How to Accurately Determine Property Values

Figuring out the real value of a home today is far from being easy. Things are changing so fast in different directions at the same time and have done for so many years that evaluating real estate deals can be one of the most challenging tasks you will face as you get started in real estate investing.

How much of a discount does a property really offer in today’s market, how much can you flip it for as a wholesale deal and what will it be worth if you fix it up and retail it?

Forget Zillow

Credit has to be given to Zillow for an amazing marketing job of some of the worst tools on the web including its ‘’Zestimates” or home value estimates. If you are really lucky Zillow may be very up to date and not to wildly out of whack. Not quite that lucky? Maybe it will at least be predictably inaccurate by 25% or so. However, after extensive testing even the best online home value tool has been found only to be right 50% of the time and when giving a range of potential pricing.

If you find one of these tools you really like you can try using it to quickly confirm your own immediate gut instincts but do not rely on them exclusively if you expect to make profits.

Get to Know Your Area Intimately

The better you know your area or the areas you plan to focus on investing in the faster you can make confident offers and the more profitable your real estate investing efforts will be.

Make it your business to know what every home is asking for in your neighborhood and what they are sold for. Then you’ll be able to instantly spot an amazing deal as well as recognizing those who are promoting bogus, overpriced ‘deals’ and who to ignore in the future.

Utilize Real Estate Agents

While real estate agents aren’t always the most knowledgeable about exactly what defines appraised value they are certainly great sources of data. You can even utilize real estate agents to obtain free CMA reports showing recent comparable sales, pending sales for similar properties and more.

The Problem with Full Blown Appraisals

While a full blown appraisal is the most accurate and reliable way to go, they also mean full blown waiting times and prices. The odds are you can’t afford a full appraisal for every property you might be interested in or be able to wait that long. Plus, unless you are using conventional financing you don’t need one. However, you do need to understand what factors matter for accurately determining your resale potential.

The Fast, Affordable & Effective Alternatives

The 3 preferred options by most real estate investing veterans that offer speed, accuracy and are far more affordable are utilizing ‘pencil searches’ or Drive-By appraisals from licensed appraisers or AVMs.

Don’t forget about ‘subject-to’ appraisals for estimate of renovated values, getting multiple quotes for repairs and consulting appraisers for solid advice on which improvements will really add dollars to the appraised value of homes you are considering rehabbing.

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