Realtor bringing comps of rehabs, not comps of ARV

[Arthur Banks]

Being fairly new in this, I thought I'd ask this question here before I "fire" my realtor :) I have a buddy that's been a realtor for more than 5 yrs (I'm guessing it's at least that). I don't believe he's worked with many investors.

I sent him some properties I found on bidselect and he also sent me some from the MLS. I in turn asked him to get me comps so I could know what the ARV (after repair value) would be after rehab. What he sent me back were properties that recently sold, but all needed work. None were move in ready. I take that back, one had been rehabbed. So I asked how can I roughly determine what these properties will sell for after repair, so I can work the numbers and figure out if it's a good deal, if all your comps are similar "in-need-of-repair" homes? His response you can't really tell what the ARV will be. I'm new and all, but that just doesn't make sense. Suggestions? Coach him or find a new realtor. I will say we have always talked of figuring this out and working together.

Thanks in advance BP family.

[Chad Truran]

Originally posted by Bill Gulley:

I'd say you're asking the Realtor to do your job.

They can show closed sales, move-in ready or needing repair, if it needs repair, those repairs should be mention, but not the costs to repair or improve.

How does the Realtor know if you are going to put in granite counter tops or pre-formed, a Kohler sink or a Stanley, are you going to put in $30 a yd carpet or $8 rags?

Looking at sales in need of repair are not good comps for the ARV, unless your after repaired house will still need more repairs! You need to look at move-in ready comps if that is the condition you'll be selling the property in.

After learning RE, before any investor starting off selects any strategy of what to do, they need to become familiar with thier market.

Rehabbing a place takes money, bisides that, before you start you need to know what funds are available for what will be required. That will drive you into a price range, not so much of the property value but the spread you might make. You can't stick a Kenmore stove in a $350K home, probably more like a Vulcan at least 2K and up. So, do you have the funds to rehab bigger more expensive projects, if not, you may stick to the Kenmore type homes. Certainly depends on the amount of work and materials needed too, you may only need paint in that $350K property for a profit.

Anyway, a Realtor isn't going to know the extent of rehabbing you are going to do, at what level of finish so you can't expect them to give you an ARV on a house needing work.

There are two ways to learn your market (use both to some degree). 1. Sit and learn appraisal techniques and how to crunch numbers. 2. Get out an look, go to open houses, go see listed properties, walk through and see what is in them and what amenities are in different priced homes, that is the only way to know what the market and competition is doing. IMO, investors don't spend enough time looking.

You should look in an area to the point that you know the floor plans by driving by a property, be familiar with the builders, try to check out homes near completion, workers will usually let you in.

Need to get to the point where you can see an agent's sign in a neighborhood, and be within a few thousand bucks of the asking price, look it up after you guess, if you can nail it or be within a thousand bucks, consistantly, you then know that market, at least generally.

When I was doing rehabs, the lumber yards and box stores were like candy stores to a kid. I've spent hours looking at materials, prices, talking to the desk on price breaks and shopping. You need to get to the point, IMO, that you can walk through a house and have the materials ringing up at the cash register as you walk through, you know what sink will go there and what the price is.

Sorry I got so far off the Realtor comp issue, but you need to do your homework.... Good luck...... :)

This is one of the best posts I have read in awhile. Tons of common sense that sometimes get overlooked in the rush to get ahead.