A house with no comps?? Need Help Again!!

12 Replies

Hello everyone,

I hope you are having a wonderful day. I have a house that I want to put in a cash offer on but I can't because there aren't any comps. It's a prime location, excellent schools, but the guy who bought the house in 2007 is a builder.  He turned the house into this massive house that doesn't exist in this town/neighborhood. Most of these homes are 3 or 4 bedrooms and 2 and 3 baths. This house is 6 Bedrooms, 5 baths with all kinds of legal extensions. He's a younger guy with young children and his wife died of cancer and he went completely broke. He is going to put the house up for sale soon and my brother feels he will take cash for it. 

What do I do in this situation?

Thanks in advance,

Karen

What's your intended use of the property?  If you're fix and flipping, be VERY careful.  Be very conservative in valuation.   I was burned badly with a hard-to-comp property.  Appraisals are little more than a guess in the best of circumstances.  They're a total crap shoot with hard to comp properties.

If its going to be a rental, is there demand for such a property?   Could it be a boarding house, especially if there is demand from college students?

Some other plan?

Hi John,

Thank you so much for your response.  The property is a buy and flip for resale. The reason why there aren't any comps is because the house is ten times larger than any other house in the entire neighborhood.  The house doesn't need one thing done to it. Everything..including the dog house in the backyard is completely updated and absolutely gorgeous. Such a shame what happened to him......

I have another question, They are asking close to $800,000 for the house in an area where all the other houses go for $550.000. My question is...who would buy the house knowing they could never sell it for the amount they paid for it? Just curious....

Thanks,

Karen

Originally posted by @Karen Hurd :

I have another question, They are asking close to $800,000 for the house in an area where all the other houses go for $550.000. My question is...who would buy the house knowing they could never sell it for the amount they paid for it? Just curious....

 Karen, it seems like you have asked a question you need to answer before you buy this property. What happens if you can't get what YOU paid out of it?

If it is hard to comp for you, it will be equally hard to comp for your buyer - maybe even more so, because you will have just purchased this house, giving it a value by undervaluing it. Guess what house comes up as the closest comp? The exact same house.

In my experience, you never want to be the one trying to sell the largest/best house in a neighborhood. Just my two cents. Good luck!

Hi @MindyJensen

Thank you so much for your advice, but I'm not interested in buying the property at all. I know someone that is and I couldn't figure out why. You answered my questions.

Thank you. 

@Karen Hurd You asked: "who would buy the house knowing they could never sell it for the amount they paid for it"? The answer is: those who just want THAT house - and can well afford it. If your Buyer is such a candidate, firstly find out how much THEY would pay. That's Wholesaling101. Cheers...

I wouldn't touch this deal with a 10' pole.

Sometimes folks think the average $/sq.ft. sales price can just be multipled by the size of the house to get a value.  That's not how it works.  Appraisers will adjust for size differences.  But the adjustment factor is maybe one third of the average sales price per sq.ft., not the full amount.  And for a property that's unusual for the area it may be even less.  Much better to buy the smallest, dumpiest house in a neighborhood than the biggest or fanciest.  Once you exceed the neighborhood parameters, the increase in value falls off rapidly.

@Karen Hurd

To figure the comp on a house like that find out how much more 1 bedroom is worth in that area.  I.e.  find 2 similar homes with one being a 3bdrm and one a 4 bdrm.  What's the difference in price?  Let's say 10k...  then you can add 10k x 2 or 20k to the price of the 4 bdrm.  Same with the bathrooms.  It's a little more difficult to figure out since there aren't any near by properties that are similar, but that will give you an idea.  However, as an investor, you usually don't want the best or worse house in the neighborhood.  As @Jon Holdman stated, it's hard to recoup the value when you've exceeded the area.

Thank you Kevin Delaney so very much! This...was extremely helpful and I'm very grateful for the fact that you took the time to write so much! 

I have one more question.... that doesn't pertain to this house, but you have a sentence in your answer...".how much more 1 bedroom is worth in that area" Because I do not have access to MLS, how do I know what a house IS actually worth to begin with....I was told to never use the sold houses on zillow, Trulia...any of those sites. I was told they were all wrong. I am trying to make sense of this because the house sold what it sold for....In other words....How can zillow get away with lying about what the house actually did sell for. I don't know if this question makes sense, but if you could answer it for me that would be amazing!!

This was a catastrophic success. I learned a lot and also lost a huge amount of time having fun.

Can we please forget about the evil in this world and can someone tell me how to find real comps without using the MLS??????

This Blog Post may help.  

Edit to add:  The Podcast referenced in the post was a good listen as well.

@Karen Hurd Where did you hear that Zillow's SOLD prices are wrong? To the best of my knowledge, they are quite reliable. 

Isn't it just their "Zestimate" (guessed value) for UNsold homes that cannot be taken at face value? All the best...

Originally posted by @Brent Coombs :

@Karen Hurd Where did you hear that Zillow's SOLD prices are wrong? To the best of my knowledge, they are quite reliable. 

Isn't it just their "Zestimate" (guessed value) for UNsold homes that cannot be taken at face value? All the best...

 Correct.  My understanding is that the historic sold prices come directly from public records.  It is the Zestimate that can be giggleworthy.

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