Chicago: Comps and Micro Markets

[Tracey Steele]

Hi BP Community - What are your thoughts on comps and micro markets? I'm looking at a property that does not have any real comps that have sold in the last six months. If I use an entire neighborhood, then I get one picture, but the property of interest falls in a micro market within the larger neighborhood that is "developing". 

What are your thoughts properties that have a lack of available comps?

Thanks!

[Crystal Smith]

Originally posted by @Tracey Steele:

Hi BP Community - What are your thoughts on comps and micro markets? I'm looking at a property that does not have any real comps that have sold in the last six months. If I use an entire neighborhood, then I get one picture, but the property of interest falls in a micro market within the larger neighborhood that is "developing". 

What are your thoughts properties that have a lack of available comps?

Thanks!

 It depends on what kind of property it is, Single family, multi or commercial.  It also depends on what your plans are for the property.  

If it's a single family and you plan on purchasing, renovating then selling (i.e. flipping) then not having any sold comparables within a one mile radius of the last 6 months is problematic.  The new buyer, using a loan, may run into the same problem & you'll be stuck.  Some appraisers will go back 9 months, but your risk w/ such a property will be high.  Note:  Make sure you take a close look @ the pending & contingent properties as well.  When we run our own numbers if we have no comps or only 1 good comp we usually pass.  If we have 2 good comps but no more, then we'll examine the contingent & pending properties.  If there are enough & the numbers work, we'll take a look @ sold comps >6 months.  If we don't have enough contingent or sold, we pass.  

If it's a small multi up to 4 units, the general same rules apply as a single.  With that said we've seen appraisers go out more than one mile & greater than 6 months to get comparables, but not by much.

If it's commercial then you can examine the income being produced by the active properties in the area to determine what the potential value of the property your considering, even if there aren't any sold comparables.