What is the process for determining the Fair Market Value, or After Repair Fair Market Value of a single family home?
I’m really stuck on this issue. I know how to access the county tax assessment. However, I need a good method for determining accurate values of properties (sales prices). I am heavily investing in marketing, and expect to be swamped with leads starting in January. But I don’t have access to MLS, and hate to bother a real estate agent every time I get a phone call from someone with an opportunity. What are other people doing? I’ve found Zillow and other paid services from First American to be unreliable. Do I need to become a real estate agent to get access to MLS and do my own comps? Do I need to educuate myself on appraisal methods. What are some the best business practices that are being used by other investors, so you can estimate an accurrate ARV for properties. I’m looking to buy distressed properties. My formula would be ARV -30% - Repairs, holding costs, and commissions. But if you can’t determine the ARV of a single family home, you can’t get past Go!
I’ve been trying to find a good way to do that also. I hate calling my realtor all the time for comps. I’d love to find a good way to do it myself.
Real estate, particularly residential, has been fine tuned over the years to involve real estate agents. Only agents and appaisers have access to the MLS unless you bribe one to set you up. Whenever I consider a property, I email the address to whatever local agent I’m working with and they send me 10-20 comps from the MLS. It cost me nothing, it takes them 5 minutes, they get a commission from the sale, we all live happily ever after.
PARKJO, We all expect to be swamped with leads, unfortunately it doesn’t happen like that. You should really expect about 1% of whatever you anticipate now. Educating yourself on appraisal methods would be wise if you would like to know how to valuate properties
how much of a commission does a re agent for giving you comps for a property you close on?
I understand the role of MLS in preparing comps. But my question is more about best practices, and what are other investors doing to understand value. You can’t really make a deal until you find an opportunity, and you can’t know if it’s an opportunity until you understand value. Is it true that you even need access to MLS. You could look at a lot of real estate, and internalize values. You could also go to a court house, or go online to get access to values. Is everyone calling a real estate agent to do comps on their opportunities, or is there a better way to do this?
I don’t pay an agent for finding me comps. I pay them a commission when they do all the other paper work involved in closing a deal. All of the things they do for me before I find the deal is out of anticipation that I’ll find something eventually. They know there is no deal unless I know what the FMV is.
Investors (atleast the smarter ones) are using agents (MLS) for comps to determine value. This is what they do to get a CMA and this is what appraisers do for a URAR. Calling a real estate agent and then checking your emails takes about 5 minutes. This certainly beats going to a court house to look through hundreds of tax records or relying on one of the many inaccurate websites. Residential real estate is set up to use agents. If you try to over step them you end up going way out of your way.
When I get a lead on a property. I email whichever agent I work with in that particular area the address of the property and ask them to tell me what they think. They respond with numerous comps and extensive info about the area that I would never know without them. This information tells me if I found an opportunity or just another junky property. The MLS is the fastest, easiest, and best way to find comps. If you really want to skip using one, become one yourself. Especially if you think you will get swamped with leads and don’t want to disturb an agent.
MLS comps are absolutely the most accurate way to determine ARV. Now I’ve developed some shortcuts over the years , but they are all still based on MLS comps. My city is broken down by areas on the MLS, and I have an average sold price per square footage for each area for the last six months. Now you would need to do it for the areas you invest in, but it works as a great basic tool to quickly estimate ARV for any house in my city.
I just take the square footage for whatever house I am looking at, find the area it is in, factor in if its over or under built, and multiply the average price per square foot times the square footage of the house I am looking at. POOF - ARV.
If your market is appreciating quickly you might have to update it often, but for my markets 5% appreciation updating every six months works great.
If you want to determine fmv on your own you need to learn your market. You dont need a realtor, if you asked 3 different realtors you would get 3 different #'s. I just Look at the comps for the past 3-6 months as well as the comps on the market. I even go see some comps in the area of my subject property and see what makes it worth what their asking. I use a good site which gives me all the comps that sold and what the neighbors homes sold for and when. The number one key is to buy at the right price so you have many options and have room for some error. Always be conservative with the numbers.
I’m not sure where johnny is getting his comps from, but accurate comps come from the MLS. Third party sites like zillow can be extremely inaccurate, and asking prices in the area can be very misleading. Most houses are sold via a realtor, and when they sell, the sold price and concessions are directly documented in the MLS. In Texas, the MLS is the only place that actual sold prices are documented. The tax office only knows the sales price if it is documented in the MLS. The courthouse only documents the loan amount. The MLS is the way to determine comparable sales in any area. Even appraisers use it to determine their appraisal values.
The only way to get access to the MLS is through a realtor. I would highly recommend networking with a realtor to get access to accurate comps in your area. I wouldn’t just ask them what this house would sell for, I would have them print out all the sold houses in that area for the last 6 months. Then you don’t have to take their word for it, you can figure it yourself.
hello all, this is my first post and I just want to comment on the necessity of the MLS to find comps. I’m a licensed appraiser and I often use the mls to find comps for my assignments however I still have to verify the information to some extent to satisfy my “conscience” on the accuracy of the data. To do this I use public records (assessment records &/or deeds), exterior inspections, & often personal interviews with a party to the transaction. Just because its in the MLS does not make it the most accurate information available. The info included in the MLS is only as accurate as the info available to the realtor at the time of the listing. Also not all sales are found in the MLS. Many property owners don’t sell through realtors. Not all realtors list in the MLS. Some list on their proprietary websites in my area. Further our daily newspaper lists every property transfer including those that don’t show up on the MLS. All I’m saying is that the information found in the MLS is found in at least 2 other places that is available to the public at no charge. The difference is that the MLS has a more efficient search engine than the others. Knowing your area is your best alternative to using the MLS. Vena Jones-Cox has an excellent audio seminar on knowing your market. I think it is located here in the free audio section or I know you’ll be able to find it in the training section of therealestatearena.com.