Pulling comps the right way

Real Estate Agent · chicago, IL · Member since 2008 · 46 posts · 1 vote

I'm a new realtor but I always thought that to pull solid comps on a subject property, you only looked at similar properties that had been sold or closed within the last 60 to 90 days, using a half-mile or so radius. Well, that's what I've been doing for a couple of probate properties. I asked my managing broker to check my work just to be sure, and he used not only sold but active, pending, price changed, etc. At that point, i just knew I'd have to find someone else to check my work.

Am I right on this?

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Damien Hall

Investor · Washington, DC · Member since 2008 · 90 posts · 16 votes

15y

Jerrold:

IMO your broker is giving you a broader sample to look at. I think he lead you in the right direction. I do believe that pulling comps based on what is sold is the best way to do it. But pulling comps and formulating ARVs is really more art than science.

The active listings will show you the current competition on the market. If you want a quick sale then you know you will have to come in at the lower end of these properties no matter what the sold comps were. You can also look at the specs of those houses and compare to your subject. Price changes can let you know the activity in the retail market. If something is priced too high then that criteria will give you an idea of how the market is valuing properties. There's really no "one way" to pull comps.

But I think your broker did you a favor. And of course you can still get other Realtors to check your work even after your broker has.

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Damien Hall
Investor · Washington, DC · Member since 2008 · 90 posts · 16 votes
15y
Jerrold:

IMO your broker is giving you a broader sample to look at. I think he lead you in the right direction. I do believe that pulling comps based on what is sold is the best way to do it. But pulling comps and formulating ARVs is really more art than science.

The active listings will show you the current competition on the market. If you want a quick sale then you know you will have to come in at the lower end of these properties no matter what the sold comps were. You can also look at the specs of those houses and compare to your subject. Price changes can let you know the activity in the retail market. If something is priced too high then that criteria will give you an idea of how the market is valuing properties. There's really no "one way" to pull comps.

But I think your broker did you a favor. And of course you can still get other Realtors to check your work even after your broker has.
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Nick J.
Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
15y
Damien had a great response. I am more concerned about recent solds but certainly use the other parameters to help indicate whether properties are going up, down or staying flat.

Also, I don't know if Damien mentioned this but when considering the use of comps, also consider days on market. If you see comparable properties in the X range but they're all on the market a really long time, obviously, that needs to be taken into account.
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Manny Cirino
Real Estate Agent · Winter haven, FL · Member since 2011 · 572 posts · 336 votes
15y
Your broker is a broker for a reason. When going through comps it is important not only to check similar recently sold properties but also current selling properties that are close by and similar. If you have a house that is appraised at $100,00 and you have 6 other houses that are very identical same condition, feature, size, everything equal and are also worth $100K but they are priced at about $85K - $83k. Tell me if the those houses are like yours, why would a buy pay more for your listing? Instead they could save $15k-$20k. You have to price your homes properly in order to compete if not you will find your self reducing the price 2 or 3 times and ticking of your seller.
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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
What is the goal for pulling these comps? If it's to determine market value, I don't see the value in using Active or Pending sales.

The Active listings -- especially in this market where sellers are often desperate -- are mostly going to tell you what the sellers *want* to sell for, not necessarily what they think the property will sell for. And by virtue of the fact that they haven't yet been put under contract or sold, they are over-priced.

And the Pending Sales aren't going to be much better, as in this market, many properties are selling well-below list price.

Using Active and Pending Sales will likely lead you to a number that is higher than market value, which may lead you to list the property too high...
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Jerrold Stallworth
OP
Real Estate Agent · chicago, IL · Member since 2008 · 46 posts · 1 vote
15y
Thanks guys for the responses.

it appears that most of what's been sold in the area are REOs and 'Corporate-owned' (same as REOs i think)but I didnt want my search to extend beyond 6 months. However, it looks like I might be forced to since theres been only one regular sale in the last 6 months for that area. Everything else is REO.

I thought by my managing broker using actives, he was screwing up the comps. Thanks for enlightening me.
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Jerrold Stallworth
OP
Real Estate Agent · chicago, IL · Member since 2008 · 46 posts · 1 vote
15y
J-Scott

thats what I was thinking. I'm pulling comps because i want to wholesale this property, not list it. So I used sold properties bought with cash for the last 6 months. I read somewhere on this board that this was the best way to determine what cash buyers are paying for similar properties in recent sales.

it just occurred to me that maybe Damien & Nick thought I was pulling comps for listing purposes. Sorry guys, my original posts should have been more precise.
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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
15y
Well, what we do to determine values is we call an appraiser whom we have a great relationship with and ask them to look at the current info relating to the home. They give us their best valuation with the info provided. Though anyone can look at comps in reality our opinions are less valuable then a real appraiser.
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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
15y
"I'm pulling comps because i want to wholesale this property, not list it." This is the wholesaling forum, so I think most of us didn't get confused.

My only other comment... A Wholesaler isn't like a Broker. So I can see why your broker got confused. Must make for stange office discussions.
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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Originally posted by Chris Martin:
"I'm pulling comps because i want to wholesale this property, not list it." This is the wholesaling forum, so I think most of us didn't get confused.

I actually *did* get confused...I don't view threads directly from the individual forums, and didn't even notice it! :oops:

Knowing that, I certainly reiterate not to use active or pending sales. Find cash sales of similar properties (they could be REO or short sale depending on condition) from the past 6 months (3 if possible)...
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Damien Hall
Investor · Washington, DC · Member since 2008 · 90 posts · 16 votes
15y
Jerrold:

I wasn't confused. I just think looking at a broader sample is a better way of analyzing the market. I certainly agree that sold properties are the best way but I wouldn't discount the other paramaters to give you a feel of the market. When it comes to purchasing the property, your investor will want an overview of the entire market. If you can provide him all of that info within your wholesale packege then that will be key. I've seen great packages where everything I needed to know was in the package.

Also as Curt indicated, if the deal goes far enough, an appraiser will come out and provide the ARV. I'm not an appraiser but I believe they take into account more than sold properties to get the ARV. Once again, from your investor's perspective, that ARV is the key to his lending.
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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y

This is, IMHO, a HUGE red flag. If you have no retail (fixed up, move in ready) sales, then an appraiser will have a really tough time figuring out a value. You don't want to go back into the distant past because there are no recent sales. You want to consider if there really is a market at all for this property.

Can you tell what's happening with these REO sales? Are they turning into rentals? Is a bunch of inventory fixing to come into the market?
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Manny Cirino
Real Estate Agent · Winter haven, FL · Member since 2011 · 572 posts · 336 votes
15y
For wholesale deals I always pull to sets of comps. The first is to present to the seller those usually reflect house selling in the same condition as hers these are usually short sales or house recently sold by any other type of distress, motivated seller. This way she can see why I am offering what I am offering. Her I take into account DOM, recent cash buyers, recently sold and a couple other factors. Then a pull a second set of comps for my A.R.V. That I present to my investors/end buyers for that I usually take in to account the recently sold remodeled homes, current selling(non short sale/reo) but all depends on what type of deal I have, you have to know if it's a good retail flip, rental, lease option etc... That well help you pull the correct comps
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