One of the main stumbling blocks people face when starting out in the business is how to find reliable sources for comps. While many investors get a license to have access to the MLS (Multiple Listing Service), it is definitely not necessary to be able to make money in the business. In this article you’ll learn how to find free, accurate and reliable comps. I will also show you ways you can use to gain access to the MLS without a license.
First, it is important to know what a comp is. Real estate agents and appraisers use comparables to determine the potential value of a house. They find similar properties that have sold in recent months and come up with a pretty accurate market value. A comp is neither an appraisal nor an average of the highest sold houses.
There is a lot of confusion about this and there shouldn’t be. There are reliable sources either free or paid that you should use to find accurate comps.
It’s true that MLS comps is the best and most complete source for finding accurate comparables, and I encourage you to find a way to gain access to it. In the end, it is not as difficult as you may think. However, there are plenty of other free resources online that you could use, such as Zillow.com, Realtor.com
When searching for comps on Zillow, don’t pay attention to the Zestimate because this evaluation is inaccurate. Search instead for “SOLD” houses that are not only close to your subject property, but that are equal in size and layout. A 1.000sqft house will always be worth less than a house measuring 1500 sqft.. Also, a Victorian style house will be priced differently to a twin, even if they share the same size.
First you have to find the style and size of the house by going to the counties website, or you could you could use Zillow’s number. Since they take that number from public sources, it is likely to be accurate.
Avoid putting generic information on Zillow. Be as much specific as possible and use the filter to get the results you are looking for. The filter serves a great purpose. It saves you tons of time by only showing you the houses that fit your criteria. Remember to check ONLY the “recently sold” box as this is the main criteria we look for.
In this example, the house is a single family house, so it serves no purpose to choose any other classification other than the one we want. Zillow tells us that our house is 1.344 sqft in size which is aligned with the county assessment.
square footage should be within 150 sqft difference. e.g.
If this house is 1.344 sqft only search for properties within 150(+-) difference.
The more recent the sales the better. 3 to 6 months back in time is customary. Try not to use comps that 6 months or older . Sometimes comps can’t be found in that time frame. In that case, you’ll need to go further back in time. Because the current market has gotten more stable, we can go back a little farther than 6 months. Remember that every market is different and you might find markets that might be going down in value still.
We are looking for the highest sales that have ocurred within the timeframe we searched, because those are the comparables that will give you the ARV (after repair value).. Once you know the ARV, formulating the offer becomes easier.
If comps can’t be found, it is always advisable to use an appraiser. They could be worth its weight in gold.
Gaining Access to The MLS
One of the ways you can gain access to the MLS is as an unlicensed assistant. Some real estate offices offer this service for a monthly fee. Go to a investor friendly real estate office and simply ask. This is where leveraging your connections will be of help. Any real estate agent could help you with this. Just ask. What do you have to lose?
Another way of gaining access to the MLS is by offering to pay the agents monthly or yearly dues. Having a good solid relationship with the agent first is crucial. Not everyone will accept this, but others will gladly do it if you send them a lot of business. You might even get away with paying anything. Make sure you do send them business in the form of refferals if this is the case.
Ok we learned how to come up with comps and we also learned ways of gaining access to the mls. If you follow one or all of these tips you will find yourself a comparable expert in no time. I hope this article help you overcome this hurtle and if you have any questions don’t hesitate to leave a comment or recommendation.