I'm looking at at SFH in Chicago thats listed at $125K. Its in decent shape and needs work but not foundation or anything major like that. I am not sure about the rehab costs but I will be very consverative and say its between 30-40K, mostly cosmetic. So thats about $170K in not including any other costs. My issue is that its a 5 bedroom and and I'm getting comps for 4 and 5 bed, but seems like all but one of the Sold properties recently has been a fixer upper or in bad shape. I am assuming the Appraiser will use these numbers for the sale price now, but for ARV - I only see one comp which is at 224K. I would be ok with that, but I'm wondering when it comes time to sell, how it would be appraised when there aren't many "nicer" homes to comp with. Anyone have experience with this?
@Raji Ahmed - how far back are you going? We bought a rehabbed one when all the recent comps needed work and they went back 12 months and more then .5 mile to find actual comps
@Brianna S. I had my realtor do a CMA. It includes listings sold and on the market within a 1 mile radius of the property within the last 6 months.
"Mostly cosmetic" and an estimate of $30-40K on a $200K house don't go together in my mind. You can do a lot for $30K. If its strictly cosmetic (paint, flooring) it should cost a lot less than $30K.
Be very careful if you can't find good comps. That's a case where a small shift in the market can have a big impact. You never know what an appraiser might choose.
@Jon Holdman Thanks Jon. I guess maybe I over estimated due to lack of knowledge of what costs what. I am planning on taking a GC out there with me this wknd to get a better idea of the estimate. Im trying to be very conservative with the comps but just not sure of ARV with so many comps in poor condition.
@Raji Ahmed I assume you're trying to fix and flip this house, or wholesale it to a fix and flipper. ARV and the rehab estimate are the two most important numbers. And the hardest to figure out when you're starting. There are a number of threads on determining ARV. My advice to you is that you CANNOT rely on an agent to give this to you. You MUST be able to determine this yourself. You may need help from an agent to pull sales, but do not rely on the agent to choose the comps or do the adjustments and math to get an ARV. That number is too important to have someone else just give it to you. A 5% difference comes right out of your profit, and that's easily a third to a half of your profit.
For the rehab, my take is there are contractors who are used to working with homeowners and then there are contractors that work with fix and flippers. The homeowner ones are going to be much more expensive, but will be much more willing to hold your hand and deal with change orders.
Are there any rehabbed properties for sale or pending that are similar? Those will be the appraiser's comps when it comes time to sell. Your 3 month old comps will be 6 mos old come sale time.
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