe one had a real high sales price but the seller gave $25K in concessions. If you run across wierd financing like that, toss out that comp and find another. Go for deals with conventional financing. All this info should be in MLS. Learn how to find it.
Also, as another footnote, pick comparables based on similarity and proximity (keep it within 1 mile, and closer if possible). Don’t skip over nearby comps and cherry-pick comps from further away just to make your numbers jive. You’re slitting your own throat there. And don’t pick comparables from other sides of geographic boundaries, such as rail road tracks, major highways, rivers, and the like. Keep it in the subject’s neighborhood.
Just a few tips. I could go on, but then I’d be giving away all my secrets and we appraisers need to stay busy.
Good luck.
Let me add one thing to this …
If a realtor gives you a CMA report, make sure that they are using comps (SALES) like I discussed. A lot of realtor reports will use expired’s, active’s, and old sales. Or they’ll pick sales from far away to make the CMA report more attractive, thus making you more likely to buy. So be wary…