Valuing Property Remotely (Part 2)

Real Estate Agent Comparables

The next piece I’ll talk about is working with real estate agents to get comparables, or “comps” on units which interest you. Remember in my previous post about working with real estate agents? If you didn’t read that one yet, go back and browse it. This is where a good agent in your corner is so valuable.

When getting comps, you want to look at the prices at which units sold, not what the listing prices are. Solds – particularly over the previous 4-6 months tell you what buyers are really paying for properties in that area. The problem with listing prices is that they often reflect more idealism than reality. Listing prices can help you see a relatively better deal, when you note that the asking price is lower than all the others’ asking prices, but ultimately, how does it compare with what people have truly paid?

Also look at how long the properties are sitting. If you are looking at a unit that has been on the market for 210 days, that can tell you a number of things. First, it likely tells you the property is for some reason overpriced. That’s not always the case, but it’s something you should take into consideration. Many times it means a property needs some kind of rehab or at least polishing compared to others in it's price class. Properties will sell when priced attractively.

Within that issue could be the potential for a deal. The seller might simply be relying on their agent’s advice, and that advice might be flawed. A seller might be willing to accept a lower price, but feels that the agent is in charge, and just operates from that vantage. Buyer’s also tend to think asking prices are somewhat written in stone, and might just be staying away. A property which has been on the market for a long time means there’s potential motivation there, so try an assertive offer.

Multiple List Data

Related to getting comps from agents is using the multiple listing service (MLS) and the auto mailings you are getting from your agent. While those are asking prices, in bulk they help you understand what’s going on in a community. You can see the overall range of asking prices, how long something is sitting on the market, how much inventory there is, and so forth.

I actually have my agents set me up a search to pull all units in my criteria that have been on the market for over 90 days, and that adds in a good factor in my searching. As I mentioned above, it helps illuminate what sells at what price and what does not, but it can also put a potential nugget on my plate if the seller becomes motivated and fearful that a property won't sell.

In my next posting, I'll be examining title company assistance, appraisals, assessments, and local government resources at your disposal. So, until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!