What to offer based on comps

8 Replies

I am trying to determine offer amount on a Philadelphia deal I am working on. The comps show one recent cash sell at 72k and other at 106k.

The repairs are unknown at moment.

I think the idea in real estate investing is to get the property as low as possible.  So always go on the low side.  Now, if it is a competitive deal or super real estate deal, you'll have to get more aggressive.

Those comps are really far apart from each other.  Doesn't tell us much.

@John Gallagher

You’ll need to get a look inside and get a handle on the condition before coming up with comps. Are there any interior photos?

Meeting with seller tomorrow. I was trying to get a price range to give seller idea where my numbers are at.

Are you wholesaling it? If so you need to determine what a flipper will pay and then reduce the offer even more to get your profit out of the deal. Tons of people use the 70% rule. take 70% of the ARV (honestly, I would lean towards $75-80,000, but I always lean low). so 70% of 80K is $56,000. Assume the house needs $20,000 worth of work to get it to the comps. Now you are at $36,000. Then decide how much money you want to make, subtract that from $36,000 and then work from there... This is a VERY BASIC way to do it without knowing anything more than you posted.

Need more data:

1 - describe the property you are thinking of making an offer on for:

        a - S q FTg
        b - # of bed/bath
        c - garage, bmst
        d - 1 floor or 2 floors

2- describe the BOTH properties you are using for comps:

        a - S q FTg
        b - # of bed/bath
        c - garage, bmst
        d - 1 floor or 2 floors

3 - distance in miles between all three properties from eachother

4 - Are these the only properties that sold in your area for comps?
        

The condition of each is extremely important.  If you don't know that.  You could be comparing apples to oranges.  Also, are they both cash transactions?  Was one a cash transaction and the other a traditional buyer?  Try to get those answers.  If you can't, maybe go a little farther out to get more comps.  

If none of that helps, go with the lower number.  Often times the seller will not ask you how you got your numbers.  They mostly care about what is that number.  Hit them low and let the games begin.

Are both of your comps cash sales? If so they are far off in price and you would want to look at better comps to get your ARV. Then subtract out your rehab and fixed costs to determine what purchase price would yield a profit worth your while.

@John Gallagher

I am just starting off as well so take this with a grain of salt.

Are you sure there aren't other comps available?

You may want to talk to your buyers in the meantime and find out what their criteria is and see if this property fits it. If it fits a certain buyers criteria then you know who to approach first so you can get the deal done with as quickly as possible.

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