Advice on comps

[Conrad Legé]

Hello,

I am currently in my search for my first fix & flip. I have found & recently looked at a property that I feel has potential. I’ve been reading the BP book on Flipping Houses by J Scott as a guide. I recently had my broker run some comps for me however there are limited SOLD comps to work with however there a few strong comps that are currently “contingent.” Would like at least 3 solid comps to work with.

My question is, is it good practice to use comps that are contingent or pending or should I stick solely with comps that have SOLD? 

Thanks,

[Paul De Luca]

@Conrad Legé

3 good sold comps should be minimum in my opinion and you should also look at active, contingent, and pending comps. Sold comps are more important.

[Kevin Garvey]

I occasionally look at contingent comps if I can't find anything comparable and have exhausted all possible avenues for sold comps. Usually I will expand the area and look farther back in time before looking at under contract comps. I only find myself having to do this in situations where it's an unusual property type or configuration. 

[Crystal Smith]

Quote from @Conrad Legé:

Hello,

I am currently in my search for my first fix & flip. I have found & recently looked at a property that I feel has potential. I’ve been reading the BP book on Flipping Houses by J Scott as a guide. I recently had my broker run some comps for me however there are limited SOLD comps to work with however there a few strong comps that are currently “contingent.” Would like at least 3 solid comps to work with.

My question is, is it good practice to use comps that are contingent or pending or should I stick solely with comps that have SOLD? 

Thanks,

On one of our first fix and flips we had a great property in a great neighborhood in Orlando. The recently sold comparables supported the ARV we needed, but we did not pay attention to pending or contingent. (There were no pending/contingent) We completed the renovation, and put the property back on the market but the sold properties we used to justify the purchase were now too old. We set the price based on our original assumptions but the offers we received were all well below what we needed. So while you can't use contingent/pending comparables to determine what you can potentially sell your property for, you should pay attention to the data. The contingent/pending show that there's good market activity.

[Martin M.]

@Conrad Legé

You're on the right track focusing on sold for your comp.... but I hear ya... sometimes there just aren't that many sold comps nearby to make an accurate comp.

If you do use contingents because they're all that's available, one thing to look at with them is list to contingent time. If that's fairly short like 3 to 5 days, the seller's likely accepted an offer near asking price or higher.

Opposite applies if the place was listed 6 months before going contingent and then went contingent and so on.. but sold comps are way much better if they're available. Good luck with it

[John Warren]

@Conrad Legé where in the Chicago market is this property? Most areas of Chicago have tons of comps, so I am surprised you are not getting enough data. 

[Shawn McCormick]

@Conrad Legé In addition to what others have said, I would call the listing agents of the pending listings that you are trying to use as comps. Find out what they are under contract for and if there were any concessions. This will help with your comps knowing that they will eventually be used in your appraisal. Depending on how old your current sold comps are, they may fall off by the time you are done with yours, so the pending will be valuable.

[Conrad Legé]

Quote from @John Warren:

@Conrad Legé where in the Chicago market is this property? Most areas of Chicago have tons of comps, so I am surprised you are not getting enough data. 

This is on the south side. My broker pulled 11 comps total. 4 of them sold however the rest are pending and contingent. 2 of the 4 that sold are more than 2 miles away from the subject property.. Is that too far for a dense area like the city?

[Conrad Legé]

Quote from @Shawn McCormick:

@Conrad Legé In addition to what others have said, I would call the listing agents of the pending listings that you are trying to use as comps. Find out what they are under contract for and if there were any concessions. This will help with your comps knowing that they will eventually be used in your appraisal. Depending on how old your current sold comps are, they may fall off by the time you are done with yours, so the pending will be valuable.

This is a good idea. Thanks Shawn. 

[Martin M.]

@Conrad Legé

2 miles is too far. Ideally you'd want within a few blocks, maybe no more than half a mile for the comp to be accurate

[Shawn McCormick]

Quote from @Conrad Legé:

Quote from @John Warren:

@Conrad Legé where in the Chicago market is this property? Most areas of Chicago have tons of comps, so I am surprised you are not getting enough data. 

This is on the south side. My broker pulled 11 comps total. 4 of them sold however the rest are pending and contingent. 2 of the 4 that sold are more than 2 miles away from the subject property.. Is that too far for a dense area like the city?

 You have to think like an appraiser would. Start in the same neighborhood, if there aren't any, go out to 1/2, 1 mile, 2 miles IF needed. Don't force the comps. Once you've found them in the geographical area, then you must find as close to age, beds, baths and sqft as you can so as few adjustments need to be made. If it is densly populated and most homes are similar age/size and you still cant' find any, then you can start looking back more than 6 months if needed.  All the while keeping within the same zip codes, school zones and not crossing any major roadways if possible.