Yesterday we discussed another item that should be considered when pulling comps on your deals. Today let’s go over one last item that you want to look for as much as possible, it’s the terms of sale for your comp. Ideally you want to use your InvestorComps account to pull real estate comps that were normal market transactions with no “undue pressures” on buyer or seller. The most common examples of “undue pressures” are:

  • A seller who must do a quick sale to avoid foreclosure or bankruptcy
  • An estate in probate that must be liquidated quickly
  • A tax sale or bank REO where the seller is willing to take less money just to get the property off of the books.
  • An investor wholesaler who is willing selling his property at a deep discount to avoid rehab costs or to obtain a quick sale.

These types of sales are typically not good indicators of fair market value. Although if enough of them occur in a certain neighborhood or area, then they can effect the overall fair market value of that neighborhood. You may not always be able to find this information about your comps but it is important to look for it whenever you can.

Now that you have a good idea about how to select good comps for your rehab properties, now let’s discuss how the actual appraisal should fit into the deal. Many investors feel that the appraisal is simply a necessary evil associated with obtaining permanent traditional financing for their rehab properties. They often think that they have pulled good comps and that should be enough for establishing market value. I firmly believe that a good solid appraisal is a part of an investor’s due diligence and can make or break a business deal.

Stay tuned for my grand finale of good comps selection and rehab planning….. Where I’ll let you know just how important and a good Appraiser and a solid appraisal can be to your investment deals!

Categories: Real Estate Comps

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