Cash Comparables

[Luciano Lara]

When finding comparables for an REO that I plan to close with cash, should I use comparables that were also closed with cash? Does it matter? Thanks in advance!

[Steve Babiak]

When you buy with cash, the comps you look at will somewhat depend on your exit strategy. If you intend to flip to FHA buyer, then you will ideally take recently sold comps of properties that would pass FHA inspections; chances are those will be in better condition that the REO you buy for cash. That is so that you can compute ARV of the re-sale "more generously".

Now, if you are trying to justify lower priced offers, then you would want to help your position by using similar condition comps; so, in this case you'd stick to cash purchases that were also REO or otherwise distressed.