ARV Question: Closer but 5+ year sold comps vs Further but 1+ year sold comps?

Question

New investor here trying to see what everyones experience has been like. I often run into situations where I can't see nearby comps for a deal i'm working on that are within a 0-3 year window of being sold. Would an appraiser consider a similar property that was sold awhile back or something that is further but within a more recent time?

Would yall also have any recommended free and paid services to get nearby comps easily? I'm using a combination of MLS comps provided by realtor, redfin, and backflip analysis tool.

Thanks in advance for your input!

Jonathan Greene · Answer

What type of real estate and where are you looking that you can't find comps within three years? It's likely, you are being too tight on your comparables or not searching correctly.

Jei Mercado · Answer

@William Haynes Very well said and makes a lot of sense. I like that "what is easier to put a value on" I didn't think about it that way and given the amount of properties these folks probably do they'd probably take the most convenient route. Thank you!

Jei Mercado · Answer

@Jordan Ray thanks for the offer! if I find something again i'll let you know. I noticed these deals move so fast its hard to do these calcs quickly to make a decision.@William Haynes thanks for the response! from your experience do you know if appraisers would choose closer comps but adjust a different search criteria such as a lower br/ba criteria and adjust the arv by 5-10k on a lower lower room or bathroom count or would they prefer a property further out just to match that criteria. this is probably a case by case basis.@Allie McAlister thank you for the detailed response! yeah that was exactly my concern too with regards properties sold around that 3 year time frame. i'll definitely reach out and let you know.

William Haynes · Answer

@Jei MercadoIt's definitely going to be a case-by-case basis. I think their general stance is going to be to go with whichever comparable property has the greatest degree of similarity in terms of (probably, in this order): location, age built, quality of construction/current condition, and square footage. Basically, from what I've seen (and this is purely anecdotal), they're not really going to go out past one, maybe two miles, unless there simply is no truly comparable property. If there are close comps where the only difference is a bedroom or bathroom count, they're going to use it.

Think about it this way: what's easier to put a value on? That's what these guys are thinking. The difference in locations between one mile and five miles could be highly subjective and difficult to nail down. Is this or that area worth X less than the other area, and are you, Mr. Appraiser, willing to put your name behind that call? Maybe not. But a bedroom or a bathroom can be easily qualified in terms of dollars (I usually see $4,000-$5,000 allotted for differences in bed/bath count).

Truthfully, if I can't find easy comps and if I can't make it easy for the appraiser to agree with the value I'm looking for, I just don't buy it. Let someone else buy the fringe areas and improve them first.

To be direct, I can't imagine an appraiser using 5-year-old comps. It would be pretty unheard of. The value of the market 5 years ago absolutely is not what it is today. Even if they did use it, it would be wrong; the same property from 5 years ago would have appreciated with the market.

Best of luck!

Allie McAlister · Answer

Hi, Jei!

When I pull comps, I use nearby and recently sold ( within 3-6 months ) properties with similar or matching bed and bath count, and as close to the same sq. footage as possible. Brick v.s siding and covered v.s no converted parking also make a large difference and are items that have to be adjusted for.

Generally, using comps that are over 12+ months sold are not reliable to be an accurate reflection of current market values. A lot can change during that year time frame.

If you're unable to find comps within a 3 year time frame, I'm interested to know what your other search parameters typically are ( sq. ft. range, bed/bath count/ etc. ) , and also the locations you are unable to source these comps.

But, hey, that's what I'm here for! If you have addresses you need more info on, let me know and I'm happy to pull together some good comps for you.

William Haynes · Answer

Hey Jei,The general perspective is you really really need to be inside one year and one mile unless you simply can't find truly similar properties. This is what appraisers are going to do. So you may find what seem like good comps 2-3 years out, but if there are closer comps this is what the appraiser is going to use.

Jordan Ray · Answer

Whats the address? I can send you some comps.

Jei Mercado · Answer

Hi Jonathan, thanks for the quick reply. I'm looking at SFH in the Memphis, TN area (38128). I don't believe anything too crazy. I've only filtered by sold 0-2 years and br/ba which is why i'm surprised. If I changed the filter to around 3-5 years then I can see 1 or 2 properties but i'm not sure if that is enough for an appraiser to use.

I'm fairly new to real estate so if there is any feedback on what I can get a better idea than that would be awesome. There are some areas I can see a good value so my question was more related what about areas that don't have with in a 1 mile radius or haven't sold anything nearby since 5 years ago.

ARV Question: Closer but 5+ year sold comps vs Further but 1+ year sold comps?

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