Comp Readjustments for Discrepancies

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Comp Readjustments for Discrepancies

Muaz I.
Wholesaler · Richardson, TX · Member since 2013 · 21 posts · 2 votes

Just getting started with wholesaling and concluding my first month of consistent marketing. I've got a few leads on the table and am starting to run into a problem. When pulling up comps how do you guys readjust your ARV for discrepancies which may arise?

For example, I'll often run into a property which may only be 2000 sqft but it sits on a 2-3 acre lot. From my comps I find enough similar properties with the same number of bed/bath/sqft/etc. but none of the comps will have the 2-3 acre lot size of the subject property. How do i readjust my ARV to account for that extra acreage?

Or for example, if all my comps don't have a swimming pool but my subject property does, how do I adjust my ARV and account for that?

Or, If subject property doesn't have a garage, but all of the comps do have a garage?

Does anyone else run into similar problems?

Sorry If these questions have been answered elsewhere, I didn't have much luck finding any answers. Thanks in advance!

P.S I'm located in Dallas, Texas if that's relevant at all to my inquiries.

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Shaun Reilly
Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
12y
Originally posted by Muaz Inaam:
@Shaun Reilly

Thanks, so I know that in Texas it definitely adds to the value, however, is there any quantifiable method of determining how much the lot size will add to the ARV of a property?

or maybe in the above example, if I was to determine the ARV to be more than $175,00; is there a cap to how much more I should add to the value per acre?

Well yeah there is a really easy way, find similar houses on similarly sized lots. But that is your problem, you don't have any to compare it to on that characteristic.

Alternatively you can find other houses, that aren't similar to yours but are similar to each other, that have the same kind of discrepancy. Not perfect but if you can find things where the only big difference is the lot size you can maybe work out some value to the extra land.

You could also just ask some local agents how much more they think a place on 2 acres vs. a quarter acre is worth. Take that number with a grain of salt but can give you a ballpark.

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  • William T.
    Wholesaler · Saint Louis, MO · Member since 2013 · 336 posts · 54 votes
    12y

    Welcome to BP, it is best to obtain the most accurate ARV before signing papers for the deal. It will be hard to change things once you have signed the contract already. You would more than likely do an addendum or sign another contract.

    0Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    12y

    Start here:

    Primer for Estimating ARV

    Podcast Guest on Show #2024
    0Reply
  • Muaz I.
    OP
    Wholesaler · Richardson, TX · Member since 2013 · 21 posts · 2 votes
    12y

    Thanks William,

    I haven't gotten that far as of yet; I was more so inquiring regarding how to calculate the ARV before I move forward with it or even determine if it's a deal or not. I was having trouble understanding how to calculate it when there are distinct discrepancies, like extra acreage, or a swimming pool, etc?

    For example:

    Subject Property is 2000 sqft. 3 bed/2 bath. 1976 built And sits on a 3 acre plot ($?????)

    Comp 1: 2100 sqft 3 bed/2bath. 1975 built and sits on a .20 acre plot ($180,000)

    comp 2: 2050 sqft. 3 bed/2 bath 1978 built and sits on a .20 acre plot ($175,000)

    Comp 3: 2150 sqft. 3 bed/2 bath. 1976 built. Sits on a .25 acre plot. ($182,000)

    Although my subject property is almost identical to the other three comps, it has significantly far greater of a lot size. How do i adjust to account for that?

    0Reply
  • Muaz I.
    OP
    Wholesaler · Richardson, TX · Member since 2013 · 21 posts · 2 votes
    12y

    @J Scott

    @J Scott

    0Reply
  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y
    Originally posted by Muaz Inaam:
    Thanks William,

    I haven't gotten that far as of yet; I was more so inquiring regarding how to calculate the ARV before I move forward with it or even determine if it's a deal or not. I was having trouble understanding how to calculate it when there are distinct discrepancies, like extra acreage, or a swimming pool, etc?

    For example:

    Subject Property is 2000 sqft. 3 bed/2 bath. 1976 built And sits on a 3 acre plot ($?????)

    Comp 1: 2100 sqft 3 bed/2bath. 1975 built and sits on a .20 acre plot ($180,000)

    comp 2: 2050 sqft. 3 bed/2 bath 1978 built and sits on a .20 acre plot ($175,000)

    Comp 3: 2150 sqft. 3 bed/2 bath. 1976 built. Sits on a .25 acre plot. ($182,000)

    Although my subject property is almost identical to the other three comps, it has significantly far greater of a lot size. How do i adjust to account for that?

    Well looking at the info you have right here I would tell you that I would start with using an ARV of $175K since the acreage should only add to the value. IMHO something quirky like that MAY increase the resell but it will be hard to quantify. Since it is only to your benefit have the seller tell you why their place is worth more because of it. They might be fine with your numbers before you try to inflate your risk... err I mean ARV. :)

    To touch on your general questions. Some places acreage will be worth a lot others it isn't worth much. That is something you will need to know for your area. Same thing with a pool, places where it is hot all year tend to put a lot of value on them. Here in the North East most people think it generally LOWERS the value of the property as a lot of people don't want to deal with it just to have it available for 2-3 months a year. A garage is the only thing you mentioned I would be surprised doesn't add significant value in pretty much any market.

    0Reply
  • Muaz I.
    OP
    Wholesaler · Richardson, TX · Member since 2013 · 21 posts · 2 votes
    12y

    @Shaun Reilly

    Thanks, so I know that in Texas it definitely adds to the value, however, is there any quantifiable method of determining how much the lot size will add to the ARV of a property?

    or maybe in the above example, if I was to determine the ARV to be more than $175,00; is there a cap to how much more I should add to the value per acre?

    0Reply
  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y
    Originally posted by Muaz Inaam:
    @Shaun Reilly

    Thanks, so I know that in Texas it definitely adds to the value, however, is there any quantifiable method of determining how much the lot size will add to the ARV of a property?

    or maybe in the above example, if I was to determine the ARV to be more than $175,00; is there a cap to how much more I should add to the value per acre?

    Well yeah there is a really easy way, find similar houses on similarly sized lots. But that is your problem, you don't have any to compare it to on that characteristic.

    Alternatively you can find other houses, that aren't similar to yours but are similar to each other, that have the same kind of discrepancy. Not perfect but if you can find things where the only big difference is the lot size you can maybe work out some value to the extra land.

    You could also just ask some local agents how much more they think a place on 2 acres vs. a quarter acre is worth. Take that number with a grain of salt but can give you a ballpark.

    1Reply
  • Stephanie Dupuis
    Residential Real Estate Broker · Bremerton, WA · Member since 2013 · 494 posts · 142 votes
    12y

    @Shaun Reilly brought up a good idea about asking a local agent about the value of the lot.

    The way you know how much things (such as acreage) are worth in your area is through practicing comps...experience. Doing this over and over until you get a feel for the value of items after comparing property after property.

    This is a great comp to practice with. To begin to get a feel for the value of the lot, you need to create your own estimate. To get your estimate, compare properties that are similar in every way except their lot size (acreage). The difference in sale price will start to tell you about the value of the lot. Do many of these, b/c you will see that it's not a simple, per acre formula.

    0Reply
  • Muaz I.
    OP
    Wholesaler · Richardson, TX · Member since 2013 · 21 posts · 2 votes
    12y

    That's a good idea; I hadn't thought of that. Thanks for the help, guys!

    1Reply
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