What are my options when there are no comps available

Question

I am a newbie to real estate and bigger pockets. I have been quietly reading forums and post for about a month. Long story short I have a background in construction and spec building in Massachusetts.

I have found myself in an interesting situation with a piece of property (1 of 5) that could be involved in a larger real estate project (about 12 SFH and 4 unit commercial building). This current lot is larger than the others it is surrounded by as is the house. It is a 5 bedroom 5 bath single family home that has been split into 3 units. The unofficial asking price is 650-750 on about an acre of land with a 2 car detached garage.

This house (along with the 4 others) would be an eventual tear down to complete the project. My problem is the asking price is high and I cannot find comps for an appraised value to give an official offer.

Any input or suggestions would be great thank you in advanced

-Eric

Glenn Istre · Answer

Hi Eric,

So there are roughly 4 methods to determine the price of a property. The first is the CMA or comps. This is the most readily and easy to use method. The other 3 are Cost approach, income analysis approach, and an appraisal.

The appraisal performed by a licensed appraiser would be the most accurate in this case but if you do not want to pay the cost to have the appraisal then it may not be worth it. I would recommend this approach if you are planning on tearing it down and building something new because the appraisal may require the land to be surveyed so you get that bonus.

If you are not looking to spend money the cost approach could be used. This is essentially the cost to build an exact replica of the house. The problem with this is the material costs can vary and you would need to determine if you would use the cost of material that is similar or exact replacements.

The last and most likely the least useful would be income. This property is not and will not generate income so i would not advise you use this.

I hope this helps!

Glenn Istre · Answer

Eric,

Usually mortgage companies can give recommendations, real estate firms, and general contractors. You could also do a internet search and use yelp to see what kind of reviews they have. Honestly anyone you work with on this deal may know someone. Ask if they get any kind of benefit for referring a particular person. This does not necessarily discount the individual but more information may be required before making a decision on the appraiser.

Eric Heider · Answer

@Glenn Istre thank you for responding. I think you are right in saying the best approach is to pay a licensed appraiser. I think I will go that route.

Do you have any tips or suggestions to finding a ‘good’ licensed appraiser?