Ask 5 different Realtors...get 6 different answers on valuation of property....help! - Posted by kf_az

Posted by Eric C on October 16, 1999 at 18:14:08:

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Ask 5 different Realtors…get 6 different answers on valuation of property…help! - Posted by kf_az

Posted by kf_az on October 15, 1999 at 23:38:11:

This is a question for you rehab investors. My partner and I are relatively new to the arena…but all of the successful rehabbers had to start somewhere, right? We are comfortable with the prospecting of deals as we are concentrating on pre-foreclosures and the foreclosure sales. There doesn’t seem to be a lack of deals in our market(Phoenix). We are also pretty comfortable with the estimating of repair costs and dealing with contractors as we’ve probably been tested with many of the possible negative scenarios that one could run into. But, we’re not discouraged…only more motivated due to the fact that “if it were easy, every one would be doing it”. Our big dilema is that we can’t get any Realtors to agree on what our finished product will be worth after repair. And since this is the figure that we work backwards from when calculating our offer after figuring repairs…we are frustrated. We know all about running comps on the MLS and even some websites that do it for free. On one occasion, due to the above mentioned resources, our subject property would not bring more than $72k. The realtor that bought it at a foreclsure sale and flipped it to us said it would bring $85k. We decided to roll the dice(because worst case scenario, we would net a couple of grand) and let the realtor prove it to us. Darned(I was sensored) if he wasn’t right and we got 2 full-price offers within 48 hours. Good news? Yes and no. Yes because we made our target net profit. No, because we don’t know how the hell they did it. Now we’ve got another property that we feel the comps(all smaller than our target) support a certain price and we’ve had it on the market for 30 days. I’ve asked several realtors what they think of the list price. Some say it’s accurate, some say it’s too high. Our problem is we want to reduce the aksing price if its too high so we can get on with it and save on holding costs. To make a very very long story short…how do you seasoned rehabbers calculate your list price or do you simply leave it up to a realtor that you might be using?

Re: Ask 5 different Realtors…get 6 different answers on valuation of property…help! - Posted by JPiper

Posted by JPiper on October 16, 1999 at 16:31:12:

To answer the last question first, never allow the judgment of a realtor or 10 realtors as to value be the basis for your estimate of value. You alone should be determining the value of your property. To permit someone else this important task will insure that you will never truly understand value. By the way, I would listen to others? estimates?.but understand they are just estimates. Don?t allow these estimates to be a substitute for your own judgment.

Why do you get 5 different answers on value from 5 different realtors? Because estimating the value of a property is an ART, not a science. Not to mention that one must understand the motivation of the party offering an estimate of value, before one knows the credence to place on their estimate. As an example, the realtor may estimate high, because his/her interest is to list. The banker may want to estimate low, because his interest is security. This is why you are best advised to develop the ability to estimate value on your own. Listening to others is fine, but again, it?s no substitute for your own opinion.

Why is estimating value an art? In a very basic sense, you are trying to estimate what an individual, a willing buyer, will pay in an arms length transaction. When you stop to think about that, you understand that buyer?s don?t necessarily operate solely on reason. Sometimes buyers buy houses because the house has a good ?feel?. They may like the cosmetics. Or they may like that little bunny rabbit that ran across the back yard just when they stepped out on the deck. One thing that most buyers DON?T do is to bring a tape measure to figure out the square footage of a house. In other words, buyers have a very intangible list of criteria that are virtually impossible to figure out scientifically. This is not science?.it?s ART.

Given that, here?s what I like to do when I?m trying to establish value. I pull the comps?..all of them that I can find in the immediate area. Bigger houses, smaller ones. I pull expired listings, active listings, pending deals, and sales. With these in hand, I drive to the neighborhood, and drive those comps. By that I mean I drive by all the sales. I stop, I look from the outside. I try to understand what it was about that house that made it sell at that price. I read the agents commentary on the listing sheet to get a feel hopefully for what the interior condition might be.

I look at a lot of different factors. I look at the immediate surroundings for that comp. What sits next to it? A house next door with 5 junkers parked in the driveway may account for a somewhat lower sales price. Did the comp have permanent siding or not? How old was the roof? What about the paint job? Landscaping? What?s the ?feel? of the street? Busy street? Apartment buildings close by? Near any major attractions in the city? All of these and many others will influence the buyers desire for your property, and hence value.

I drive each comp. I take my time. I?ll arrange to view active listings. I may stop at a convenience store, ask someone about the area. I may stop at a real estate office in the area, inquire about rental rates. I may call the fsbo?s.

In short, by the

Put yourself in the buyer’s shoes… - Posted by Dave I.

Posted by Dave I. on October 16, 1999 at 13:17:56:

My advice is to listen to the realtors, but don’t take what they tell you too seriously. Be objective when making an offer. I would tend to let the local recent comps guide me as to what the potential investment property is worth. When selling, try and do whatever you can to make your property stand out from all of the other thousands of homes on the market. If it is sitting there not selling then there isn’t the demand that you want or the price is too high. Make that demand happen. Is there a way to offer owner financing? Can you afford to offer a “FREE” trip to Las Vegas with purchase of your home (Gambling money not provided)? This seems like it would be expensive, but a trip for two to Vegas can be a whole lot cheaper than carrying costs. Can you take a trade for the down payment? Maybe someone has a paid for 1996 Ford Explorer that they would give you as part trade. If it’s worth $15,000 I would give them $10,000 trade and then sell it to get your money. What I am trying to say is, “Make your home stand out in the newspaper”. You want a husband and wife across town reading the paper to comment,“Wow! Honey, if we buy this house we will get a FREE washer and dryer”. The washer and dryer might cost you a thousand dollars, but how much will you spend holding the home for several months (not to mention that you could buy and sell another home or more in the same amount of time). I hope that I have helped… Dave I.

Dont listen to the realtor, look at the comps - Posted by Darin

Posted by Darin on October 16, 1999 at 09:23:40:

When you call a reltor, you tell them the search criteria. Have them run sf comparisons with no price, have them run everything in a 2,3,4+ square mile radius, have them run exactly what your home has vs others. There are so many ways you can run searches. Each realtor is proabably running them differntly.

I have the most success finding out what homes sold per square ft and go from there.

Get the copies of the comps and you determine value.

Rember, a realtor may come in high so you will list wiht them. They dont care about the value of your home, they want to list it first, them get the price to where it will sell.

marketing - Posted by RRSmith

Posted by RRSmith on October 16, 1999 at 07:11:20:

Run a ad ahead of time testing the waters, see if you can line up buyers BEFORE you are done rehabbing. This will naturally tell you how much demand there is AND at what price. early to bed early to rise advertise,advertise , Advertise

Re: Ask 5 different Realtors…get 6 different answers on valuation of property…help! - Posted by kf_az

Posted by kf_az on October 17, 1999 at 12:33:55:

Thank you. Very sound advice that I can sink my teeth into.

kf