How to COMP a Single Family Home
In today’s blog I am going to write out exactly how my team and I do comps on a property to determine the ARV (After Repair Value). But first I would like to explain what this intimidating word “Comparables” (comps for short) means. It simply means to put a value on a piece of real estate by comparing it to similar properties in the area. While ARV is working to determine what our property will be worth after we do the necessary repairs and/or updates to match what the area is calling for.
Now there are a bunch of different ways to evaluate a property and determine a value whether you’re talking about an apartment, a tri-plex, a rehab, some sort of creative deal, etc., but for the sake of time (and my fingers) I’m going to show you how we comp the most common type of property, the Single Family Home.
To begin, there are 7 primary things that we look at to try and get the most accurate value we can. You can get A LOT more specific than this and at times it is needed, but typically these 7 things are more than enough to get us a very accurate value.
- Bed/Bath Count - Radius (Start at ¼ mile and move to ½ mile)
- Square Footage - Date Sold (Start within 3 months)
- Condition - Age of property (Within 10-20 yrs. desired)
- # of Stories
A large portion of determining a properties value is going to come from experience and knowing your area. I can still be as scientific as I can when figuring out a properties value but at the end I still always have a gut feeling of what the value is based on the picture I built.
When I start to comp a property, I open up my MLS and check to see Active, Pending, and Closed properties. I then set my radius around the property I’m trying to determine value for to ¼ miles and set the “closed within” range to 3 months. I then run a count and see how many properties it gives me based on those parameters. If it gives me too many (somewhere around 10+) then I will go back and narrow down my search even more, specifying bed/baths, narrowing the sqft. range, etc.
Once I have roughly 5-10 properties I will change to map view and start closest to farthest away to begin narrowing those down to find the 2-3 most comparable to mine. Meaning they are as close as possible with the bed/bath count, sqft., # of stories, all of the things I mention above.
After I have hopefully 3 solid comparable properties, I will take the Price it sold for and divide it by the sqft., thus giving me the Price per sqft. which is the basis for how most real estate is valued. Once I have my price/sqft., I multiply that by the properties sqft. and get an estimated value.
Here’s a simple example:
- Property A
- Sold for $125,000
- Sqft. = 1,200
- Price/sqft. = $104
- Property B
- Sold for $138,000
- Sqft. = 1,300
- Price/sqft. = $105
- Property C
- Sold for $131,000
- Sqft. = 1,185
- Price/sqft. = $110
- Avg. Price/Sqft. = $106
- Our Property
- 1,230 sqft.
- Estimated ARV = 1,230 * $106 = $130,380