How to Get Real Estate Comps

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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:

1. Doing Your Own
Research
2. Internet Searches
3. Service Companies
4. Access to MLS
DOING
YOUR OWN RESEARCH

  • Courthouse Searches

  • Newspaper Listings

  • Tax Appraisal
    Districts

  • Master the Neighborhood


Courthouse
Searches

If you live in a state that 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this when I first started and found the information to be outdated and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...

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