How do you sift through the comps without seeing the houses up close? Cops seem to have a $20+ sq/ft range on them, some are similar sq footage, rooms, and year built, yet as I look through the list of solds in the last 6 months, most will be around say 75, a few will be 60, few will be 80-90. How do you get a feel of which end of the scale your rehab is going to sell for??
Your price is going to be influenced by things like flooring, kitchen design, bathroom design, lot size, and upgrades. If you don’t know what the homes have, you are just guestimating.
In a particular area, you will probably noticed that homes with less sq ft get more per sq ft than the larger homes.
For example, a 1200 sq ft home is $200 per sq ft while a 2100 sq ft home is 170 per sq ft. It is kind of like a wholesale effect. The smaller home gets more per sq ft because the overall price is still much lower than the larger home.
Just like when you go to the store and buy a drink. If you buy a 12 pack, you get a better deal than a single can. If all things were equal, you would rather be selling 12 single cans than one 12 pack.
So you need to compare apples with apples. If you have a 2000 sq ft home, don’t look at 1500 or less sq ft homes. Look at homes right around 2000 sq ft.
I am looking at a 2400sq/ft comparing to another 2400sq/ft. I foudn the difference though, its across the street in a different part of or different subdivision. I have my comps within .5 miles, I may change that to .25, but the you don’t get many comps, I guess 3 is all you really need.
Every time I think I have it down and understand it, I find something new out that raises question
Since we’re rehabbing, essentially if done right for the right $$$ we can make our homes get top dollar / sq/ft right?
I was going to say, if you found a home that had upgrades like wood flooring and granite counters, you could build the same way, providing the numbers work.
See what some of the hardcore rehabbers say though.
You need to be EXTREMELY cautious Mark.
I have somewhere in the neighborhood of 4,500 valuations under my belt, and I’ve seen the most amazing mistakes made by those who choose to go it alone.
The worst to date: An investor from well outside the area purchased a home in a neighborhood which backed to a neighborhood of homes within a country club. He used comps from within the country club neighborhood, and went on to overimprove the property by more than $180k in my opinion (the house languished on the market, and ate him alive).
In another instance: A woman–trying to sell her home herself–went to a Loan Officer for advice (rather than an Agent or Appraiser). She priced her property (with help from the Loan Officer & an Automated Value Module [AVM]). Problem was…property valuation is not the expertise of the typical Loan Officer & AVM’s are proving to be highly unreliable–she overpriced her property by $70k (nearly 30%).
Those are just two of numerous examples. With such a wide range of potential comparables to choose from…should you follow online advice, or consider hiring the services of a professional (which cost little in relation to the potential dollars they could save you).
I could offer more detailed advice regarding selecting comparables, but many would consider my business advice a very valuable commodity, and it’s a holiday weekend…I’ve got a yard to tend to.
Best of luck,
Ugh a yard!! Don’t remind me!!!
Thanks for the heads up I know me and I’m sure everyone else who participates / trolls the board does too!
The best kinds of comps are those that come FROM the neighborhood you are buying in. Also, you need to make sure certain criteria match. In my area, 1 mile areas are broken down into Map areas. So if there aren’t enough from the neighborhood, I do my best to make sure the comps come from that Map area. Then make sure the all the comps have the same matching features such as:
Bedrooms - Are critical, very tough to compare a 2 br to a 3, or even a 3 br to a 4
Baths - Important up to about 3.1 baths
Sq Ft - best to go 100 sq ft lower, plus 150 sq ft above. This ratio will give you a tougher comparison to make sure the property is a good deal.
Year - Important. In most areas, a 1960s house is still comparable to a 1975 house, but I would not say a 1979 house is comparable to a 1985 house. Newer houses just cannot be used against older houses.
Basements - In Michigan, basements are a key factor for determining price. If you live in an area where basements are important, don’t compare a house without a basement to a house with a basement. You’re setting yourself up for problems.