The more you know about pulling your own comps the less you
will be surprised when you hear back from an appraiser. Appraisals can make or break a deal for investors. Whether it’s a subject-to appraisal (appraisal subject-to written repairs being completed) that
determines how much your
hard money loan will be or an appraisal that
determines your potential home owners’ loan amount. Your best defense against a botched appraisal
is to learn how to pull solid
comps yourself.
Pulling comps is much more an art than a science. If you are planning on protesting your taxes,
buy fix and flip or planning to buy fix and sell; pulling your own comps is a skill
that every successful real estate investor needs to master.
Let me start off by saying that I am
not an appraiser. However, I am a real estate
broker and investor. I have had my real
estate license for ten years and have been a part of countless real estate
transactions. I was the agent on about
50 closed transactions last year alone.
The only way I can continue to do this type of volume is by being a good
judge on after repaired value so my investors stay happy and I am able to
guarantee repeat business. I’m sure
there are many ways to pull comps and determine value but the following are
just some tips to show how I do it.
Note: if you do not
have access to MLS, go to www.investorblock.com
and sign up to pull comps for free in Dallas, Fort Worth, San Antonio and
Houston. Some of the same principles
will apply so feel free to keep reading.
Here are 3 rules that you should always start off with;
11. Comps that are in the same subdivision are
always going to weigh more than comps outside the subdivision.
22. It’s always best to stay within 5 years +/- year
built when searching for comps.
33. Appraisers only pull comps for the sale of a
house from 6 months back. For rental
comps, you can go about a year or two back.
Step 1: Go to your local
MLS provider, sign in, and find the
property type that you would like to look for. I.e. Single Family, Commercial,
Rental etc…
Step 2: Select all Active categories, pending and Sold categories,
then select “search by map”
Step 3: A map will appear and on the top menu of the map will be the
label for “Locator”. Click that and then type the address of your subject
property and press Enter.
Step 4: Zoom out a bit so you can get a good view of the area and
then select “Draw Polygon” at the bottom of the map. Draw a polygon around the area around your
subject property remembering not to cross any major streets and staying within
what would appear to be the same subdivision.
Once finished select, “Apply to search”.
Doing this should remove the map from your screen and take you back to
your home page.
This is where the process starts to develop into
an art.
Step 5: Add in Square footage and year built into the main search
remembering to start off with 5 years +/- and 10% Sq footage +/-. You can always widen the search later on but
this is a great starting point. Once this
is done, select “Search”.
Step 6: If you have a manageable number of Sold comps pulled skip
to step 7. If you have either a large or
under 3 properties that have not been rehabbed pulled up, re evaluate the
search criteria you have entered. It’s
better to go down in square footage and year built. If you go up in square footage and year built
you will need to do adjustments. If you
have too many comps, you might want to add the subdivision to the search
criteria. It will help further narrow
your search.
Stage 7: Once you have a manageable number of comps, start to go
through them one by one and look at the pictures of each one. This is where newer investors have a tough
time. if the house looks like the
subject house will once the repair is 100% complete, put a check mark by it and
use it as a comp. If it’s a foreclosure,
short sale, motivated seller, a house that needs work or is “well maintained”
then it is not a true comp. You need to
determine the ARV (After Repaired Value) by houses that have already been fully
repaired.
Hopefully that helped a little. All you need is a little practice and you
will be able to do this entire process in no more 5min per house. As always, if you need any help or assistance,
don’t hesitate to call me. If I’m a
strong enough resource to you now, when it’s time for you to buy your next
Texas investment property you know who to call.
JD Castillo
214-650-5493
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