Learn to spot bad comps that will throw off your ARV. Not all sold properties make good comparables.
Bank-owned properties often sell 10-20% below market value
How to spot: Look for "REO", "Bank Owned", "Foreclosure" in listing remarks
Sales between family members or related parties at non-market prices
How to spot: Same last name on deed, price way below or above market
Seller paid buyer's closing costs, inflating the sale price
Example: $210K sale with $8K concessions = real value closer to $202K
Estate sales, divorce sales, short sales - motivated sellers accepting below market
How to spot: "Estate", "Must Sell", "As-Is" in remarks, unusually fast sale
Sales older than 6 months in fast-moving markets
Why it matters: In appreciating markets, old comps undervalue; in declining markets, they overvalue
When in doubt, throw it out. It's better to have 3 clean comps than 5 questionable ones. Bad comps lead to bad offers and blown deals.
Not all sales are created equal. Learn to identify problematic comps that can skew your ARV and lead to bad offers.
Bank-owned properties often sell 10-20% below market. Banks want quick sales, not top dollar.
How to spot: Look for "REO", "bank-owned", "foreclosure" in listing, or HUD/Fannie Mae sales
Sales between family members, business partners, or related parties often aren't at market value.
How to spot: Same last names on deed, $1 sales, gifts, or unusually low prices with no explanation
If seller paid buyer's closing costs, the effective sale price is lower than listed.
Example: $250K sale with $10K concession = $240K effective price. Adjust your comp!
Properties sold "as-is" typically sell below market due to unknown condition issues.
How to spot: "As-is", "sold as-is", "investor special" in listing remarks
Markets change. A sale from 8 months ago may not reflect current values, especially in hot markets.
Rule: Prioritize 0-90 day sales. Use 90-180 day sales with caution. Avoid 180+ day sales.
When you see a comp that's significantly lower than others, investigate WHY before using it. A $200K sale in a $250K neighborhood usually has a story - find it before you make a bad offer.