Buy Fix Sale

Flipping Houses: Property Analysis and Inspection – The Comps

What is a comp (comparable)? To determine the value of a house, an appraiser or an agent will typically look at three comparable sales in the area, or “comps” as they are known in the industry. Agents and Appraisers have access to the Multiple Listing Service, known as the MLS, which is a database of all the properties in a given area that have been listed “for sale,” are in process of being sold (pending,) or have already been sold. Without being an agent or an appraiser, you may have a harder time accessing this information. Additionally, you can ask your agent for a list of comps – which should be easy and free for your agent to supply to you.   It’s very important to find our comps immediately or as soon as possible. When I’m looking for comps, (to use a popular metaphor) I try to get as close as possible to an “apples to apples” comparison. Rarely would one ever be lucky enough to be comparing “red apples to red apples” unless you’re buying within a condominium or homeowners association neighborhood. You’ll likely be comparing “red apples to green apples,” but it’s important that they’re both “apples.” Nothing will be identical but comparing something close to what you’re buying will get you the best numbers.   Here is a short list of seven very important comps that I include in all of my property analysis’:   1. How much have comparable properties sold for in this area within the last 6mo?   2. To expound on number one, what has sold within 1/4 mile to 1/2 mile of your house?   3. Ensure that my property is equivalent to the comp property – is it a rehab, REO, HUD, or a homeowner-occupied and then I organize them accordingly?   4. What is the square footage comparison? I’m looking for a house with comparable size/square footage.   5. How many bedrooms and how many bathroom?   6. What is the yard/lot size?   7. How big is the garage, if applicable?   So where does one go to pull comps? The easiest way to pull a comp is to be a licensed real estate agent or broker because one would obviously have unfettered access to the “Multiple Listing Service,” or the “MLS.” Fortunately for me, my wife is a licensed agent and broker. However, if you’re not licensed, I recommend either earning the license on your own or having someone close to you like a spouse, business partner, or a close family member/friend obtain theirs. It can really save you a lot of time and even some money depending on the situation.   However, it’s not always as simple as getting your license or paying for someone else close to get theirs. Before my partner earned her license, I had to use other options. I still use...