Real Estate Elevated: 3 Best Ways to Accurately Estimate Comps
Over the years, I’ve talked to a lot of Real Estate Elevated students and real estate investors, people trying to make extra money at home with the occasional flip house, and people just trying to sell their homes for a profitable market value. All of these people have one thing in common—they don’t know the best ways to accurately estimate good asking prices for their homes.
A big part of being a successful real estate investor is learning how to determine a home’s after-repair value and knowing what kind of price to pay on a distressed property to make a decent margin when rehabs are done and the house is ready to sell.
This seems like a simple process with tools that are easily accessible online to anyone who knows to look for them. After all, if you look at a site like Zillow or any other listing site, you’ll see a lot of estimates for the values of homes in a given area. However, if you’ve been investing for any time at all, you’ve probably already learned that basing your asking price entirely on this information is a good way to end up with a price that’s way off for your market.
That’s not to say that you shouldn’t go online to look at list prices for comp houses in your area. In fact, I think that starting with an online search of local listings is a great place to start—it’s just important to know that this isn’t your entire search and estimation process.
Going online to see comp properties in your area can give you a ballpark idea of what you can ask for your home. Before you set your heart on a really great price, though, make sure that you take a good look at the listings for those comps.
Research Comp Listings
Look at how the comps in your area are marketed, how their selling agents describe them, the pictures they have posted, and every other detail of the properties you can see find in their listings. This will give you a good idea of what you’re up against.
For example, if you’re thinking about putting laminate flooring in your house, but a comparable property in the area with hardwoods and a lot of great upgrades has been sitting on the market for a month with no action, you could be in trouble. Or this could be a good time to look at the kinds of renovations you need to make to bring the property up to current market values, where you can afford to spend a little extra, and where you should go with less expensive updates.
Evaluate Your Comps in Person
Just looking at your comps online will only tell you so much. Remember, professional real estate pictures are specifically taken to make homes look their absolute best. So, comparing your property as you see it right now to those pictures might not be fair.
Whenever possible, I like to schedule a viewing of at least one or two of the comps in the area. When I do this, I look at every single aspect of the house. I look at updates and renovations, landscaping, location in the neighborhood, nearby amenities, access to highways, noise, and anything else that could affect a home’s value. Then I can do a more realistic comparison with my flip property and get an idea of how comparable it really is.
Whether you’re building a full-time real estate investing business or you just want to make extra money at home on the side, it pays to know how to accurately estimate the value of your properties and how to effectively look at comps in the area. Follow these tips and see how much more accurate your asking prices get.
For more information about real estate investing, visit Real Estate Elevated's BiggerPockets blog.