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!

[Anson Young]

dosnt really matter, cash close can be anything from an investor, to a homeowner w/ cash, lottery winner, etc.

[Luciano Lara]

So you're saying a cash close for $50K can be compared to, for instance, a conventional-loan close also for $50K? Wouldn't it be like apples to oranges?

[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.

[J Scott]

What do you plan to do with the property?

In my opinion, if you plan to do any work on the property, it doesn't matter what the comps are when you purchase...it matters what the comps are for when it is in saleable condition (post rehab)...

Why do you need purchase comps for an REO?

[Anson Young]

Originally posted by Luciano Lara:

So you're saying a cash close for $50K can be compared to, for instance, a conventional-loan close also for $50K? Wouldn't it be like apples to oranges?

Just saying cash =/= investor pricing. A FNMA homepath house can be $50k, closed with a rehab loan since homeowners got first crack at it for the first 15 days on market. Nor does cash = investor, could be cash rich homeowner, lottery winner, etc.