Potential first wholesale deal? Need help!

[Dan Miller]

I've found a few foreclosure properties in the same neighborhood and am trying to figure out the ARV. A realtor has sent me recent comps, all of which are from Sept through Jan. '08. For this subdivision, they range from 430k to 580k. I'll assume the 580k property is an outlier, as it looks like it has a new addition, unlike the others. If I ignore the top and bottom comps, the range is still large: 440k to 530k, with a median of 500k.

My approach is to determining maximum offer is to take 70% of the ARV (from the comps) and then subtract my wholesale fee and rehab costs. In this case, I'm not clear as to what the ARV should be. There's such a large range (90k), with the median around 500k. Even reading the notes from the comps, there doesn't seem to be much discernable difference b/w a 440k and a 530k. Assuming 500k ARV vs. 440k could result in me overpaying big time. Just not sure what to do. How do I handle this? What should I use as the ARV?

Comps:

9/27/07 $430,000
11/2/07 $440,000
10/31/07 $499,000
9/14/07 $494,000
11/8/07 $503,000
11/9/07 $510,000
10/19/07 $530,000
10/24/07 $580,000
12/20/07 $515,000

Thanks,
Dan

[Jon Holdman]

You need to try to find more details. What is the condition of these comps? What was the circumstances of the sale? Short sale, REO, anything like that? What are the specifics of the houses? Even in neighborhoods built by one builder with a handful of floor plans, there are variations. In older neighborhoods, there can be very high variations. Without more details, these number are meaningless. You would essentially have to take the lowest, $430,000, as your ARV.

Try the public records database. Some areas are very good, some nearly useless. Here in the Denver area, there is huge variation from county to county.

A title company is another source of info. If you have any relationship with a title company, they should be able to give you info. If not, just start calling.

Drive by and have a look at the comps. Especially those recent sales. If there are people there working on a recent sale, that's a clue it needed work. A big roll-off dumpsters another clue of significant work. If people are living there, it was problem nearly move in condition.

For me, I can often get more info from the title company's database than from my agent's comps. In particular, the buyer, seller, and lender. But, the agent will have different info. So, all of it together starts making a better picture.

Jon

[Dan Miller]

Jon,

I have the detailed MLS comps, which has BR/BA, comments, etc, as well as pictures for some of the properties. The 430k one appears to be a short sale or REO (comment says, "bank approval required"), so I'd probably rule that out. On the rest it's hard to tell. Perhaps I'll just drive by the comps (as they are all within 4-5 blocks of each in other in the suburbs, and see if anything jumps out at me.

Thanks,
Dan

[Jon Holdman]

Five out of your nine fall into the $494-$515 range. If those are all comparable in terms of size, beds, baths, style, and location, I'd guess your value at the low end of that range. I assume you want to flip, so you want to err toward the low end. But that's really just a guess. You have to get out and learn you neighborhood.

Jon

[Andres Garcia]

How did this deal work out?

[Jason F]

from the price differences and the fact that one of the houses in newly built, while the others are older, means that you are probably looking in an area that has a lot of different style and size houses. this neighborhood was probably built over the course of many years, rather than by one builder.

you need to look at sq. ft. and use that as a function in your determining price. come up with a price per sq. ft. for your comps and apply it to your house. different builders would also indicated different materials used to build, establish a discount for houses that are wood frame rather than block.