How do I run comps on properties?

Question

I hear all of the experienced. investors saying you must be good at running comps to get great deals........but how do I run reliable comps?  What is the best source of information?  What all am I looking for?

Wale Lawal · Answer

@Rebecca Schnur

Knowing how to find comps on the MLS is undoubtedly a valuable skill for those who wish to run an accurate, up-to-date comparative market analysis. However, only licensed real estate agents and appraisers are authorized to access the MLS, making it tricky for other real estate professionals to run comps independently.

Many real estate investors have found workarounds to this challenge, mainly through symbiotic relationships with licensed agents. For example, an investor might rely on an agent to pull MLS comps on their behalf in exchange for referrals to clients and listings.

If you want to find comps in your area without having to gain access to the MLS, these online resources can be good tools to help you do so:

• Zillow: You can search within a city to find your neighborhood, and zoom in to find your own property. Here, you can see nearby listings of properties including the number of bedrooms, bathrooms, and pricing. Compare similar homes to your own to get an estimate of how much your property is worth.
• Trulia: You can find public records of properties that have been sold near your address on Trulia. This site offers comps based on proximity to your home, property type, square footage, the number of bedrooms and bathrooms, and when and how much they sold for.
• Realtor.com: Here you can find information on recently sold properties in your city. You can find comps based on the property type, square footage, and the age of the property.
• Redfin: Narrow down the “listing status” of nearby properties in your city to “sold” and find comps that have sold from one week ago to up to three years ago. You can set property facts filters to discover comps that more closely resemble your own home’s features.

All the best!

Jossalyn Wallace · Answer

Find a local realtor who can help you and talk you through their process! Generally you're looking within a certain radius from the subject property (say 0.25 miles), within 200 +/- sq ft of the subject property, similar finishes and number of rooms and if they don't have adjust to compensate, that have sold within the last 6 months. (there are some other factors to consider if you're looking at a unique home or location as well but so you have an idea). You can check accuracy of sold price on public records or tax appraiser sites too.

James J Canull · Answer

I think it’s important to find a very localized realtor who can run this info for you. Getting a solid referral for one is ideal

Bruce Woodruff · Answer

Every participant in the RE equation provides value or they wouldn't be there. Hence they should be compensated.....how much is up to each deal.....

David M. · Answer

@Rebecca Schnur

Oh, you were referring to yourself!!

Anyway, thats a tough one for the conscience...  By some's definition, you are always taking advantage of the seller..  People think real estate agents are taking advantage of the seller since they are taking a commission and thus reducing the proceeds to the seller.  In theory, the seller shouldn't have to pay for access to the MLS to gain the larger market to get the highest bid...  Many investors sell themselves for that reason...  Some hate wholesalers because the fee/difference they are making on the assignment is what they are taking away from the seller who couldn't connect with an investor/buyer...

Or, think of it another way..  the value of the property is what the market is willing to pay for it.  Well, by partaking as a buyer you are part of the market.  So, whatever you are willing to pay for it is "okay."  If somebody else wishes to pay more... then you have your answer.  Or, lets take a "normal" purchase by a regular buyer.  Sometimes the buyer is able to negotiate the listed price down (not exactly in this market...).  Was that fair for both sides?

Hope that helps a bit...

Bruce Woodruff · Answer

I wouldn't worry about the sellers in these deals (more than just being a basic honest person). They are grown-ups and can/should take care of themselves. As you acquire deals, you will have plenty to worry about besides this....

Just my .02.

Rebecca Schnur · Answer

David, by both sides I meant me (not overpaying) and the distressed seller (don’t take advantage of them). Thanks for the tips. :)

Bruce Woodruff · Answer

What do you mean by unreliable? The price they are listed for is what they are listed for. You can follow up and search the 'SOLD' listings and see what they actually went for.

When people talk about Zillow being unreliable, they are talking about their 'Zestimates', which are their guesses about what the listed property is actually worth. That number may or may not be accurate.

David M. · Answer

@Rebecca Schnur

Yes, you just go off of the pictures and amenties described in the listing.

For what it sounds like you are doing, you have to remeber that you "make your money on the purchase."  You can't control what you sell it for, but you can control what you buy it for via your offer.  Generally, you have to plan for a nearly worse case situation of either a total gut / full remodel.  So, what is your estimated cost for doing so?  What do you think you can sell it for?  How much profit do you want?  What are your carrying and closing costs?  From that you back out your highest number to offer.

The comps are really for figuring out what it would go for.  As i mentioend, if you have a feel for the market there is no need to run a formal comp, unless you need to show documentation to somebody (who probably run their own appraisal anyway).

When you say "... fair deal to both sides," who are the two sides?  two sentences earlier you said you are buy and hold?

Rebecca Schnur · Answer

Also, in response to everyone’s comments together….what I am trying to do is find  distressed properties to purchase, refurb, and hold for rental. Both Lt and ST. I am using sites like Foreclosure.com to locate properties. But, my stumbling block has been this, figuring the comps, so I can be confident I am offering a fair deal to both sides.

How do I run comps on properties?

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