How to determine the best comps?

[Dominique Arnold]

My business partner and I are looking to invest in our first flip. We are currently evaluating a few properties. I am curious to know how others select the best comps. for their investment. Of course, as investors, we try to find those at a higher price point however, while assessing your comps what are some other factors you take into consideration? 

[Charlie MacPherson]

I suggest that you DON'T look at comps with "higher price points".  That approach reeks of "eraser math" - paying more attention to favorable data and less to unfavorable.

First and foremost, comps need to be realistic. 

I look for properties within 1/4 mile and sold within the last 6 months.  Frequently, there's just not enough data available, so I slowly increase the search radius and time frame.

I spreadsheet my comps, with columns for beds, baths, square feet, lot size, basement type, septic (public / private), garage, days on market, REO or Short sale, condition, sale price, $/sq ft.

In general, I try to get the same style home, but at least comp 2 story homes with other 2 story homes, ranches with other single story homes, etc.

I also throw out any comps that are either inexplicably low or high prices.

I include 3 sections in my comps - the subject property, sold properties and thos currently on the market (your competition).

I've attached on that I just did on an exceptionally hard property.  It started as a Campanelli Ranch, but had massive additions along the way.  You'll see the notes I made on it.  Note that I excluded this part from the attached file as we were already under contract.

I was representing the seller on this deal. We had it under contract at $374K, but the VA appraisal initially came back at $315K. This was my second set of comps, which caused the appraiser to raise the value by $15K to $330K.

I still think he was very wrong, but it did save the deal!