Tim Bell property analysis 4

Now, other considerations in regard to comparable properties could be the status of the property. Okay. We talked about some physical aspects, physical characteristics of the property. Now we're going to talk about the status. Okay? And obviously the statuses occur in the mls. They also occur outside of the mls. But let's talk about each one of these statuses. The first one there is sold properties. Sold properties are properties that were on the market for a period of time. A buyer came along, they were attracted to the property, they negotiated with the seller, they came up with a figure, they signed a contract, they gave them the earnest money deposit, and now they went through the escrow period. The escrow period is that period when they've signed the contract. And now they're doing things like getting their appraisal done and getting their inspection done and getting their mortgage all finished up. Okay. The average escrow period in America at this point is about 42 days. Some places they've streamlined the process, they got it down to 30. Other places, it takes 45 or even 60 days in some markets to get those things closed. From the time the buyer and the seller agree to the time it actually settles, closes, funds and records. Okay? But the average in America at this point is about 42 days. So sold homes were properties that were on the market for a period of time. Buyer came in, agreed to buy them, they went through that 42 day or 45 day or whatever escrow period. They got their mortgage done, they got the inspection done, they got the appraisal done, and they have all signed. And now it's closed. And now that buyer owns that property. That's a sold property. Now, the soles are typically the only comparable properties that an appraiser will consider. They won't look at anything else. That said, I suggest as an intelligent real estate investor, we may want to look at some other statuses of properties because that can give us some additional insights into what's going on in that neighborhood. Okay. So sols, of course, are your best comps. That's SOLs. Let's go to the next one. The next one are active listings. Active listings are properties that are currently on the market but have not yet sold. A buyer hasn't come in yet. Okay. They're available on the market. They're active listings. Okay. Now, the reason I like to look at active listings is because it's possible that as a fix and flip investor, and therefore as a wholesaler, who's going to sell the property to a fix and flip investor, those active prices, those properties that are currently Active may still be on the market. When I, as a fix and flip investor, put the property on the market, for example, let's say I go into a neighborhood and average days on market is 30 days. That means on average it takes about 30 days to sell a house in that neighborhood. And by the way, you can ask your real estate agent how long that is in your market and your part of the world. They will always know. Okay, so let's say 30 days on market is the average days on market. So, and by the way, the way they calculate days on market, they take all the homes that sold and they figure this one sold in 17 days, this one sold in 23 days, this one sold in 42 days, this one sold in 67 days, they add all the days up and they divide by the number of houses and that gives them the average days on market, okay, that tells you, on average, how long does it take to sell a home in that particular neighborhood? Okay, that's average days on market. Well, if the average days on market is 30 days, and let's say that you're in your market, I'm not saying that's what it is. I'm just saying if it was. Let's say that you're a fix and flip investor. And the property you're going to sell as a wholesaler to your fix and flip investor, it doesn't really need very much work. It needs paint, needs a little bit of flooring, a little bit of spruce up, a little bit of landscaping, and boom, they can put it back on the market. The contractor says, yeah, I can knock that thing out in two weeks. I, I can get it all painted, we can get the flooring done, we can get everything done in two weeks and put it right back on the market. Well, if that's the case, then those active properties that were on the market when you purchased, the properties of fix and flip investor are still going to be on the market. Okay? By definition, if the average days on market is 30 days and you're putting your property on the market in two weeks, then those same properties are going to be there. Now, here's why this is important. The reason it's important is because buyers buy by comparison. That's how they buy. Okay? They drive around with their real estate agent going like a honeybee from flower to flower to flower. They go from house to house to house. And while they are looking at those houses, they start to build a database. It may be a conscious database where they're writing things down and they may even be filling Out a spreadsheet, or it may be an unconscious database. Okay? They may be collecting all that information and in their brain about the various different houses they see. So this happens often. And if you don't believe it, you can talk with a real estate agent. This happens often when real estate agents are showing houses. So the couple gets to the next house. They walk in the house, and they look around, and they say to the agent, oh, my goodness, this place is. This is terrible. And they look at the price sheet, and they say, and it's $10,000 more than anything else we've seen. This is crazy. We're out of here. These people are nuts. And they leave. They do what the real estate agents call the 32nd whirlwind tour. That's where they go in and out, and they're out, and they're gone. Whoo. That was terrible. Now they get to the next house, they walk in, and they're looking around, and they're kind of quiet. Oh, my goodness. Look at this house. It's beautiful. This is our dream home. And they look at the information sheet on the house, and they see it's $10,000 less than anything else they've looked at. Oh, my goodness. This is awesome. Why are they whispering? Because they're telling their agent, look, we want to write this up. Let's go. And the seller's in the kitchen, and they're in the living room. Okay? That's why they're whispering. But anyway, they say to their agent, look, this is great. This is $10,000 less than anything we've seen. It's a lot better. It's a lot nicer. Let's go. Let's get this going. Come on. Write it up. Let's go. Okay, again, that is how buyers buy houses. Okay? So we need to understand the prices of the active listings. We need to make sure that our property is competitive with those active listings, because you can be very certain that the buyers will know what the other properties are that are available in the marketplace. They always do. Okay, now the next one on our list is expired listings. Expired listings are listings that were on the market for a period of time, typically three months or six months or nine months or 12 months or longer, and they didn't sell. They didn't sell. They didn't get the result that you need to have for your property. Okay? Expired listings are like that kid your parents told you not to hang around with when you're in high school. Remember that kid? They said, oh, don't go around with her. She's a bad one, or if you hang out with him, there's going to be trouble. Remember that kid? Well, the, the expired listings are like that kid. They didn't get the results that you need to get. So do not price your property like the expired listings because if you do, you're going to end up with the same result, which is no sale, which of course is an unacceptable result. So don't assign an ARV that mirrors the expired listings because you're setting yourself up for failure. Okay, now the last one on our list here in terms of comparable properties, in terms of various different statuses of properties, is pending sales or sale. Pending or under contract. Here's what that means. The property was on the market for a period of time and it attracted a buyer. The buyer came to the property, they looked around, they said, yeah, we want to buy your house. They got the contract out, they signed the contract, they gave the earnest money, and now they're in that escrow period, the period from the time when they've agreed with the seller on the price to the time when they actually sign the papers, pay the money, close fund and record on that property. That's the escrow period. Again, the average escrow period in America is about 42 days now at this point. And it really hasn't varied that much in many years and probably won't vary that much unless all of a sudden the mortgage people figure things out. I don't know. But anyway, so these pending sales, these under contracts, they're somewhere in that escrow period. Why are those important to us now? A lot of people say, wait a minute, Tim. In my marketplace, they don't show the agreed upon price for a pending sale or under contract. They don't show it in the mls. Why? Because if the sale falls through, then they feel that if subsequent or future buyers know what that agreed upon price was, it could damage the seller's ability to get a higher price later on from another buyer. So. So they don't show it. They don't show it in my MLS either. I don't know of any MLS in America where they do show what the agreed upon price is, but I maintain, I don't care. Why? Because some combination of price, amenities, condition and location was good enough that it actually attracted a buyer to the property in the first place and they started the negotiation. By definition, you can't end the negotiation until you start the negotiation. Well, there was some combination of price, amenities, location and condition that was good enough that it attracted a buyer to that property in the first place for them to start the negotiation. Okay, so the reason I like pending sales is because they're telling us what today's buyers are interested in. Okay, Remember, the average escrow period in America is 42 days. So the solds, the decision to buy that house was made at least 40, 45 days ago, maybe even longer than that. Okay. I want to find out what the current buyers are interested in in terms of price, amenities, condition, location. So imagine this. Imagine you're, we're gonna go fishing. Okay? So we put the tackle in the back of the truck. We're driving out to the lake. It's early in the morning and we're driving along and we drive by Denny's. And I look at you and say, are you hungry? And you look at me and say, yes, I am. So we pull into Denny's, we have a nice breakfast, big grand slam breakfast with eggs and all that good stuff, right? So we're about an hour getting to the lake late, later than what we anticipated. And so we're hurrying up the shoreline with our tackle and we find another fisherman there. And we look down on the water and that other fisherman has 10 great big beautiful fish on the stringer down in the water. What's the first question we're going to ask that fisherman? If you're a fisherman, you know the answer is what are you using for bait? Right. Because theoretically, if we use a similar bait to what he's using, we're going to get a similar result. Right? It's the same way with pending sales. Pending sales, under contract sales are solds that have happened more recently. In other words, the decision to buy that property was made more recently than the decision on the soles. For example, let's say the home sold shows a sold status yesterday. Well, the decision to buy that house was probably made 40 plus days ago. Okay. The pending sales, the decision to buy that house was actually made sooner, more recently. So that's telling me what today's buyer fish are biting on. That's why I like to look at pending sales and other contracts.