Is this a good way to estimate ARV?

Question

Okay, so I'm trying to figure out the best way to estimate ARV so I can determine my max offer, ect.  I'm practicing by trying to value my current home.  So I went onto zillow and looked up sales in the last 6 months in my neighborhood with 3+ br 2+ ba 2000+ sf.  (My house is 4br 2.5ba 2800 sf).

I took the 14 sales that were within about a 2 mile radius and found the price per square foot and applied it to my home which puts my value at approximately $182,000.

I am unsure about this method because my appraisal came in only at $155,000 a year ago.  I don't have access to MLS, which I'm assuming is the best way to determine value.

But, my question is, is this a good starting point for me when comparing potential deals in different neighborhoods for my first flip?  Is it significantly more accurate using MLS data because there is more information?

Thanks!

Chris Feltus · Answer

Going to echo Rob Gillespie sentiments here. Websites such as trulia/zillow use an algorithm to aggregate data. This is acceptable to find a ball park estimate, but not reliable when pricing individual comps.

In addition, the data inputted into the algorithm is delayed. While the data from MLS is always instant and accurate. In other words, yes the MLS is significantly more accurate.

Brian P. · Answer

Asher the price per square foot is a tool used by lazy and incompetent Realtors and if a rough gauge at the best unless you are just limiting it to very, very similar properties.

I have seen them use it to value homes that were similar in square footage but one development sat on quarter acre lots and one sat of third acre or even half acre lots, no way a 1800 sq fit home in one is equal to a 1800 sq ft in the other.by using that method.

I have had homes sell for 10% more because they were in one school district and homes on the other side of the road were in another school district, same builder, same age, etc.

If you want to use $ per sq ft as a rough tool, always use the lowest price per sq ft for your ARV purposes and adjust for serious differences.

Jerry Puckett · Answer

Asher, you're right, the "zestimate" is trash, but the sold comps on zillow are usable, so long as they truly are comparable. I would narrow down your radius to a half mile, and not go back more than six months.

To get a good conservative estimate, I would recommend, throwing out the lowest comp, then using the next 3. That's a technique I picked up from Jon Holdman a couple years back, and it has worked well for me no matter where I get my comps from.

And I wouldn't be worrying if my data doesn't jibe with the tax assessor. That data has a lot to do with the zestimates being trash.

Luis A. · Answer

Zillow also uses information from the tax records. So when you see in Zillow that a certain home sold for $x and the date it sold, that comes from tax records and is accurate information.

The problem is that many counties can take forever to update their online records, mine is one of them. As you know the only sold information that is valuable is for homes that sold withing the last 6 months or so or even earlier.

So Zillow can be useful to a degree since it can give you some information on recently solds. The other part of the equation is YOU. You have to figure out how to use that information and what comps to use and which not to use. That is where learning how appraising works comes into play. Talk to appraisers and learn from them and read appraisals so you you can see what they look at.

Also, you want to verify whatever information you find in Zillow. Many times you can do this by checking the county records yourself which are available online.

I used Zillow a lot before I had MLS access. Now, there is no substitute for MLS, it is an indispensable tool for a real estate investor and if you are serious about investing I would recommend you find a way to get permanent MLS access, it's a tool of the trade.

Disregard the "Zestimate", it's a joke...

Asher Anthes · Answer

What do you mean?  Isn't the algorithm used to create the "zestimite" which is extremely inaccurate for my home especially.

I just looked up information on zillow and trulia and only used the sales that were reported by both websites in the last 3 months.  I feel like this would be a pretty accurate way to determine value.  I guess MLS would be slightly more accurate because there is more data, so a better average?  Or is there anything else I'm missing?

Asher Anthes · Answer

all the homes are about 20 years old.  And yes, I am working with an agent.  I'm trying to find a good resource that I can use in addition to my Realtor's data

Arthur Garcia · Answer

Asher in addition to square foot did you also take into account the age of the home?

Rob Gillespie · Answer

Asher,
if ya don't have access to the MLS, just buddy up to an agent and ask their opinion according to their experience and the MLS. I would never use one of those free sites to price my stuff, it is just too inaccurate in my opinion. Good luck!

Is this a good way to estimate ARV?

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