Finding the right comps is key in coming up with your starting point in coming up with an offer. The comps will give you concrete evidence of what the property is potentially worth after being fixed up, also known as After Repair Value or ARV.
It turned out that I was not pulling comps correctly. It seems so easy right? Well I was finding houses in similar conditions as the house I am going to offer on. This would work if I was planning on paying retail value for a fixed up home, but these properties are distressed and in need of repairs. I want to find the houses that have been updated or rehabbed and sold at retail. Those would be my solid ARV Comps.
Back to the drawing board I went and to help you guys out here are the tips that Bruce gave to me (All are obvious, but I seemed to have forgotten them so maybe you did as well)…
- ARV Comps = Sold Comps in Good Condition or Renovated
- Same Bedroom Count (if none then make adjustments for more or less)
- Same Bathroom Count (if none then make adjustments for more or less)
- Check pictures of Kitchen to see if it is in good condition and updated. If there is no picture assume it needs an update or call the agent and ask
- Check pictures of bathrooms to see if they are in good condition and updated
- Does your comp have a garage
- Does your comp have a fireplace (this is probably area specific)
- If the market is declining, consider using some Active houses to help determine your ARV
If anyone has any other suggestions I would love to hear them.
Current Offer Situation
I’ve got a call out to the listing agent for the property and waiting to hear back from him. After recomping the house I feel pretty confident in my offer price of 130k. I’ll fill you in after I hear back from the Listing Agent.