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Using Active Listings to Comp your Flip Deal

by Marty Boardman on March 8, 2012 · 3 comments

  
comps on a flip deal

A used tire with rim for $20.  A Pac-Man pocket watch for $140.  A size 20 wedding dress for $75.  And I can’t leave out the Italian Murano glass lamp for $100.  These are just a few of the active listings on CraigsList.org here in Phoenix.

How does someone put a price tag on a Betty Boop purse collection or a cow skull with a hand painted eagle design on it?  These are all truly one-of-a-kind items.

Thankfully, in real estate there are usually enough comparables in any given area to determine the value of a piece of land, house, apartment or commercial property.  Buyers, along with their Realtors and appraisers, will be fixated on closed sales within the last 90 days.  Secondarily, they’ll consider pending sales in the area.

However, an often overlooked but useful value indicator, at least for us real estate investors, is active listings.

Think about it for a minute.  What’s the first thing a Realtor will do once their buyer has determined what kind of house they want and where they want to live?  The Realtor gets on the multiple listing service and does a search for all active listings that fit the buyer’s criteria.

These active listings will be your competition once your fix and flip deal is ready to list.

Some of these listings will likely be beat up short sales and bank owned homes.  A few may be traditional sales or remodeled flips.  Regardless, buyers in the market for a house like yours will be looking at these active listings.  How does your property compare?

Before you make a final determination on value for a fix and flip deal always review the active listings in the area.  How many are there?  How many are like yours?  How many that are like yours are traditional sales or remodeled flips?  Do they have similar features and/or upgrades?

Remember, this is not an exact science.  Active listings won’t tell you what your fix and flip deal is worth, but they will give you a good idea of what it isn’t worth.

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{ 3 comments… read them below or add one }

Evan March 8, 2012 at 9:34 am

That’s especially true in Phoenix, where comps that closed 60 days ago are no longer indicative of market value. Demand has risen dramatically, inventory is depleted, and list prices have increased in response to the change in the market. As these sales close (and many will in spite of appraisal restraints), solds will become more relevant again.

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Chris Kolmar March 9, 2012 at 9:57 am

The standard problems with using active properties, and the reason you don’t use them in normal comp analysis, is that their value is not actually defined. If I way over price my home on the market because I don’t really care if I sell in the next 8 years, then using that to judge what price my flip can command is of no value.

I am all for using common sense in judging how to properly value a properties, but it seems like you may be skating on thin ice if you only used this practice.

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Mike Chouinard March 9, 2012 at 3:59 pm

Nice post Marty. I’m sure you wouldn’t suggest only use active listings to determine value but would also look at pending, back up, and closed listings as well. There’s no doubt though you need to know what the homes that are actively listed are selling for or you could be in for a shock. I would also suggest utilizing market data to calculate for the direction the market is moving for your projected hold time.

Just my two cents.

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