How to tell what a property is worth?

Hello Michael,

Welcome to RE Investing, Although an appraisal is one way to get a value for a property you do have several other options which are free and fairly accurate.

I use several bank websites to get values. Many mortgage lenders offer on their websites a how much is your house worth feature. I use three different ones and evaluate/average the data I am finding. Typically you will find a large spread on these values. Usually they will give recent sales info that their price is based on. I look to see if recent sales are REO owned or owner sales.

I also look at zillow.com, but again take what I am seeing with a grain of salt.

I know from seeing your questions on other posts that several people have written about your team. Call three different realtors and ask for listings and cma's (comparative market analysis) of houses in the area of this home. Tell each one you are an investor and looking for a house in this area. Many of them will not do much with out you having an LSR (Loan status Report) You may want to see a mortgage broker and obtain one, it does not obligate you to buy and it shoud not cost anything. Tell them each you need the info in the next 24hrs, 2 days, whatever time frame you choose. If they respond timely they are worth continuing with if they do not find different ones.

Call a local title office (another team member)and ask for comps, they're data base includes homes sold by owners where as a realtor on the MLS does not normally. Again expect to call several. Many will not do wholesale/simultaneous closings, look for one that does. Prepare a list of questions to ask each. Again tell them who you are ( RE Investor.

I will review tax records, our county site here in arizona is free and has alot of good information. Not all states offer free information.

Drive the neighborhood, write down every address and phone number where you find a forsale by owner sign, for rent sign as well as realtor sign in the yard. Go home and call them all if they do not have a flyer in the yard with their sign. Make a spread sheet showing asking price, sqft, # of bedrooms etc, divide sqft by asking price and get a price per sq ft for area. An area normally is a certain radius around your target house (1/2 mile or so), but watch for changes within that area, 2 blocks of carports are not equall to 2 car garages and 200 moe sqft.

It works best to work/study an area or area's, start watching the newspaper for homes for sale in these areas and cross check them with your list from driving. Create a call back list for a month away and call and check if they are still for sale, what is their current asking price, if they sold what did they sale for. Take this info and start a wall map for your area posting the solds with price and date. In a few months time you will know the areas better than most realtor's.

Hope this helps.

Bill

Hello,

I'm a little stuck with a deal i have in sight. I found out about a house that was abandoned about 2 months ago. I went to my county office and figured out what bank has the mortgage. I also found out that here has not been any liens or notices of foreclosure on this house yet. I thought that maybe the owner left someone in charge of paying the mortgage but they moved out of the country and, by comments of other neighbors, they don't plan on coming back so I'm also thinking they stoped paying the mortgage a couple of months ago. What happens if I decide to contact the bank to try to buy the letter/lien on it? Will I need to have the owners authorization to do this? Is it better if I get an agent who's done short sales before or do it on my own? What's the fair price to offer? Houses around that area are selling for about $170K to $200K but I know that there's only about $135K owed now, the house is only about 6 years old, and with out loking inside, I'm sure it's in good conditions. Can some one help and give some advise?

Your first step in this instance is to find the owners. Regardless of what is happening right now, unless the bank has foreclosed on the property they do not own it and can not talk to you or anyone else. Even when out of the country, people can be found. Your first step is to write to them at the property address and if it is different from the tax info address on county web site send a letter to this address as well. Keep your letter simple, saw your house at 1234 main strret would like to buy it, do you want to sell it? Can pay cash, call or contact me at ___________.

Look for a skip tracer to track them down, may not be worth cost involved, but check it out.

When you find them you need them to sign a purchase contract and authorization for you to talk with their lender. If purchase contract is for less than owed you will need short sale documents which lender will tell you about. You may find that if they are not living in house lender will not do a short sale (do not volunter what you do not need to).

Good Hunting

Bill

Many real estate investors determine the value of an income property by using the capitalization rate, aka cap rate. It is probably the one most misused concept in real estate investing.While brokers, sellers, and lenders are fond of quoting deals based on the cap rate, the way it is typically used, they really shortcut the true use of a valuable tool. A broker prices a property by taking the Net Operating Income (NOI), dividing it by the sales price, and voila!--there's the cap rate.However, most people don't seem to recognise that there is sometimes a fundamental conflict of interest when these people come to put a value on their property.The most important part of dealing with real estate is being able to tell what a property is worth. This value will tell you whether a given investment will be ultimately profitable, or it will fail. Therefore, you should establish a way to estimate the value of a property.
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Florida Closing Cost

Hi Michael,

A good real estate broker has a good idea how much the house is going for and also if you want to hire an appraisal and that runs between 300 to 400 dollars. I have used the zillow.com and its not very accurate with the value of the property. I hope this helps. If you need anymore help let me know.
Good luck !!

Have the greatest day as ever

Paul T. La Moy

Hi Mike,

First I like to say welcome aboard this new life changing event! When it comes to finding out the Fair Market Value on a property without an added expense to you is with your real estate buddy. I found that appraiser's often base their estimates on the comps they receieved from realtor's. So to use funds to do an actual appraisal everytime can be expensive. So your best choice should be to stay with the comps you get from a realtor friend. Or you can do a liitle research on your own in that particular area. I keep records of property listing's that sold for my county that are published in your local newspaper blog. This sometimes when I was out in the real estate feild would give me the latest edge. Because not every home is sold by a realtor. There are For Sale By Owner's(FSBO) selling also. Much success to you ..........Lubertha

I read the following thread and it appears you have recieved some great advice from Lubertha, Bill, Paul and others. The more information you find out in a local market the more the potential property values will come to you.

I like to keep properties on my radar that I watch and follow. As these properties sell, I update my values for a certain local area. Thus, I use comps for the last year or 6 months but I also create my own comps based on current sales.

How fast a home may sell wiill also tell you if the home may have been under priced. Thus, you can track different trends in a market and know the direction the local market is headed....is the market cold?...ice cold?....warm?...luke warm...hot...or boiling?

The days on the market and the selling price may help you determine your local investing market at that point in time. Good luck with your real estate investing. Believe and Achieve! - Joe

I have been reading alot of entries here on the forum about how to determine the FMV of a property, the starting point for all calculations. Yet, I am still confused.

I have looked up a couple of properties on the TotalView site and at Zillow and at Cyberhomes. What I am finding is, that the amount listed at these sites is more than two and half times what the County Clerks assessed value is, and about double what the last known selling price was for (which is less than 24 mo. ago).

I have also looked at recent sales for the area. There is NONE for the last year that would even begin to be comps. within a 1 mile radius, and I would not want to expand beyond that because of the difference in neighborhoods.

How do I go about determining what the FMV is when there is such a large disparity in the $$ amounts that I am seeing.

Any and all help would be appreciated at this point. I just don't know where to get a FMV $$ amount for this property to start the process of calculating for an offer.

Thanks, Marcus

Hi this is one of my first post on this site and I am really a newbi as well although I own several properties , how I determine value it to check for past sales that have closed and compare to the asking price of the property , I then calculate how much it will cost to do repairs and updating , from there I will usally make an offer of 60 to 75 % so I can be sure to have a good spread of profit even it I have to discout the property to get it sold , this has worked for me in the past and made money , as I said I am new here and mostof the ideas and approaches discussed here are new to me as well , I might also mention that getting a closing will take as many as 10 to 20 offers before I find the seller willing to make it happen , I hope this info is of some help to someone ,
Kind Regards
Joejoe

A realtor is your very best resource for comps. Of course you can check county records to look at all the recent sales (realtors typically go only by those from the MLS), and figure your compas from those.

Rina

P.S. Welcome to the new posters. Good to have you here.