by: Tim Randal
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
YOUR OWN RESEARCH
Within this category, there are four subcategories.
- Courthouse Searches
- Newspaper Listings
- Tax Appraisal Districts
- Master the Neighborhood
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.
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.
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found the information to be outdated and not even close to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.
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:
- First American Real Estate Solutions (www.firstamres.com)
- Dataquick (www.dataquick.com)
- Netronline (www.netronline.com)
- CD-Data (California only - www.cd-data.com)
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
- Ask or Hire Someone to Help
- Become a Realtor
- Obtain an Associate Membership
- Relationship Access
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
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.
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
So, it's time to get busy chasing MLS access
and learning your farm areas. Good investing...