How to estimate with wildly different comps

[Alan Crookham]

This is probably going to sound like a fake scenario, but this is the real deal! I live in a fairly small town in PA of about 10k people. I am planning to do my first house flip as soon as I finish setting up my newest rental (which will be my second, so I’m a newby still).

I found a neighborhood I really like, and started researching recently sold houses on Realtor.com, and there are three in the neighborhood. Same neighborhood, fairly similar houses, but the sale prices are 40k, 80k, and 175k. All on the same street. I do know that the 40k house needed a new roof, but that is still a massive price difference. How would I conservatively work out the comps in a situation like this?

Thanks!

[Andrea Weule]

That's tough...on a positive note in small town you should know most of the people.  Or someone should know everyone's story.  Find that person.  I grew up in town like this in Montana and my folks still live there (mom always has).  My mom knows everyone and knows most stories and who to ask.  

Frankly, I'd ignore the $175k as it is more than double the others, unless you can find out the story on that house.  I my hometown, they've done crazy things, like refinance some farm land into the same loan as the house.  Even though the deeds are different, they'll put the full loan amount down as the price of the house.  

You're looking for ARV, so the $40 should be out if you know it needed a roof, it probably needed more. If $80k is reasonable use that. You can always hope for a higher sales price, but don't run your number planning on it. I'd check a few other equivalent neighborhoods too.

Best of Success!