One of the most important jobs of a real estate professional is to determine just what the market value of a property should be. Pricing a listing and making competitive offers are the keys to any real estate negotiation, and rely on timely, accurate insights of the local market. By far the most relied-on feature of iMapp is its Comparables Valuation Tool, which uses our most timely and accurate sales data to help iMapp users estimate what the market value for a property could be. If an iMapp user wants to calculate what the market is for a property they are looking at, they can simply click on “Find Comparables” in the right-hand menu on the Property Report.
The Comparable Valuation Report will load, providing a fast and flexible interface to assess the market for properties like the one on the report. To use that power and flexibility to its fullest, here’s a detailed rundown on how it works: To begin with, the top of the report shows the key details about the subject property….the one you were viewing before you clicked on “Find Comparables”. Next to that is a map showing that property and the locations of the other comparable ones the tool found.
The next section below that is where the calculations are done, which often needs a bit of an explanation. First, iMapp provides TWO methods for calculating an estimated valuation based on the comps we have found. The First Method is based on the “Market Value Ratio”. That means we compare what the county assessor says a property is worth and what it actually has sold for. We develop a ratio between those two numbers and use that ratio to estimate what the Subject Property would sell for with that ratio applied to it. So if the county reliably underestimates market values by 10%, we can just take the assessor’s value estimate for a similar property and add 10% and get a good guess at what the market really would be for that property.
The Second Method with offer is based on “Price Per Square Foot”. That is a fairly common method for valuing properties and means we compare how large the buildings are and what they actually have sold for. We develop a ratio from that and use that ratio to estimate what the Subject Property would sell for with that ratio applied to it. So if the average home in this neighborhood sold for $200 per square foot, and this property is 1000 square feet, it is probably worth about $200,000. We include a minimum and maximum range for both of these values in our chart, so you can see just how much variability there is in the results we’ve found, but the average (mean) result in bold is what most users rely on. We’ll discuss when to use each method below.
Now, we’ve discussed many averages and ratios and ranges of comparisons, but behind all of that math is a set of sales data for Comparable Properties that you can see a bit lower in the report. These are the properties we have found that are similar to the subject property and that you can review here. This includes only properties that are of a similar use category, so, condos get compared to condos, single-family homes to other single-family homes, etc. After all, you want to compare the subject property to ones that are similar to it. We can’t get very accurate results if we start out comparing apples to oranges.
The list of comparable properties will be ordered based on overall similarity, distance, and qualities of the comparable property. Usually, the comps at the top of the list will be more reliable than those lower. If there are more than 30 comps, any additional will fall off the bottom of the list. Occasionally, a user will wonder why a property that they KNOW sold recently nearby isn’t on the list. Usually, the answer is that it is a comp, but that it didn’t make it into the top 30 comps on our report…likely because it isn’t all that similar to the subject property in some way.
This list will contain both MLS and non-MLS sales by default, but users can customize the criteria to include only one or the other as they see fit. As this list is customizable, if you see something on this list that just doesn’t fit, you can remove it. There is a blue checkbox next to each property in the list. Just uncheck that box and it will remove that property from the calculation, drop it to the bottom of the report, and redo the math. This is handy if you know a property has some outstanding positive or negative features that make it not similar to the subject property. This would include things like an outstanding view or some unusual wear and tear or damage or even just a property that sold for below the Assessors valuation for any unknown reason. Try removing those and seeing how the numbers change. If you want to re-add any removed entry, recheck the box next to it.
This list of comparable properties is initially selected based on the default criterion for your account, which is always available for you to customize and tweak in the Comparison Criteria section, based on your results and knowledge of the area.
You can change these limitations any way you want to find the best list of comps, but be careful not to make them too restrictive or you will not get any results at all. We advise at least 5 good similar comps or 15 broader comps, but the more the better. It makes sense to begin with most of the options set to “Ignore” and then tighten those restrictions if you end up with many matches. You can also change the “Distance” set to a larger area and “Duration” to a longer time to help find more matches. Click the “Update Criteria” button any time you make a change to ensure you have the most current results.
In general, you will get a more reliable value estimate if you have found a list of comps that are more similar to the subject property. So if your subject property is a Waterfront Property with a Pool, it may be wise to set those filters to match those features. If the list of comps gets too low when you do this, you can broaden the distance or duration again….or remove some of the other criteria. Once in a while after adjusting criteria, the list gets too small to be helpful. Often the culprit is that the Land Area filter or Building Area filter is set too narrow. Try broadening those categories a bit and see if that helps…within 20% is usually reliable.
Now if you just are not able to find many comps at all after adjusting criteria, there is one more thing to try. You can use the “Click Here For a Less Strict Search” option, which will broaden the property use comparison. This is helpful for more unconventional properties that just don’t have many similar matches nearby. There might not be many comps for a fourplex, making it hard to estimate its value, but this feature will compare it to other residential properties as well, instead of only fourplexes. This is also helpful for commercial, industrial, and other property types where there is less volume of sales.
We mentioned earlier the Market Value Ratio method and the Price Per Square Foot method for valuations. Both are good and reliable methods. In general, we advise users to use the Market Value Ratio for a quick estimate…to just see that first number when first looking at a property….or for when you don’t have the time or ability to dial in a set of comps that have the same features as the subject property. The counties usually do a good job adjusting for major differences in properties, so using their valuation as a basis works out well.
But if you do have a good set of very similar comps, all with a garage and a pool, for example, we advise you to use the Price Per Sq Ft method. If those comps are all on similar size lots as the subject property, in the same neighborhood, and without any other major differences, then the size of the property will be the major factor affecting price. The Price Per Sq Ft method will catch that valuation quite nicely (and usually the Market Value estimate will be quite similar, providing additional confirmation).
The most important advice when using the Comparables Tool in iMapp is to not be afraid to adjust Comparison Criteria. Those filters will help you dial in a precise set of comps that is not too big and not too small to get a very accurate property valuation estimate…giving you unmatched information on the local real estate market and an edge over your competition.