Comp question

6 Replies

When figuring the ARV of a property that I would like to fix and flip, do the comps have to be sold homes that have been fixed up? How would I be able to discover if they had been rehabbed or not?

I have been in contact with a real estate agent for looking at homes I’d like to rehab, and when I asked him to pull comps for me, he said it was not a problem. I asked him for as many as he could get on each of the five properties that I am considering. He has sent me only one or two for each property. One of the properties, he only sent one and said that it was the only one he could find in the past year that was fixed up. This is where my question above comes in. Do I really need to find comparables that have been fully remodeled as the subject property or is that necessary?

I’m now trying to come up with my own way of finding comps. Redfin isn’t in my area, so I’ve signed up for an account with realquest for comps. Does anyone know if this is a good place to find accurate sold comps?

Any help or advice would be greatly appreciated!

You want to compare like with like. Usually you can get a decent idea from the pictures of the house on the listing. If you have access to the MLS, it will say whether it's an REO and you should throw all of these out. Generally anything that's way lower that where other such houses are selling is a fixer. It's just one of those things, everything in real estate is a little ambiguous, and comping out properties is especially so.

Real Quest is good it has better formula than Zillow for sure I use it. Just keep in mind you have to make sure the properties are well matched and within the same radius or at least in a similar community, comps can very.

Example: there is a houses is was looking at built in 2006 within a gated community. It is a 4/2/2, 2,880 sq. ft. and 2 floors. the owner is in the middle of foreclosing. I was looking at comps within the same street. The comps were $110k, $135k, $145k $146k, $143k, $157k. The houses all looked exactly the same but as you can see th comps were all over the place. Here is what my research should be about the comps

$110k - was a single floor 3/2 2,050 sq.ft. Sold at auction the houses was used as a meth lab.

$135k - 4/2/2 2,800 sq. ft sold as an REO

$145k - 4/2/2 2,800 sq. ft sold as an short sale

$146k - 4/2/2 2,800 sq. ft sold as a flip/fully rennovated

$143k - 4/2/2 2,800 sq. ft sold as an short sale

$157k - 4/2/2 2,950 sq. ft sold as a flip/fully rennovated

You can see how this is hard to calculate right? You have 2 rehabs one is at $146k and $157k same exact same house floor plan etc... So what is the difference? The 1 at $157k had a paved drive way and stone on the mid way up the front of the houses. It also had tile instead of raw concrete in the patio. You have to really be careful what comps you choose because the work you do will have to match. In this case the paved drive way and stone is well over $10k so the property would have to be purchase at a good price.

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Well, some good advice has already been offered on this post. I think this may help.

First, know your area. Study what's been going on for a while in that area, this will help you understand many things.

Older communities. Is there regentrification going on? Is it high crime ie. will the copper fly out the door if it's vacant for a week? Are bars on most windows. BTW I've found pockets of good blocks in mainly bad areas where we could get a little more out of them than the surrounding area usually several or more blocks with limited access, that has few entry and exit points and neighbors help us by watching over the place during rehab. They know where they live within the area and they know if its kept up in their little pocket they get to keep their sanctuary.

New communities. Just because it's new doesn't mean it has low crime rates. And, people with money have better things to steal.

If they are building they are building old or new community doesn't matter. it does however, mean good or better things are going on.

when looking for comps it can be tricky,. Example when I was investing in Arizona. Two houses not identical but very similar in almost all aspects, less than a thousand feet apart not accross a major thoroughfare. One is worth 250 and the other 500.

Know your area! It doesn't take that long to find out. If there is a discrepancy there is usually a reason. It's not always a deal. Knowing your area will help in that determination.

Sure take the CMA from your agent. Hopefully they have a working knowledge of that area, if they don't you can point out some specifics to them or find one that does know that area. If there are few comps, thats just the way it is and there can be sevaral answers. Make your decision based on your best judgement. Remember it's an investment there are no guarantees.

Ps. Just because you would not invest and rehab or hold in a particular area doesn't mean someone else won't. Those make good wholesale properties.

@Lilly Kane The way I pull comps for my investors is to paint a picture of the immediate surroundings. I send them solds (both rehabbed and not), under contract and active listings. I want them to see what the range is selling for and how much increased value a rehab adds. would have been my suggestion but I see it's not in your area. Talk to your broker about what you want to see from him/her, and if they don't deliver, find a better one.

There are 2 kinds of comps I want when considering a rehab project and determining the ARV. Everyone will do it a little different.

1- Sold comps of like properties with in .5-1 mile of the subject

2- Active comps of like ARV properties with in .5-1 miles of the subject

I prefer, if possible, comps from an agent who knows the area and my investment strategy. I.E. an agent who knows rehab flippers and works with them.

Consider you financing, hard money or private money. Ask the lender how they determine comps. There is nothing more frustrating then when you think you have a deal, only to find out the lender does not think so. Most HML are going to look at 90 day, conservative, re-sell comps. In other words, what the home will need to be priced at to sell within 90 days. They are looking at their, usually, 6 month term. Therefore, they want to see it priced to sell within that term.

I consider when preliminary comping, tax assessments, driving the neighborhood, and the mobile app. The final ARV I get form an agent.

My 2 cents worth :)

Good luck

Thank you all for the helpful answers. I will take all of them into consideration as I try to figure ARV for the rehab project. I don’t think anyone answered the question about how to know which of the sold homes were remodeled. Is it something that only someone with MLS access would know or is there another way to know?

@Mickie McNie - I will follow your advice as far as asking for what I need from him, and possibly finding another one to work with instead.

@Cameron Sharp - The HML says their evaluators will use 10 comps, but what if there aren't that many within the normal parameters? Will they just go further in distance or age, and then make adjustments?

Is there a spreadsheet or something that I could use for comps somewhere on BP?

Thanks again for the help!