Do You Use A Flip Sale As A Comp?

[moh malekpour]

One of my comps appears to be a flip sale. Upon a search of sales history for this comp, I noticed that it was sold twice within last 2 months. First it was listed and sold in 4 days for $330000. Exactly two months later it was listed with the agent who was the selling agent in the first transaction and sold in 13 days for $379000. Both agents are from the same real estate office. This is 15% increased in value within 2 months. My market is hot but this is boiling. According to MLS, agents, interior/exterior photos, nothing in the property was changed in that two months period except the ownership. It is very obvious that it is a flip sale and I can make a comment that it is a flip transaction. What I don’t know is if a flip transaction can be considered a good comp or not. Have you ever had the time that you were struggling if to use a flip comp or not? There is something wrong with this transaction but the last sale is closer to the current market value. I cannot get anything out of agent except that this is the market.

 

[Tim Hicks (Texas)]

As long as you explain and it is in line with the typical market.

 

[Jan Roseberry]

You can explain, but can you verify. I had one which was very similar and ended up using as a fourth comp because I could not get verification which I felt was facutal. I even tried the title company that closed it, could not tract down appraisers (usually can in our area).

 

[Robert Anderson]

Moh,

You and I generally work in the same market, and there are generally a lot of available comps. I would not use the flip sale simply because you are not certain what occurred and because review appraisers are going to question it. If the flip sale is a very important comp, such as the only model-match sale in the subject development, I would include it as a fourth comp.

Bob Anderson

 

[Risky Business]

I would use it only if necessary to prove your logic. And if I did I'd put it in last spot due to its sales history with a HEALTHY explanation of why its included.

 

[moh malekpour]

Bob,
This is in SB county. Do you cover that area or just OC? It is not a model match but it is the upper end comp for bracketing. I always use more than 3 comps. This is a given but my subject has a new enclosed patio that I have to give it a value. I have found a comp with enclosed patio, which is 2 miles away, but I decided to use it because it is the only one with similar patio and I am going to use that one as my fourth comp. My other comps are within 2 or 3 blocks from the subject and are bracketed.
You are right. I have many comps that I can use them. I shot 20 comps when I was in the field in the case if I need them but they are not very good comps. Some of them are 2 stories while my subject is single story. Some are superior and need condition adjustments that I am hesitant to do unless I have to do. Some have older listing date but recent closing date and for that reason they have lower sales price because from the time that they came to market and the time that they were closed took a long time and now need time adjustment and I am not comfortable to do it.
I tried to get information from agents but they have tight lips and don’t reveal a lot. They are both from the same office and say the same thing. The selling agent of the first transaction became the listing agent of the second one. In both transactions, the listing and sold prices were the same and in both times there were adequate exposures. To me, first sale was lower than market value based on the comparables but I cannot find it out why. The second transaction appears to be at market value as it is only 2 weeks old. It would be a good indication of market increase if the timing was not that short and the increase was not that high.

 

[Mike Garrett RAA]

I would not use it....too spooky.

I do use flips but they must be legal flips and there must be substantial work done on the property to justify the difference in selling prices.

Saw one like you are talking about a couple of years ago. Agent bought the property from a widow and sold it two weeks later for about $25,000 more. I refereed the case to the Board of REALTORS® ethics committee. The agent agreed to undo the deal and give the money to the woman or risk losing his license. The slime ball is no longer in the business.

 

[Robert Anderson]

Originally posted by moh malekpour@Jun 26 2005, 07:40 PM
Bob,
This is in SB county. Do you cover that area or just OC?

Moh,

San Bernardino is too far for me to drive. I stick to Orange County and a few cities in southern Los Angeles County. I used to cover Riverside County for the VA, but I don't even do that any more.

It sounds like you have a good handle on comps. I would probably include five comps in this one, with comps 4 and 5 being the flip sale and the sale that is 2 miles away. But, that's just me, and there are many valid ways to handle this one.

Bob Anderson

 

[Jim Bearden]

Originally posted by Mike Garrett, RAA@Jun 26 2005, 10:11 PM
I would not use it....too spooky.

I do use flips but they must be legal flips and there must be substantial work done on the property to justify the difference in selling prices.

Saw one like you are talking about a couple of years ago. Agent bought the property from a widow and sold it two weeks later for about $25,000 more. I refereed the case to the Board of REALTORS® ethics committee. The agent agreed to undo the deal and give the money to the woman or risk losing his license. The slime ball is no longer in the business.

Mike took the words out of my mouth, good for you on the slimey broker.

 

[allen worsham]

I do a lot of work in San Bernardino and Riverside Counties, and what you are dealing with is not uncommon with the increasing values here in the Inland Empire. As it was sold with adequate exposure and all sales can be verified, I would use it and then explain it including the MLS#'s, agent's name's and phone numbers listed in case the reviewer wants to discuss it with them. I would also include additional comps to support your value, but with 20 comps shot, I am sure that you can make it work.

Allen