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Using Comps To Determine The Value Of Your Property

The more accurate you are with your after repair value or on your offer price, the greater chance you have at making a profit. Figuring out the value of a property is always an inexact science that is based more on demand than anything else. However, there are clues you can follow to guide you. Analyzing what has recently sold in your area is a good first step, but unless you are comparing apples to apples, it won’t do you much good. The best way to estimate the value of another property is to know as much as you can about the property that sold, your subject property and the immediate market area.

You don’t need to be a realtor to find comparable listings (more on that later). There are multiple sources for you to get an idea of what your value should be. Between internet property valuation sites, courthouse searches and mastering the area, you can find out a lot about the value. Additionally, most local weekend newspapers will publish a list of every property that has sold in local towns every week.

Valuation sites should be used as a starting point for the value, and not the final number. They may have accurate information on the year built and size of the property, but they may not know the exact condition of the property or circumstances of the sale. You can place a call to the realtor listed on the website and ask for more information, but this can be a long and tedious process. One of the quickest ways to have an inaccurate value is to trust what you see online. Use any values you see with caution until you can do your own legwork.

In a perfect world you can quickly access the multiple listing service (MLS), type in the property and find the information you are looking for. The problem is that not everyone has access to the MLS. Only licensed realtors with an individual user name and password can log into the site. This means that you may need to contact your realtor every time you have a question about a market or an individual property you are interested in. If you have a good relationship and have done deals together in the past, they may spend the time and give you the information you are looking for. However, more often than not, you will need to wait to get what you need.

The alternative to having to wait for a realtor to get back to you is to get your real estate license yourself. This may seem like a drastic move to make for simple comps, but over time it may prove worthwhile. Yes, the process and costs to get licensed make it prohibitive, but there are also additional benefits. Obviously you can use your license to list or sell real estate and make a residual income on the side, but you can also gain a much greater knowledge of the market. As a licensed realtor, you can get alerts of every new property that hits the market and know every property that has be listed, taken off the market, currently on or has sold. If you spend the time to read the listing sheets and look at the values, you will know how to break down comps and become a better investor.

A good realtor will know what they are looking for and the importance of comparable size, bedrooms and style. If you are trying to pull your own comps or looking online at previous sales without knowing the full picture, you can put yourself in a hole before you even start. A similar style property that is located even one additional mile from the subject property can make a huge impact on the value. It is a good idea to establish a relationship with a local appraiser and try to pick their brain. If you give them the comps, they will tell you whether or not they would use them in a report and why. The appraisal process and trying to figure out which properties are most like yours is a very subjective act. The more you know about how realtors and appraisers work in your area, the more accurate you will be with your values.

It is important to not place too high a value on certain amenities. There is no telling if a buyer will like a pool as much as you. The same goes for the fixtures, counter tops, appliances and other items associated with the property. The location is still the number one selling point for most properties. For all intents and purposes, location is the one thing that value can readily be attached to. Mostly everything else is based on the discretion of the particular buyer and seller.

Using the right numbers is a critical part of being an investor. If you are having trouble finding the right comps, you need to reach out to a local realtor or appraiser. The comps make all the difference. Make sure you are using them to your advantage.

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