How to Get Comps
by: Tim Randle
There are primarily four ways to get information on
comparable sales (comps) when trying to determine the
value of a target property. Those four are:
- Doing Your Own Research
- Internet Searches
- Service Companies
- Access to MLS
DOING YOUR OWN RESEARCH
Within this category, there are four subcategories.
Those are:
- Courthouse Searches
- Newspaper Listings
- Tax Appraisal Districts
- Master the Neighborhood
Courthouse Searches
If you live in a state that is discloses property
sales information, you will have a much easier time than
those of us who live in a non-disclosure state, like
Texas. My understanding for disclosure states is that
information on sales can be found at the courthouse if
you're willing to spend the necessary time. From that
information you could devise your own methodology for
determining comps. Certainly, it would be beneficial to
know the history of a target property which you can look
up while you're there, but I think this would be very
slow and probably not worth your efforts if the only
goal is to get comparable sales data.
Newspaper Listings
In some states the sales information is listed in the
local newspapers so you could get a feel that way or
create your own database and update it periodically.
Again, I think this is a slow way to get things done,
but it may prove useful to you in some circumstances.
Tax Appraisal Districts
In my area, the tax assessed values provided by the
tax appraisal districts are frequently useless. You'll
have to get a feel for this in your area as you may find
that the assessed values are close in many
neighborhoods.
Master the Neighborhood
Probably the most accurate way is to spend the
necessary time to master your farm areas. By this I mean
learning the values for certain neighborhoods that you
target. You can speak with Realtors, attend open houses,
view as many floorplans as possible, etc. until you can
drive by a house at 30 mph and know within a reasonable
range what the property will be worth in good condition.
This information comes in extremely handy when talking
to sellers on the phone. If a seller calls you and tells
you the house is in ABC subdivision, it's a three
bedroom, two bath, two car garage house and it's 1,500
square feet, it's nice to immediately know the market
value in your head.
INTERNET SEARCHES
I know some investors use online searches to
determine value. I tried this when I first started and
found the information to be outdated and not even close
to what I consider a comp. For example, at the time the
Austin, Texas market was appreciating almost one percent
per month. Retrieving sales numbers that were almost a
year old and five miles away from my target property was
useless. If you're in a disclosure state, this
methodology may prove more helpful. I haven't used or
even looked at any of these sites for this purpose in
years, but here's an initial list you could view,
although keep in mind that some of these may be
regional-specific.
I'm sure you can find many more sites like these if
you'll spend the time to do so.
SERVICE COMPANIES
Some investors subscribe to services that provide
sales information. This can be in the form of software
in the form of CD's that are sent out periodically or it
could be an online service where you login to retrieve
information. I've never used any of these services and
typically, the reviews are mixed as to their usefulness.
Again, that may come down to whether or not your state
discloses sales information. Here's a list for you to
check out:
ACCESS TO MLS
Having access to Realtor's proprietary information
that is available in the Multiple Listing Service (MLS)
is invaluable. In my opinion you should begin working
toward this goal regardless of which comp methodology
you plan to use or currently use. Again, there are
several ways to accomplish this goal:
- Ask or Hire Someone to Help
- Become a Realtor
- Obtain an Associate Membership
- Relationship Access
Ask or Hire Someone to Help
One way to obtain information on sales is to contact
those who have access to it. For example, you could get
in touch with a Realtor, Appraiser, or Title Company and
establish a relationship. At some point fairly early on
you'll have to make it worthwhile for these folks to
continue helping you, so it's important to either pay
them for their assistance or to get some deals done
where they get paid.
If you're going to go this route, I think it's
extremely important to have the actual data sheets sent
to you so that you can begin to learn how to evaluate
values. You'll soon discover that no one runs comps like
you do. After all, a comp is merely someone's opinion of
what a property is worth. I've had Realtors provide
alleged comps on properties that were in different
subdivisions miles away, fifty years older than my
target property, with a different number of bedrooms and
baths, different foundation structures, sold years
prior, etc. Do you really want to trust six figure
decisions to someone else's judgment?
Become a Realtor
Although I frequently see disparaging comments about
Realtors and the liability associated with becoming one,
I think this line of thinking is way overblown. I can
promise you that if you're in real estate long enough;
you're going to end up a target for someone. Whether or
not you happen to have a real estate license is probably
irrelevant.
Then there's the theory that you're held to a higher
standard if you're licensed. Again, who cares? You're
not going to operate your business to at least the
standards that Realtors are held to?
No, I'm not licensed and I go back and forth on
whether or not I should be, but my decision, or lack of
one, is based on costs versus benefits and being lazy.
I've never met a successful investor who also happened
to be licensed who told me not to get my license. It's
seems to be only the folks who aren't licensed who warn
me of the "risks". So, my suggestion is to not
rule out this possibility simply because someone else
told you to or you read something on a newsgroup.
Obtain an Associate Membership
In some areas, the Board of Realtors will sell
associate or affiliate memberships to non-licensed
individuals. For example, appraisers may qualify and
I've heard of investors being able to obtain a
membership as well. In my area anyone who wants access
to MLS must have a real estate license or someone in
their office who is licensed. If you don't know if this
is available in your area, it's certainly worth a phone
call.
Relationship Access
Building relationships with Realtors and other
professionals who have access to MLS is another great
way to gain access. Granted, this methodology takes
longer and requires ongoing efforts, but it is an
effective way to get comps. You may start out initially
with receiving faxes and then progress to limited and
supervised access to the MLS during non-work hours. From
there you might achieve non-supervised access, which
then gives way to a full-fledged copy on your home
computer. Anyway, you get the picture. As the
relationship grows and the Realtor is fairly compensated
for time spent, you'll find it easier to ask for favors.
As far as how you do this, I would suggest scheduling
lunches with the appropriate people. If you take ten
Realtors out to lunch over a month, you'll find someone
willing to work with you. I would suggest contacting
agents who specialize in commercial properties. The
reason is simple. Agents who work the residential
listings and buyers need to use MLS on a daily basis.
Commercial agents typically don't. In fact, in my
area commercial real estate deals are handled almost
exclusively through networking. In other words, it's
done by word of mouth, phone and faxes and MLS isn't
even used. However, being a member of the Board of
Realtors still requires paying the same dues regardless
of the fact that commercial agents may not really use
MLS. Is it possible that one might agree to let someone
else pay for that service that they're being charged
for, but not using?
Hmmm...
If you're going to take this approach, tread lightly.
In many areas allowing non-licensed individuals access
to the MLS is viewed as a violation, thereby putting the
agent's license and livelihood at risk. Again, it's a
relationship thing. However, perhaps that agent opened a
"branch office"? Anyway, it's something to
consider and I wanted to let you know that not only is
it possible to do this, it's not even that difficult.
Summary
In summary, let me state that no method for getting
comps will surpass the importance of learning your
market and more particularly, your farm areas. However,
that takes time and I wanted to let you know there are
other ways to get it done while you're gaining the
knowledge and experience. In my opinion the combination
of MLS access and firsthand knowledge is critical in
determining comparable values, but that's not always
possible, especially when just starting out.
So, it's time to get busy chasing MLS access and
learning your farm areas. Good investing...
Sincerely,
Tim Randle
(c) Copyright 2003, All Rights Reserved.
|
