Run Comps Like A Boss

compare Hey Moguls – it’s Jamel Gibbs here bringing you a lesson that could greatly increase your profit margin. It has to do with running – and understanding – the comps.

Comps refers to comparable properties in the area to which you can compare the property you’re trying to sell, so you can price your property correctly.

This is not an area that you should just breeze over. The fact is, if you don’t know how to analyze a deal by using comps to make good offers, you could wind up paying too much for a property. If that becomes a pattern, your business is not going to be successful. (Read: profitable.)

Look, this isn’t rocket science, so if you’ve been shying away from learning about comps, I’m going to make it very simple for you.

A couple of the resources I’ll be using are:

1. RealQuest

2. Bank of America Home Value Estimator

The reason I’m giving you two resources is because you don’t want to get your numbers from only one source. That’s too narrow. When you have more than one, you have more information to work with and can make a closer estimate of what your property is worth.

Here’s a quick note before we dive in, though…

An even better resource for comps would be a trusted local Realtor. When you’re connected with that trusted Realtor, you won’t need any other resources! If you’re new in the business, you may not have that team member on board as yet. But these steps below will help you.

RealQuest

RealQuest has an estimator that’s free to use. If you want the real deal, though, you’ll want to jump into their paid service. But for this lesson, I’m going to explain how to get the information - for free - that you need in order to make the best offers on properties.

Go to the RealQuest site and click the link: “Real Quest Express.” It’s located at the top left-hand corner of the page.

Enter the property address where it says, “What’s Your Home Really Worth?” and your property details will show up.

If you want to look at what houses sold for in the area recently, you’ll need a paid subscription to RealQuest. If that’s not an expense you can afford right now, use the Estimated Number that RealQuest gives you.

You’re done here – see how easy that was?!

Now it’s time to move to our second resource...

Bank of America Home Value Estimator

Go to this site: Bank of America Home Value Estimator.

The title will say: “What’s Your Home Worth?” There, enter the full property address in the box including the zip code. If you don’t, the site will not accept the details.

The property details will give you an estimated property value just like with RealQuest. However, Bank of America (BOA) will also provide other information to help you gauge what other houses are selling for in the area.

Be aware of this: When you’re assessing the BOA comps, don’t use the comps that are priced the highest. Nine times out of 10 those comps (even though they are like-and-kind properties) may not be as accurate as you’d hoped.

The properties that sold at higher prices could be located near the water, or across the highway from where your property’s located. This means your property may not be in the same type of area.

It’s crucial that your comp properties be as close to your subject property as possible. This usually means about a ½-mile radius in suburban and in rural area. In the inner city, I suggest that you narrow it down to within ¼-mile radius.

So don’t go with the highest price comp – but you shouldn’t go with the lowest comp either. It’s safe to guess that those lower-priced properties were purchased by other investors in your area.

What you want to do is stay with the properties that are priced in the middle of the spectrum. This is the best way to ascertain what homes are selling for. Once you have several properties that are priced in the median range, add those prices together, then divide that total by that number of properties. Now you’ve arrived at the average price of the comps in that area.

Here’s an Example

Here’s an example of what I mean:

Comp 1: $80,000 (Middle-Priced Comp)

Comp 2: $85,000 (Middle-Priced Comp)

The comps added together equal $165,000. Divide by 2 (because you have 2 comps), and the estimated value in this example would be $82,500

When you’re looking for comps, also remember to use properties that are the closest to your property in style and size.

Once you have an estimated price from 2-3 sources, add them together like I showed in the example above. Then divide by the amount of sources you used. When you do this, you’ll have come up with a safe, in-the-ballpark estimate that you can use to make the best offer on the property.

Once you learn how to run comps, you’ll be running them like a boss every time - and your estimates and offers will be right on target.