How do you determine Market Value if there are no Comps??

Question

Hi all, Very new to real estate investing but I am learning. I want to buy my first rental property but I am concerned that my asking price may be much higher then the banks assessed value when determining mortgage approval. If there are no comps in the area (4plex), how do I determine if the property is worth asking or what I am willing to pay? I hope I explained it correctly.

Many Thanks in Advance!

Rob C

Many Thanks in Advance!

Rob C

Tyler Stiller · Answer

Where is the property located?  Are there any duplex or triplexes in the area?

Have you talked to a realtor in the area?

Account Closed · Answer

@Robert Campbell  welcome to BP! As @Tyler Stiller mentioned, a Realtor will be able to pull up recent sales data in your market.  In some provinces, assessment data is available year round and can show recent transactions.  Once you get into larger MF (6 units and up) the process is much easier... the value is based on NOI and cap rate.

Robert Campbell · Answer

Thanks for the advice. The realtor said there are no comps in the immediate area but looked a little farther out. I was concerned more with what the bank would do for their market assessment if it assessed much lower then asking price. The bank said I could negotiate with the seller or walk away.

Thanks for the quick responses!!

Rob

Emma Powell · Answer

This can be really tough:  we had this issue on a personal home we bought where two appraisers literally had no comps, and it was extremely difficult to get a loan for it. If it's rural, look at a USDA loan/Canadian rural equivalent (these often have no comps), and those appraisers can often do a better job of getting a value the banks will accept. If you are flipping it, you can hire a Realtor to do a current market analysis CMA or broker's price opinion BPO, usually about $50, if you can't find one to do for free (if it's challenging, be ready to pay for it). You can also hire an appraiser for about $400 if you need some teeth behind the price opinion. You'll find the closest possible comp and adjust up or down from there on features that don't match: chat with a local appraiser to find out how much. Around here it's $10k for .1 acres per of land difference, $5-8k per garage bay difference, apply the same price per square foot for extra bedrooms, $10-15k per bathroom difference, etc. Hope that helps!

Kash Jawed · Answer

@Robert Campbell - here's what i'd do:

- Check with a realtor for comps in the area.. expand the neighborhood if necessary- Get comps for triplex and try to reverse engineer the numbers- Crunch your numbers - If the ROI fits your portfolio, then i'd worry less about comps. It's a long term game

How do you determine Market Value if there are no Comps??

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