How to Determine Property value
In a perfect world you’d be looking for properties in a cookie-cutter neighborhood with tons of recent sales to choose from, and everything would be sunshine and rainbows. But this is the real world that, unfortunately, it’s not always that easy.
How do you know you have deal?
So how do you even know you have a deal unless you know what it’s worth in this article go through all things about a valuation so that you can use it to find great deals.
That’s given in here and go put it into action because, if you’re not acting on it, i mean i’m not that entertaining so you might as well take what i`m saying and go make money help people do that kind of stuff right evaluation.
A BPO broker price opinion is basically a light appraisal that a bank orders for a bank owned foreclosure. So i was thrown straight into doing these valuations over and over every single day for months, and i wouldn’t trade that experience for the world because it made me very good at valuation and that experience was priceless.
So, even though that agent didn’t turn out all that great and he still owes me money but whatever so, why didn’t? i call this after repair value, because valuation in itself kind of encompasses all of that? Sometimes you want to value and, as is property, so you’re going to take the dumpster fire of the neighborhood, and you want to compare it to the other dumpster fires that have sold in that area.
So you can get it as is value, So that’s why first we’ll start off with the easiest way to evaluate, and then we’ll teach you how to do it yourself. So without further anything. Let’s get going part one is to get a pro to do the work for you.
Why hire a Agent?
This might seem like a cop-out to hire an agent or an appraiser to do the valuation for you. But honestly it’s the easiest and most newbie friendly way to get valuation on property. i mean why do it yourself when there are people out there who do this?
On a daily basis, all day long, that’s all they do especially appraisers. They sit there and appraise all day. An agent has market knowledge and can’t really list or sell properties. Advise buyers have that fiduciary duty to their clients unless they know how to evaluate properties and know what they’re worth so Here are your options.
Get A Seasoned Agent to do the CMA
The first one is to get an agent to do a CMA, which is called a comparative market analysis, and this is the type of report that they do for their clients. if you wanted to list a property with them, they would do a CMA for you and it’s a nice report that gives you all the comparables on a single form, with other information like days on market and average sale time average of average price that it sold And it goes through and highlights the differences between each one of the properties, so you can see at a glance.
We get all the Details on the comps
Oh like these are four bedroom and mine’s a three bedroom that kind of stuff. Now, if you have a great relationship with an agent, they will likely do this for you, knowing that you’re going to bring them future business if you’re having them list the property at the end, say it’s a fix and flip, then they will 100 of the time.
Be doing this job for you, if you don’t really know any agents you’re going to have to get out there and network team up with some agents and see if they’re willing to do this kind of work.
CMA from a Good Agent
For you, a CMA for a good agent should take 10 minutes. Maybe, unless you need something really in-depth or there’s something unique about the property which creates more work, maybe 10 minutes, then maybe that’s a little more, let’s just say 30 minutes to an hour for an agent to really do a thorough job of giving you all of the information in that market for that property and, if you don’t know any agents, typically, this costs about 30 an hour if you’re going to approach an agent.
What it will cost?
This is about what you would pay and honestly i’d pay 30 dollars to know that my $300,000 investment is going to be worth it. That seems like a good return on cash. Another thing – and it’s not so prevalent these days, but back in the day when we had bank owned foreclosures, there were agents that just did broker price opinions, and these are kind of light appraisals that they would get paid by the bank to do.
And so, if you could find an agent in your area that still does BPO`S and you can pay them 30 or 50 for evaluation, and it gives you a lot of information, i think, even more than a CMA. That would definitely be worth your time as well.
Why build relationships with agents
So network build relationships and if all else fails, pull out your wallet and pay them a little bit of money for their time and their expert opinion. Your other option is to get an appraisal. Now not many investors do this on the front end on a fixer-upper property because of the time and expense
When your going to a appraiser
But if you want the expert that banks use to lend out billions and billions of dollars, you’re going to an appraiser, i mean the banks, trust them and the banks have never done anything wrong or, or you know, misplaced their trust in anything. Right all kidding aside most appraisers that i’ve ever encountered are highly professional and they take their job very seriously.
i’m just kidding guys, don’t don’t mess with my appraisals please so typically this would cost you 400 dollars and maybe a week’s worth of time to complain.
Not many investors use them
So you can see why not many investors use this when they’re going in to put an offer on a property you’re not going to wait around for a week for an appraisal to see what the as is value is and then go put in an offer. You’re, probably going to get a CMA, or that brings me to option two, which is do the valuation yourself, so we have to start with some of the basics.
This is a big subject, we’ll start with comps, then we’ll go to adjustments and then we’ll take it from there really quick when i say: subject: property, i’m talking about the property that you want to get the valuation on.
What to offer them
So if you’re talking to a homeowner and you’re trying to figure out what to offer them, the subject property. When i talk about the subject property is that property that you’re going to put an offer on?
And when i talk about comps. These are other properties that have sold close to the subject property so similar in size similar in age, similar in proximity similar similar, similar
We want apples to apples comparisons and not apples to oranges or apples to zebras it’s kind of hard to make an apple look like a zebra um and then figure out what they’re worth from there.
What`s a comp
Comparables is sometimes shortened just to comps. So if i say comps i mean comparables when i say: subject property you get it.
Comparables are the most similar properties to our subject: property in the area that we’re looking and we’re looking again for the apples to apples comparisons and sometimes we won’t find everything. That’s going to make it look like an apple, that’s where adjustments come in and we’ll talk about that in a minute.
Here are some of the categories that we’re looking for for similarities and the first one is distance to the subject property. Now this is going to be very important. i want to find a property in the same neighborhood. i want it like if, on the same street would be ideal, but obviously the same block neighborhood, where you’re not crossing major streets and you’re not going with within Maybe a half mile of the property and that’s for suburban properties.
Now urban might be even tighter if you’re comping, a condo, you might want to stay in the same building and if you’re comping, something that is in a rural area. You definitely you can expand the radius a bit more to two or three miles.
if you have to but you’re looking for something, that’s still within the same area, i’m not going to pull comparables that are 10 miles away in a suburban area, because there’s so many Differences that can happen in that much space.
it could be a different school district. A different different side of the track, So to speak, those kind of things that you know the closer you are to the subject: property, the better. The next one is square footage.
i try to stay within 200 square feet plus or minus of my subject, property so that i can get a very good idea of a very similar size, property and typically square footage counts if it’s above the ground, so basements don’t typically count for this, although you Do factor it in later, but that above ground square footage is what most appraisers and BPOS really care about, and so i’m going to start there.
Basements and comps
And then, if i have a basement and all the comps don’t have basements, i can adjust from there. But the main square footage is what i really care about and we go within plus or minus 200. And if it’s outside of that, that’s okay, we can again adjust for it. i keep saying that bedrooms and bathrooms. Of course, if i have a three bedroom two bath, i want to find all of them that are three bedroom. Two bath.
Now, if i know that there might be an option to add a fourth bedroom, i might look for comps with four bedrooms and then know that that’s kind of what the valuation will be, but if it doesn’t have the exact number we can again adjust. The next thing i’m looking at is style.
Ranch Subject Properties
So if i have a ranch subject, i want a ranch comparable. it’S a little bit harder to compare ranches to two stories or ranches to tri-levels or ranches to whatever is in your area. So if i have a ranch, i’m going to pull all of the ranches in that neighborhood and then go from there get rid of those other ones forget about next one is year built, so i want to stay within 10 years or so of my subject, property Because it’s really hard to compare a 1954 built property to something: that’s a brand new build right down the street, so 2020 property versus a 1954
it’s going to be really hard to adjust for those, and so i stick within 10 years or so, unless it’s just a weird neighborhood with a lot of different year builds, but i mean we’re talking suburban for the most part for me, and so everything was built.
Within two years of each other, which helps another one is lot size and so again urban, suburban properties. You can kind of stick within the same lot size. i try not to take my property and then have a comparable that has a double lot or something. Now i should have put this one at the top, but the sale date is very important as well. i’M not gon na pull anything that’s over six months to a year out the comparable sold over a year ago, and that’s the only comparable that i can find.
I`ll try to use it, but there should be a lot of recent sales within a certain radius of your property that have happened in the last three months, ideally especially on a market like this, where the market’s going up so fast. You want to catch the newest appraisals and the newest valuations, the newest closings, so that you can have a better, more accurate view of what your property is going to be worth now. There’s these other categories as well garage pool those kind of things.
I consider those last two car garage versus one car garage carport. Those kind of things aren’t as important to me as initially the square footage: the proximity to subject all that kind of fun stuff and the last category is condition.
So there’s two ways to really look at this and the first one is if i’m comping out a flip property, so I’m i have an existing property that is not in great shape, but I know it’s going to be in great shape. At the end, I’ll have all my comparables have after repair value, so this is their fully fixed up.
They’ve got the granite countertops, they have the beige or gray paint they have new doors and they have all this new stuff. it’s not too hard to find other flipped properties in most neighborhoods and those are going to be some of your best comparables for your future flipped property right. So i’m taking this as is property, and i’m looking for what it’s going to be worth.
When you do all of these upgrades to it now, the second way to look at that is, i want to comp a property that is just as is so. Maybe i want to take that subject beat up property and i want to know what other beat up properties have sold for in that same neighborhood. So in that case, i’m not looking for the property with all the upgrades, i’m looking for the other dumps that got sold and knowing what that’s worth so, sometimes, if you’re wholesaling or if you’re, trying to sell this project to another investor. All different reasons why you might need an as-is valuation, but i could say hey: this: is the lowest sold property that sold in this neighborhood for the last two years now an investor comes along. That’S going to look appealing to them!
How accurate is Zillow Zestimate?
The nationwide median error rate for the Zestimate for on-market homes is 1.9%, while the Zestimate for off-market homes has a median error rate of 6.9%. This means that the Zestimates for half of all on-market homes are within 2% of the selling price, and half are not.
What is the most accurate property valuation site?
It’s Property value estimating tool, , may be the most accurate of all the tools we’ve mentioned, claiming that 93 per cent of the estimates it provides are within 20 per cent (plus or minus) of a property’s true market value.
What is the best method for valuing residential property?
Method 1: Sales Comparison Approach
The sales comparison approach is commonly used in valuing single-family homes and land. Sometimes called the market data approach, it is an estimate of value derived by comparing a property with recently sold properties with similar characteristics.
How do I estimate the value of my house?
How to find the value of a home
- Use online valuation tools. Searching “how much is my house worth?” online reveals dozens of home value estimators. …
- Get a comparative market analysis. …
- Use the FHFA House Price Index Calculator. …
- Hire a professional appraiser. …
- Evaluate comparable properties.