Best practices to determine accurate home value when working leads ?

Question

I need some saavy investors to give me a few outside the box strategies for obtaining accurate home values when working property leads.  I have MLS access but don't trust my judgments. Actual appraisals are too costly if you are working multiple leads per month (both financially and time wise) and as we all know ; judging a value wrong can kill a deal and hault business growth in its tracks.

Mike H. · Answer

There is no magic system. You have to be able to calculate the estimated appraisal value yourself to really do well.

Here is what I typicall do and I can almost always come within 5k of an appraisal either way of my range (I give a 5k range).

1) Use zillow for comps. Type in the address so you can zoom in.

2) Then set your criteria filter as follows:a) Sold within past 6 months.b) Square footage plus or minus 400 sq ft from the subject property.c) Age of home plus or minus 20 years from the subject property. Although the plusmay be less if its newer. So a house built in 2000 should only have a plus of about 10 years (i.e. 1980 to 2010). A house built in 1960 can use the plus/minus of 20 and  include 1940 to 1980

d) Try to find same bedroom count.

e) Then add/subtract adjustments for bathrooms (5k for one less/more bathroom, etc), garage (10 to 15k for garage/no garage).

Be sure to stay in the same subdivision first. Then same school district. Then same town.

If you can't at least stay in the same subdivision and school district, then you might have an issue. But if you can, then you should be golden with the above.

Also, only count valid sales for your comps as I'm assuming you want to know what the house will be worth AFTER its fixed up.

Here are my last few estimates and the comps I gave the lender. And then the actual appraisals that came in for those properties:--------------------------------------------------------------------Bradley Quail - Just got the appraisal on this one yesterday. It came in at 139k so I missed my estimate by 1k - on the conservative side (always better to be a little on the conservative side):

This is what I had sent to the lender:

Estimated ARV: $133,000 to 138,000Comps:Subject Property: 1170 Quail Dr, Bradley, IL 60915Will be a: 3bdrm/2bath, 1,500 sq ft, Built in 1980Estimated ARV: 133k to 138k  (estimated LTV of 65%)ACTUAL COMPSComp #1: 1141 Guinevere Ln, Bourbonnais (2 blocks away - same school district)3bdrm/2bath home, 1,438 sq ft. Built in 1992SOLD July 2014 for 147kComp #2:  1250 Mallard Dr, Bradley, IL3bdrm/2bath home, 1,728 sq ft sq ft. Built in 1976SOLD May 2014 for 143kComp #3: 875 Pheasant Dr, Bradley, IL3bdrm/2.5 bath home, 1,972 sq ft, Built in 1979SOLD August 2014 for 167k

Here were the comps and my estimate for Amhurst. The actual appraisal came in at 155k.

Address: 1555 Amhurst Way, Bourbonnais, IL 60914Estimated ARV: 160kHouse specs:Built in 2001Bedrooms: 3 Bathrooms: 2.5Full basement (unfinished), with 2.5 car garage.Bourbonnais schools, .26 acre lot in a great subdivisionMy plan is to partially finish the basement so I can get another living room/family room down there and I should be able to get 1,500 to 1,550 a month in rent.Here are some of the comps:1528 Amhurst Way4/2, 1500 sq ft, Sold for 185k in July 20131506 Amhurst Way3/2 1640 sq ft, Sold for 176k in October 20131540 Brian Ct3/2.5 1820 sq ft.  Sold for 181,500 in Aug 2013

Here's one of my more recent ones. My estimate was for: 130k to 135kBut I haven't received the appraisal yet but you can see what I used to come up with my numbers. I think I deducted 15k to 20k for not having a garage when I compared these.

RE: 162 S Lincoln, Braidwood

3/2, 1757 sq ftLot size .44 acres Built in 1975, No Garage. --------COMPS  -------------------------------------------------------------------------- 1) 978 Eureka, Braidwood - Sold Feb 2014 for 155k 3/2, 1,400 sq ft. 2) 340 N Walker St, Braidwood - Sold June 2014 for 165k 3/2.5, 1,900 sq ft,  3) 196 S Center st, Braidwood - Sold May 2014 for 165k 3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

Built in 1975, No Garage. --------COMPS  -------------------------------------------------------------------------- 1) 978 Eureka, Braidwood - Sold Feb 2014 for 155k 3/2, 1,400 sq ft. 2) 340 N Walker St, Braidwood - Sold June 2014 for 165k 3/2.5, 1,900 sq ft,  3) 196 S Center st, Braidwood - Sold May 2014 for 165k 3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

--------COMPS  -------------------------------------------------------------------------- 1) 978 Eureka, Braidwood - Sold Feb 2014 for 155k 3/2, 1,400 sq ft. 2) 340 N Walker St, Braidwood - Sold June 2014 for 165k 3/2.5, 1,900 sq ft,  3) 196 S Center st, Braidwood - Sold May 2014 for 165k 3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

1) 978 Eureka, Braidwood - Sold Feb 2014 for 155k 3/2, 1,400 sq ft. 2) 340 N Walker St, Braidwood - Sold June 2014 for 165k 3/2.5, 1,900 sq ft,  3) 196 S Center st, Braidwood - Sold May 2014 for 165k 3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

3/2, 1,400 sq ft. 2) 340 N Walker St, Braidwood - Sold June 2014 for 165k 3/2.5, 1,900 sq ft,  3) 196 S Center st, Braidwood - Sold May 2014 for 165k 3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

2) 340 N Walker St, Braidwood - Sold June 2014 for 165k 3/2.5, 1,900 sq ft,  3) 196 S Center st, Braidwood - Sold May 2014 for 165k 3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

3/2.5, 1,900 sq ft,  3) 196 S Center st, Braidwood - Sold May 2014 for 165k 3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

3) 196 S Center st, Braidwood - Sold May 2014 for 165k 3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

3/2, 1,900 sq ft 4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

4) 822 W Main, Braidwood, Sold July 24, 2014 for 147k 3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

3/1.5, 1,300 sq ft 5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

5) 121 Eureka, Braidwood, Sold Apr, 2014 for 143k3/2.5, 1688 sq ft

Simon Campbell · Answer

@Raj Gandhi don't use Zillow.

Redfin recently conducted a study of the reliability of Trulia and Zillow. Their report stated that these two sites are missing around 20% of the active listings and that it takes 7 to 9 days before a new listing is uploaded. Additionally, 36.5% of their active listings are no longer for sale.

What does this actually mean? In active markets, not seeing a listing for 9 days could very well mean that great deal is already gone. What you are looking at are the mid-to-high priced homes that have no wholesale potential. On top of that, 35% of your time is wasted because you are researching listings that no longer exist. And if that wasn

Raj Gandhi · Answer

Use Zillow.  Their zestimate is based on some robot comps.  You don't need to trust it implicitly but it will give you a decent range.  Turn-on display of recent sales; note the details of similar units and date of sale.  Ideally, enter some of these in a spreadsheet.

Look up property tax assessment.  Again, the absolute value isn't critical but look a the trend.  If necessary, look up the same tax assessment records for some of the Zillow comps.

Look on craigslist for FSBO comps.  They will tend to be high.

This one is sketchy... if there are bandit signs around, call the wholesaler.  Make up a story about a fictitious comp.  If they demand a starting price from you, start real high. The wholesaler will under-shoot market value.

Become an expert on your area.  If you study the MLS, zillow and comps you'll eventually become an expert.  The smaller the area, the faster you'll learn.  If you're area is large then it will take a long time.

Finally, consider working the deals from both ends.  Simplified, purchase price & rehab & rent => cash flow & profit.  Instead of using your numerical analysis to determine precise rate of profit, decide on an acceptable rate of profit and re-arrange the equation.  You should be able to calculate a max purchase price.  As long as you're meeting profit projections, who cares if you don't know the exact value.

Brandon Kelly · Answer

Westin,

Regarding value when working the lead, I agree with above, in that it's good judgement and experience...   ...however, to expand a bit....   ...on the sale side, I deal with Private Money Investors, and my agreement is set up so that we get three (3) different opinions (a realtor of his choice, my opinion as a Real Estate Broker, and then we enlist a "local specialist" agent as the third opinion).

Hope this helps!

Matthew A. Rosenberg · Answer

Actual appraisals can vary in different places and with different persons, you need to make just a good judgement about it and it comes only from experience.

Curt Davis · Answer

You are gonna have to roll the dice.  Understand that even if you did pay for an appraisal that value could be different when you sell and a Realtors opinion will also be different.

Study the comps if you can see what other homes are selling for in the area of similar style homes.

Its all a guessing game, try to give your best guess!!

Good luck

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