How to Get Information on Comparable Sales
by Tim Randle
http://texasrealestateclub.com
There are primarily four ways to get information on
comparable sales (comps) when trying to determine the value
of a target property. Those four are:
1. Doing Your Own Research
2. Internet Searches
3. Service Companies
4. Access to MLS
DOING YOUR OWN RESEARCH
Within this category, there are four subcategories. Those
are:
Courthouse Searches
Newspaper Listings
Tax Appraisal Districts
Master the Neighborhood
Courthouse Searches
If you live in a state that is discloses property sales
information, you will have a much easier time than those of
us who live in a non-disclosure state, like Texas. My
understanding for disclosure states is that information on
sales can be found at the courthouse if you're willing to
spend the necessary time. From that information you could
devise your own methodology for determining comps.
Certainly, it would be beneficial to know the history of a
target property which you can look up while you're there,
but I think this would be very slow and probably not worth
your efforts if the only goal is to get comparable sales
data.
Newspaper Listings
In some states the sales information is listed in the local
newspapers so you could get a feel that way or create your
own database and update it periodically. Again, I think
this is a slow way to get things done, but it may prove
useful to you in some circumstances.
Tax Appraisal Districts
In my area, the tax assessed values provided by the tax
appraisal districts are frequently useless. You'll have to
get a feel for this in your area as you may find that the
assessed values are close in many neighborhoods.
Master the Neighborhood
Probably the most accurate way is to spend the necessary
time to master your farm areas. By this I mean learning the
values for certain neighborhoods that you target. You can
speak with Realtors, attend open houses, view as many
floorplans as possible, etc. until you can drive by a house
at 30 mph and know within a reasonable range what the
property will be worth in good condition. This information
comes in extremely handy when talking to sellers on the
phone. If a seller calls you and tells you the house is in
ABC subdivision, it's a three bedroom, two bath, two car
garage house and it's 1,500 square feet, it's nice to
immediately know the market value in your head.
INTERNET SEARCHES
I know some investors use online searches to determine
value. I tried this when I first started and found the
information to be outdated and not even close to what I
consider a comp. For example, at the time the Austin, Texas
market was appreciating almost one percent per month.
Retrieving sales numbers that were almost a year old and
five miles away from my target property was useless. If
you're in a disclosure state, this methodology may prove
more helpful. I haven't used or even looked at any of these
sites for this purpose in years, but here's an initial list
you could view, although keep in mind that some of these
may be regional-specific.
www.Realtor.com
www.Homeradar.com
www.Homegain.com
www.Yahoo.com
www.Domania.com
I'm sure you can find many more sites like these if you'll
spend the time to do so.
SERVICE COMPANIES
Some investors subscribe to services that provide sales
information. This can be in the form of software in the
form of CD's that are sent out periodically or it could be
an online service where you login to retrieve information.
I've never used any of these services and typically, the
reviews are mixed as to their usefulness. Again, that may
come down to whether or not your state discloses sales
information. Here's a list for you to check out:
First American Real Estate Solutions (www.firstamres.com)
Dataquick (www.dataquick.com)
Netronline (www.netronline.com)
CD-Data (California only - www.cd-data.com)
ACCESS TO MLS
Having access to Realtor's proprietary information that is
available in the Multiple Listing Service (MLS) is
invaluable. In my opinion you should begin working toward
this goal regardless of which comp methodology you plan to
use or currently use. Again, there are several ways to
accomplish this goal:
Ask or Hire Someone to Help
Become a Realtor
Obtain an Associate Membership
Relationship Access
Ask or Hire Someone to Help
One way to obtain information on sales is to contact those
who have access to it. For example, you could get in touch
with a Realtor, Appraiser, or Title Company and establish a
relationship. At some point fairly early on you'll have to
make it worthwhile for these folks to continue helping you,
so it's important to either pay them for their assistance
or to get some deals done where they get paid.
If you're going to go this route, I think it's extremely
important to have the actual data sheets sent to you so
that you can begin to learn how to evaluate values. You'll
soon discover that no one runs comps like you do. After
all, a comp is merely someone's opinion of what a property
is worth. I've had Realtors provide alleged comps on
properties that were in different subdivisions miles away,
fifty years older than my target property, with a different
number of bedrooms and baths, different foundation
structures, sold years prior, etc. Do you really want to
trust six figure decisions to someone else's judgment?
Become a Realtor
Although I frequently see disparaging comments about
Realtors and the liability associated with becoming one, I
think this line of thinking is way overblown. I can promise
you that if you're in real estate long enough; you're going
to end up a target for someone. Whether or not you happen
to have a real estate license is probably irrelevant.
Then there's the theory that you're held to a higher
standard if you're licensed. Again, who cares? You're not
going to operate your business to at least the standards
that Realtors are held to?
No, I'm not licensed and I go back and forth on whether or
not I should be, but my decision, or lack of one, is based
on costs versus benefits and being lazy. I've never met a
successful investor who also happened to be licensed who
told me not to get my license. It's seems to be only the
folks who aren't licensed who warn me of the "risks". So,
my suggestion is to not rule out this possibility simply
because someone else told you to or you read something on a
newsgroup.
Obtain an Associate Membership
In some areas, the Board of Realtors will sell associate or
affiliate memberships to non-licensed individuals. For
example, appraisers may qualify and I've heard of investors
being able to obtain a membership as well. In my area
anyone who wants access to MLS must have a real estate
license or someone in their office who is licensed. If you
don't know if this is available in your area, it's
certainly worth a phone call.
Relationship Access
Building relationships with Realtors and other
professionals who have access to MLS is another great way
to gain access. Granted, this methodology takes longer and
requires ongoing efforts, but it is an effective way to get
comps. You may start out initially with receiving faxes and
then progress to limited and supervised access to the MLS
during non-work hours. From there you might achieve non-
supervised access, which then gives way to a full-fledged
copy on your home computer. Anyway, you get the picture. As
the relationship grows and the Realtor is fairly
compensated for time spent, you'll find it easier to ask
for favors.
As far as how you do this, I would suggest scheduling
lunches with the appropriate people. If you take ten
Realtors out to lunch over a month, you'll find someone
willing to work with you. I would suggest contacting agents
who specialize in commercial properties. The reason is
simple. Agents who work the residential listings and buyers
need to use MLS on a daily basis.
Commercial agents typically don't. In fact, in my area
commercial real estate deals are handled almost exclusively
through networking. In other words, it's done by word of
mouth, phone and faxes and MLS isn't even used. However,
being a member of the Board of Realtors still requires
paying the same dues regardless of the fact that commercial
agents may not really use MLS. Is it possible that one
might agree to let someone else pay for that service that
they're being charged for, but not using? Hmmm...
If you're going to take this approach, tread lightly. In
many areas allowing non-licensed individuals access to the
MLS is viewed as a violation, thereby putting the agent's
license and livelihood at risk. Again, it's a relationship
thing. However, perhaps that agent opened a "branch
office"? Anyway, it's something to consider and I wanted to
let you know that not only is it possible to do this, it's
not even that difficult.
Summary
In summary, let me state that no method for getting comps
will surpass the importance of learning your market and
more particularly, your farm areas. However, that takes
time and I wanted to let you know there are other ways to
get it done while you're gaining the knowledge and
experience. In my opinion the combination of MLS access and
firsthand knowledge is critical in determining comparable
values, but that's not always possible, especially when
just starting out.
So, it's time to get busy chasing MLS access and learning
your farm areas. Good investing...
Sincerely,
Tim Randle
http://TexasRealEstateClub.com
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