Comparison sale approach! Please help me!

[Bryan Rodas]

Hello, I am trying to learn how to compare comps in a very accurate way. I've watched countless YouTube videos spreading false information, talking about arv eventhought they don't even make adjustment to the properties. I can tell they don't do it right. I want to master the comparison sale approach, however I'm lost. Any recommendation on courses, or books?. I want to know how to adjust etc. Please help me. Thank you so much!

[Patrick Britton]

@Bryan Rodas  most investors and realtors don't bother attempting to consider making adjustments.  to do so requires an understanding of statistics that goes way beyond the brain capacity of most investors and realtors.  Heck, most appraisers are lazy and make significant and poor assumptions about most adjustments.  It's a hyper-local issue as well.  For instance, years ago i was able to determine the difference in price between a 1 bathroom and 2 bathroom house, all else equal, was about $70,000 in Seattle WA.  Well, in the southside of Chicago IL it's closer to $9,000.  

Also, keep in mind that appraisers are paid to provide an opinion of value.  It's just an opinion so no two appraisers will arrive at the same conclusion, although if they've both been trained correctly the difference should be within 5% to 10% (max).  

Suffice it to say that in most parts of the country, the process is relatively similar:

1.) start by looking at solds within 0.5 miles (or within the same neighborhood/subdivision, etc.)

2.  go back no further than 6 months (Covid might require adjustments to 12 months but that depends on the area)

3.  weed out properties that are significantly different from the subject property in terms of size, number of beds, baths, lot size)

4.  weed out properties that are significantly different in terms of condition (fixer vs. new construction) and type of sale (short sale vs. foreclosure vs. conventional)

5.  weed out properties whose style is significantly different from the subject.  so think about excluding tudor homes if the subject is a craftsman.

After all that you should be left with just a few very good comparables.  from there it's okay to make some minor adjustments but valuing properties is an artistic science.  and it takes a lot of practice and effort to eventually get a reasonably accurate price range and interestingly, there's really no "right" answer.  the market will determine what is "right" but just because the market says something is worth X right now is no guarantee that 1.) it's truly correct and 2.) it's repeatable

Also, there's a massive amount of human judgement required.  At the end of the day it's a best guess and unfortunately, it's not always going to be the "answer" you're looking for.