Such variance in market comps - Why is that?

Question

Hi all,

I was doing some market analysis in the Albany area and have been finding insane amounts of variability in prices. There are some 4br3ba that are $150K then some that are $280K, even though they are close by and one isn't totally gutted while the other is finished. I've found this with many other properties; despite similar bedroom/bath/square footage comps, they can really vary widely in terms of listing price. Does anybody know why this is? Maybe some properties need more work than others and I can't quite see that at first glance but it does seem a bit strange about how wide the range is for similar properties with similar features. Any advice or points that I may be missing would be helpful!

Russell Brazil · Answer

I find unexplained price variance is often because of a school boundary.

Brett Deas · Answer

What is your timeframe? For running comps many people only use within the 2-3 month time frame because the market on a micro level can shift widely very quickly. Also connect with someone who is very active locally as they can probably offer up reasons why that someone on the outside can't.

Nate Monson · Answer

Hi Queitin, I'm going to send you a direct message and maybe we can talk a little further about the market up here!

Quentin Thiery · Answer

@Nate Monson Yes that's exactly my plan! - house-hacking in multifamily (or SFH w renting rooms) to maybe get an FHA loan with low DP or seller financing - anything to really lower my cash invested (since I am still a student and working 2 jobs part time its hard to save up a lot you know). Definitely interested in student rentals as I have some friends at SUNY Albany that could network for me lol. I am definitely looking for cash flow, but totally okay with sacrificing some of that for a property manager. I asked my initial question because I actually was having a bit of a hard time analyzing properties - the numbers didn't seem to make sense - but I also think I need some more practice analyzing deals, because I could be doing certain things wrong. Do you think the MLS is the best place to get comps and help analyze properties? Let me know what you think because I definitely am interested in house-hacking in upstate NY.

Nate Monson · Answer

Since you're in NYC this might not necessarily apply. But I always recommend house hacking as the best way to start out. (Buying a 2-4 unit property, living in one unit and renting out the rest)

When it comes to the market up here, there are a number of ways you could take it but it mostly depends on your goals. If you're looking for cash flow and ok being involved in the day to day management, student rentals can be a way to get good cash on cash returns for your investment. There are also other areas where you can buy more turnkey properties in less residential neighborhoods where you wouldn't necessarily make a ton of cash flow, but it would be a safer place to house your money and earn the other benefits of owning real estate (mortgage pay down, tax benefits, appreciation).

Quentin Thiery · Answer

@Minna Reid No i don't have access to the MLS but I am passing my RE license in the NY in the coming months so I should have some then. But yes I was looking at sites like Zillow and Redfin and yes I guess that isn't the best way to get a proper understanding of the market. It was strange just seeing obvious fixer uppers selling for $150K and then a finished home nearby selling for $180K? Since information is limited of course I can't know what isn't shown to me but from an investing point of view it was weird that a property that needed that much work would only be a bit cheaper than some of the nearby comps. Either the comps were not right or maybe the house was overpriced for any particular reason. Thank you for your reply!

Minna Reid · Answer

I see that you are an interior decorator. Do you have access to MLS, or are you just looking at some sites like Zillow? Those consumer facing sites don't really provide enough detail to perform a proper comp. Also you mention listing prices - Active inventory should not really be given as much weight as pending and closed comps. Actively listed simply means not sold yet, deeming asking prices mostly irrelevant.

Damon Bodine · Answer

A few things that could be happening here.   #1. Divorce Sales - properties in which a  married couple is deeding one portion of their share to the other who will now be the sole owner.

#2. Partial deed sales.   Lets say someone is bringing a partner or something into the existing ownership structure. or vice versa.  #3. If you're looking at 3rd party sites like zillow, red, trulia etc. the can be wrong a lot more than people think.    Have to always follow up tax records to verify sale.   Broker in the area with MLS access should know how to do this as well.   #4. Foreclosure sales .   In all serious foreclosure sales can sometimes can take multiple years to close.   Especially in a state like NY with the slower judicial process.   So you may very well see things. that were contract in 2018-2019 that are just closing now.  #5 Recording delays/mis-recordings. - Deeds are generally recorded within a couple of the sale.  However at times things do slip through.   You'll probably see some deeds every week that were actually sales from a number of years ago but were improperly recorded. So they're doing corrections now.

Hope this helps!

Quentin Thiery · Answer

@Steven Luttman Not sure if my prior message linked above^

@Nate Monson

Quentin Thiery · Answer

@Steven Luttman @Nate Monson

Thank you! Excited to hear that you guys are excited about investing in Albany and the local market. Im in NYC but looking to potentially invest in either upstate NY around the hudson valley area or in Long Island. Is there something you guys would recommend about investing in Albany - is it good to start off? Thank you for all your help guys!

Such variance in market comps - Why is that?

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