Comparable – of equivalent quality, a worthy comparison.
In the real estate business we refer to comparable sales as comps because real estate professionals are way too busy to say comparable sales.
If I’m searching for comparable sales on a house I plan to fix and flip I call it comping. My spell check says comping is not a word. It suggests I use the word coping, or chomping. But since this is my blog I don’t really give a damn what my spell check says.
I hereby proclaim that the act of reviewing comparable sales is called comping. Being the editor of my own blog certainly has its privileges.
Finding a short sale in the greater-Phoenix housing market these days can be difficult. The market is red hot and the banks know it. You’re wasting your time, and your Realtor’s time, if you don’t know how to properly “reverse comp” a house before writing a short sale offer.
Here’s an example:
I found 1826 S. Arroyo on the Arizona Regional Multiple Listing Service last October. The list sales price was $185,000. Before I wrote the offer I scoured the MLS for comps that would support my offer price of $179,000. I found comparable sales at 165K, 178K and 192K. These comps were crucial for offer success. The bank ordered a broker price opinion (BPO) and the real estate broker chosen to do the report used these comps to assign a value to the home. If they came back too high the bank wouldn’t accept my 179K offer.
I call this process “reverse comping”.
My next step was to find comps that would support an after-repair price of 235-240K. It took some time but I found a few traditional sales in this range. But here’s the problem – since I found them chances are the BPO agent could find them too, and use them. There wasn’t much I could do about that. My only hope was that the broker would take into account that 1826 S. Arroyo was a distressed short sale.
Luckily for me, that’s exactly what happened. The BPO came back at 179K. I bought the house, spent 18K on repairs and sold it 70 days later for $250,000. My net profit was $40,000.
That is okiiizzzaay. Alright. I made that word up too.