Chapter 01

Understanding the Local Market

Knowing the local market inside-out helps with making informed decisions.

Informed decisions = profit

So, let’s talk shop – finding the right comps:

If you’re selling without a realtor, as in a “for sale by owner” (FSBO) scenario, you need to be on your toes. It’s essential to know which areas are in demand and which aren’t. Make sure to thoroughly research listing sites, cross-check information, and even consider taking a drive around the neighborhood to get a feel for the area. Get familiar.

When it comes to finding a golden comp, location is the #1 priority. After that, it’s size, age, and features. If you’re valuing a swanky 3-bedroom apartment downtown, don’t compare it with a ranch in the suburbs. So, a word of caution: not all comps are created equal.

You’ve got to watch out for the bad apples. A mansion compared to a studio? No way.

Comparing a fixer-upper to a move-in ready property? They’re not exactly apples to apples. However, you can certainly use comparables to determine the After Repair Value (ARV) if you’re considering renovations or planning to flip the property.

Comparing a hot property with one from a down-and-out area? You’re just asking for trouble.

Step one in finding your perfect properties and analyzing the risk is to find properties that match the one you’re considering. Stay in the same neighborhood where possible. Look for the same bed/bath count and similar square footage.

Then, find a few more.

Once you’ve done that, you can evaluate how these properties really compare to each other.

Tasks:

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Master the Art of CompingFamiliarize yourself with the process of finding comparable properties (“comps”). This is vital in determining a property’s worth. Start by understanding the local real estate market, looking into recent sales, and focusing on properties similar in size, age, and features.
Diversify Your Research SourcesWhile the realtor’s MLS system is a popular way to track homes, broaden your horizons. Engage with local real estate agents and access county assessor records for more localized insights. Leverage online platforms like Zillow and Redfin to get a holistic view of the market.
Stay Updated with the Local MarketDedicate time to comprehend the nuances of the local real estate market. This means not just relying on data but truly understanding it. Use the freshest comps, ideally from within a year, unless the market has been notably stable. Being updated aids in making informed decisions, which leads to potential profits.
Be Selective and Critical in CompingIt’s not just about finding properties; it’s about finding the right properties. Ensure you are comparing apples to apples – same neighborhood, similar bed/bath count, and square footage. Be cautious of anomalies or “bad apples” that could skew your evaluations, such as comparing a fixer-upper with a move-in-ready property.

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