Determining the True Value of the Deal
I don’t know about you, but when I first got started in this business I had a hell of a time determining the true value of selling my property, when I bought it, as well as the After Repaired Value (ARV). There were so many variables in determining the value it just eluded me. When I first began learning about investing everything regarding value was cut and dry. Run comps using the MLS, Real Quest, Data Quick or some of the free comp-ing services from title companies. They would give you the sale prices and the list prices of all of the properties within a radius around the subject property.
I did learn that proximity, size, age number of bedrooms and baths are important when determining the value. Amazingly enough you can have two houses built in the same subdivision, same age and size and yet the value of the properties can be radically different.
Contrast that with a house built by the same builder but in the next development over and the prices can be different as well. All of this has made for a very confusing problem when determining the value of selling a home.
A perfect value would be having a house that was the same size, same number of beds and baths in the same neighborhood built by the same builder and the comparable property was sold and closed only 30 days previously. You can then be assured that the values would be the same.
Then you have to take a look at the motivation level of the seller and the buyer; just because the appraised value would be the same the market value could be radically different. Suppose the seller was willing to offer better terms for the sale or the buyer was in a pinch and needed to close quickly. This could add 3-7% to the selling price of the house.
I know that I have added many different dimensions to something that should have been simple, determining the value the property. I just want to encourage you to think about the complexity of real estate investing. What may seem like a simple item can become tricky very quickly.
This is one thing that will trip up a beginning investor, but surely not the only thing. This is why I encourage you to work with the Best Expert Professionals like appraisers and real estate agents when first getting started. Once you have done several properties you will become an old hand at figuring out what the property is worth.
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