Don’t make any changes to the spreadsheet other than entering the comparable sales, or removing the instruction message that’s highlighted in Yellow. It’s already formatted to calculate your minimum and maximum square feet for your comps (you want to stay within 10-15% range of your subject property).
Watch this short video before you start using the spreadsheet to make sure you understand what it’s designed to do.
When selecting comparable sales for your next deal, remember some of these helpful tips:
Always throw out the properties that sold for a price per SF that was much higher than the others. You can usually look at the details of this house and figure out why they sold for so much more, but it most certainly needs to be tossed or your values will be thrown off.
Toss out the comparable sale that sold for a price per SF that was much lower than the others. This usually indicated some type of seller motivation, distress, REO, or some other underlying factor that we can’t determine from the listing information. Throw it out. It will mess up your values.
- All of your comparable sales should be close (within 10-15%) as far as price per SF.
Choose comps within .25 mile and sold within the last 6 months. If you can’t find 3 comparable sales, then go farther out in distance FIRST. Then go farther back in time. The market conditions can change over time, so it’s better to look for distance rather than time. An appraiser can actually go out 2 miles but it’s not safe for you to do that unless you’re in a rural area.
If you can’t find any properties that are in excellent rehab condition, then you must be in a rental type neighborhood. Your mission at that point is to see what investors are paying for rentals (still pulling comps, just looking for houses in similar condition to yours), and do some research on what your subject property will rent for. You’ll no longer be using “MAO” to make offers to your sellers because there aren’t any retail sales. You’ll use ROI formulas to determine how much to offer the sellers.
Determining the value of a property takes practice, just like anything else we do in the real estate business. You’ll know you’re doing a good job when your cash buyers aren’t putting up resistance about the value of a property, and you’re selling your deals lightning fast!