Can't get good comps for analysis

Rehabbing & House Flipping
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Can't get good comps for analysis

Manuel A.
Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes

So I found a house again. I'm starting the analysis and my Realtor (24 years experience/investor friendly) can't find any solid comps.

I'm sure this picture says more then I can type:

(Here's the link since it came out a little crappy: http://dl.dropbox.com/u/10748346/Comps.JPG)

The proximity of the houses are all great, no problem with that. The houses were all in good condition when sold from what I could find, and comp 1 and 4 had a single car garage.

Okay, the avg $/Sqft in this are is $132.68/sqft. I don't know how to estimate what a bathroom or bedroom is worth, or a 1 car garage. No clue what so ever.

So if we adjust the values with just the sqft:

Comp 1: -$29454.96 = $100,545.04 (Minus 1 Bed Plus 1 Garage)
Comp 2: +$6368.64 = $114,868.64 (Minus 1 Bed and Minus 1 Bath)
Comp 3: -$15523.56 = $114,476.44 (Minus 1 Bed)
Comp 4: -$23617.04 = $107,382.96 (Minus 1 Bed Plus 1 Garage)

Okay, here's some more calculations assuming a 1 bed or bath is worth $1,500 and a 1 car Garage is worth $2,500 on top of the previous calculations. I'm making these numbers up from thin air as a disclaimer, but I would think they are somewhat in the area.

Comp 1: +$1,500 - $2,500 = $99,545.04
Comp 2: +$3,000 = $117,868.64
Comp 3: +$1,500 = $115,976.44
Comp 4: +$1,500 - $2,500 = $106382.96

So with the, the avg is $109943.27 with a low of $99545.04 so if everything is okay, I would believe the subject property is worth around $104,744.16 or simply $105,000.

Is this good? I mean, the cops aren't perfect, but adjusted is it okay in your opinion? Also a concern I have is the average DOM's (112). Should I skip this based entirely on the DOM's? This area of my city does do good in terms of sales though. On a 1-4 scale of sales this place has been doing a 3 for May, July, and August. On June it did a 2. Not sure about September though.

Scale meaning:
1 = 0-3 sales
2 = 4-15 sales
3 = 16-39 sales
4 = 40+ sales

So this place probably averages about 19 sales per month.

The radius of this area this based on the scale's sales is <= 2 miles.

I hope this is good enough :D

Manuel

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  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    13y

    Hi Manuel,
    Can you grid this out including the garage info, lot size, financing/concessions, and transaction type (REO, Short, "normal")? This would help to see if you're missing anything. As it's gridded now, one would assume a 2 bath is worth much more than a 1 bath. Were there no 3 bedroom comps available?

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  • Manuel A.
    OP
    Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
    13y
    Originally posted by Phillip Dwyer:
    Hi Manuel,
    Can you grid this out including the garage info, lot size, financing/concessions, and transaction type (REO, Short, "normal")? This would help to see if you're missing anything. As it's gridded now, one would assume a 2 bath is worth much more than a 1 bath. Were there no 3 bedroom comps available?

    These were all normal sales and no, there were no 3 bed comps available. This place is an older area, where the more elderly crowd lives. I know this as I've done work here (door to door surveys) awhile ago. I would think that a 850sqft. house wouldn't have 3 bed/ 2 bath just because of the small sqftg which would mean the rooms are probably really small. I'd expect more like 2 bed/ 2 or 1 bath.

    As for lot size:

    Subject property: 7,623 sq ft
    Comp 1: 6,969 sq ft
    Comp 2: 13,068 sq ft
    Comp 3: 6,534 sq ft
    Comp 4: 8,276 sq ft

    I can't find anything on the garage's or how old these houses are but I'd expect them to be "older" as this is an established "older" part of town. So I'll keep that in mind when looking at it for repairs.

    As for the deal itself, the asking price is $44,500 so 70%ARV($105,000) - Asking Price = $29,000 to work with for rehab holding, etc... Plus the seller IS motivated. This is an "Estate Sale". So I'm hoping this is going good :D

    Thanks @Phillip Dwyer

    Manuel

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  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    13y

    I'd agree with you on the size to number of bedrooms ratio. Make sure to check out the floor plan thoroughly as it may not fit the market.

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  • Manuel A.
    OP
    Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
    13y

    Well I'm going out to price out the rehab, I'll be back!

    Hope to hear some opinions from the BP community!

    Manuel

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  • Jack Bobeck
    SFR Investor · Jacksonville, FL · Member since 2012 · 285 posts · 83 votes
    13y

    Manuel,

    Try Homegain.com, if not there, befriend a local appraiser and ask for some rough numbers before you do a deal. Odds are you will eventually work with the appraiser in your real estate career.

    Jack

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y

    In my experience (and my area), it's nearly impossible to comp a 3/2 with anything less than a 3/2, as that third bedroom and second bathroom are essential to getting things sold. It may be the same or different in your area, so it would be hard to say anything with confidence (also because the size differences are large), but...

    If these are the best comps you can find, I would suggest taking the property(s) that are almost certainly lower value than yours, and going on the assumption that yours will comp at least as high as those, and then not assume anything additional from this data.

    In this case, you can assume that your property will sell for more than the 780 sf 2/1 that is both smaller and has fewer beds/baths. So, the best you can probably say based on these comps is that your property will sell/appraise for at least $108,500.

    If you really can't find any better comps, see if the numbers work with that ARV, and if so, you're good. If the numbers don't work at that ARV, you'll need to do some further research.

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  • John Stevenson
    Foreclosure Specialist · Miami Beach, FL · Member since 2012 · 131 posts · 123 votes
    13y

    I took the time to run some of your basic information through an appraisal spreadsheet and I came up with a estimated value of $115,000.

    This is based on the following assumptions:

    1. There should be a 2/1 or 3/2 bedroom to bathroom ratio. If a property has more than that there should be a downward adjustment of $1,500.

    2. Your property has 3 bedrooms but the square footage indicates that at least one of the bedrooms is going to be too small. Though 3 bedrooms has more appeal in the market, if they are dysfunctional too small then there will be very little measurable affect to the value. In fact it could actually reduce the sales price, but since I do not know the layout, I did not want to assume too much.

    3. I estimate a garage should add about $5,000 to a price.

    4. I adjusted the square footage by $45 per square foot. Adjusting the square footage of a property by the the average sales price per s.f. is an over simplification.

    5. Comp 2 had a much bigger lot and that was adjusted.

    Of course, this is not exact since there very well could be some specific factors that are not adjusted. But it may help.

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  • Manuel A.
    OP
    Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
    13y

    **Update**

    First, thanks J Scott, John Stevenson, and Jack Bobeck.

    I'm glad my estimate is somewhat close to yours and on the conservative side. It gives me confidence.

    So I went to the house, and checked it out with my team. It was very bad. Soo bad, it would probably be better to buy it, knock it down, and build a new house.

    The ceiling was about 8ft tall, everything needed replacement, windows, floors, roof, etc... It needed a furnace heater installed as it didn't have one or the venting needed for it, the water heater was in the kitchen not separated by any walls, a giant tree was growing into the foundation causing it to be very bumpy and cracked, about 1/4 of the INSIDE of the house was stuccoed, and a lot of the house wan't up to code.

    So, it was basically a brand new house needing to be built. I have several more lined up to look at and have streamlined my estimation process so I can get more done in a day. I had my GC (who is my uncle) just write up all the different labor costs for me on paper so I don't have to wait for him to be free to look at a house. So as long as I can get close to his prices, I can have him come back when a bank closes and gives me a 3 day inspection period so I don't waste his time. So if I'll have more to share later with the BP community.

    Thanks everyone!

    Manuel

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y
    Originally posted by John Stevenson:
    I took the time to run some of your basic information through an appraisal spreadsheet ...

    John Stevenson - would you mind posting this spreadsheet to the BP file place?

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  • Manuel A.
    OP
    Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
    13y

    John Stevenson Yeah, what Steve Babiak said, if you could that would be great!

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  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    13y

    Manuel Acuna You mentioned a 3-day inspection period. Is that common in your area? I typically see 10 days for due diligence periods in my market.

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  • John Stevenson
    Foreclosure Specialist · Miami Beach, FL · Member since 2012 · 131 posts · 123 votes
    13y

    This is a good example why you should never buy a house sight unseen. You just never know what is inside. So many times we start with the numbers to see if it is a good deal but a good deal is never known until you see the property. Sounds like a real money pit!

    Manuel Acuna and Steve Babiak, I will see what I can do about getting you all access to the spreadsheet.

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