Any good books on Appraisals/Comps?

Question

Doing as much reading as possible on BRRRR and Flipping but can't seem to locate any good books on Appraisals and determining the true value of a home from Comps and such.  Not looking to be licensed but was wanting to read up on doing comps and such.  Any suggestions from the group?

Brad S. · Answer

***************************************************Hey Michael, like @Carolyn Yates, I am also an appraiser and a Broker, investor, etc. And as she said, it is market dependent. Basically, you are trying to interpret the general market reaction to a specific property/ties. The easiest way to think of it is, what would a typical buyer pay for a specific property , based on its' individual characteristics. The most important thing I learned when first getting into appraising, is to "Let the Market Tell me the Value," not the other way around. Many people have a tendency to look at it the other way around. In other words, they may think it's obvious that a house with a pool is worth more than one without, or that a 5 bedroom house is worth more than a 4 bedroom, etc. But, that isn't necessarily the case and it can be market dependent. There are actually markets, where a pool is a liability and not desired, or maybe buyers don't want a 5th bedroom, they'd rather have a larger living area, etc. It is more of an art than a science and this is why it is important to have local market knowledge, or find someone that does.

The best avenue for that is often successful local Realtors. They work directly with multiple buyers and know exactly which characteristics most buyers are looking for and why. And similarly, if you want to know the value of a rental, speak to a busy local property mgt company. They will tell you which characteristics of a property helps them lease quicker and for more.

As an appraiser, I get to a sale AFTER the deal is negotiated. So, I see the RESULT of the Buyers shopping and considering many alternative properties. And many times, I need to ask the Listing Agent about their sale, to get more info on the property and/or transaction and put the story together of why the buyer valued this property and it's characteristics.

I am evaluating a property differently as an appraiser then when I cam considering it as an investment. I know of a couple of investors that know their specific market much better than any appraiser. So, it is good to have some general valuation knowledge, but can be invaluable to have a local market expert on your side, especially until you become that local market expert.

That said, here is a snippet of the sales comparison grid of the 1004 form (common appraisal form). This shows you some of the important attributes we consider when evaluating comps and adjustments. Some of the more important ones are: location (traffic street, near commercial-more noise, culdesac-no traffic or noise, etc), site size (smaller or larger than typical, useable lot area, etc), views (any significant views - ocean, lake, mountain, canyon, etc.) a couple of the markets I work in, a view can mean the difference of millions of dollars, square footage of living area (gla), bedroom/bathroom count, age (year built, older vs newer), condition (renovated, original, etc), quality (highly upgraded vs original, no upgrading), etc. You can create your own short checklist of these and just practice looking at sales and ask yourself why they sold for the price they did. You can find sales on zillow, if you don't have other data access.

Carolyn Yates · Answer

I am an appraiser and glad to answer basic questions if needed.  I will say it is very market dependent.  So an adjustment in Florida for a pool would be very different than one in Iowa as example.  But the long and the short of it is, the adjustments are determined by the market.  If you review the recent sales then you should be able to see trends for the different elements of comparison.  Another thing to note is not over-improving or under-improving.  You want your rehab to be consistent with the surrounding area and be what a typical buyer/renter in that area would expect.

Michael Elliott · Answer

Thank you Carolyn.  Appreciate the response and agree, market determines everything!!

Michael Elliott · Answer

Awesome response Brad.  Really appreciate the time you took to write this.  Valuable information!

Bob Okenwa · Answer

@Michael Elliott

Here's a good guide to get started.

Michael Elliott · Answer

Understand Elliott.  I'm just looking for some basic guidance to get started.  I'm going to search YouTube and see what is on there.  Appreciate the response.

Michael Elliott · Answer

Great suggestion Bob.  Appreciate the feedback

Eliott Elias · Answer

Running comps and determining value takes months of experience. I can get three different appraisals with three different appraisers, it's all up to what the appraiser see's with condition and comparables

Bob Okenwa · Answer

You don't need a book to run comps. Just go to Google or YouTube and search "how to run comps" and go from there. Once you learn what you're doing, you should be able to get comps in under 5 minutes on a standard SFR.

Any good books on Appraisals/Comps?

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