Do you include comps purchased by LLC's?

5 Replies

I was narrowing down comps on a house and noticed that 2 comps were extremely high and if used would push my comps up by 70k. Using comps purchased by "jane doe" the house comes to be around 188,000. If I include the other 2 houses purchased under an LLC the house comp pushes to 255,000. Would I be wise to not use these types of comps as they are the outliers from other comps? One LLC was named after the housing address and the other was "we buy houses fast llc" or something like that. I can't find any other comps like those two. And if they are investors i wonder what they saw to make them purchase at 275k and 295k in that area.

When I look at comps I'm just looking for similar properties.  If they are good comps for your subject property then I would use them. Its tough to tell without additional information but I wonder how the two other houses vary? Are they more Sq feet, more bedrooms, baths etc? Better location? 

What are you using for criteria? 

Medium four point individuRob L., Four Points Property Management | [email protected] | 978‑360‑7817 | http://www.fourpointspm.net

You're 

You're likely missing something related to the properties being comparable...maybe a different neighborhood, desirability, etc. Investors/we buy houses guys usually aren't paying close to FMV.

Really being good at doing comps takes some thought and analysis (like you are doing). It helps to have a little background in Math and Statistics. Like you said, these look like outliers. It could be that the LLC made a group purchase of one or more properties at the same time - buying and recording these on one deed (I've done that before). If so, these numbers should NOT be used. Whatever the case, if they look to be statistically out of line, I wouldn't use them. Do a simple bar-chart or histogram and you will be able to tell if they are outliers or not. Generally, I would think that comps would be normally distributed if you have a large enough data set.

Here's another thing to consider:  In my home state of TN (and maybe others), I can legally and ethically record a deed stating a higher purchase price than my actual purchase price.  Actually, we are supposed to state the higher of "actual sale or value", whichever is higher.  I have recorded deeds with values higher than my purchase price and I recorded that higher value.  It helps to fight off the stupid "I-know-how-much-you-paid-for-this-house-so-there's-no-way-that-I'm-paying-you-this-much-for-it" people that find the info on Zillow (spit).