Understanding Real Estate Comps - What You Need to Know When Pricing Your Home
By Keith Loria
Determining a listing price is one of the most important items you’ll have to tackle when it comes to getting your home sold without it languishing on the market. While coming up with a price that isn’t too high—or too low—may seem daunting, looking at comps can help when it comes to making an educated decision.
What a lot of people who put their house on the market don’t realize, is that when you look at comps, you need to compare apples to apples and oranges to oranges. That means that even though you may be neighbors, the four-bedroom, three-bathroom home with a pool and finished basement isn’t comparable to your three-bedroom, one-bathroom house with an unfinished basement. In fact, a house six blocks away may be a better comp if it is a similar age and size with a similar number of rooms.
Your agent has the tools to present you with the best comps in your area, and once they do, you can decide on the best price together. They get their information from the MLS database, looking at all the properties in a given area that have been listed “for sale,” are pending or have already sold.
A number of factors go into a comp to justify a listing price, including being located in the same neighborhood and school district. Additional factors include the street, similar housing features and size. If two houses are similar in these areas, then a comp can be used to provide a current estimated value of your home.
When it comes to working with comps, the best one would be from a home that’s the same age, on the same street, with the same number of rooms and one that closed in the last 90 days. However, it’s important to keep in mind that things don’t always work out this way, and comps are sometimes taken from “close” properties or sales from further back. Both can be detrimental when it comes to establishing a true value.
When presented with the comps, take some time to look at what features are common among all of them so that you can begin to get an idea as to what people in your area are looking for in a home. Are houses with Energy Star appliances selling? Maybe updated bathrooms are big. Perhaps those with gardens are going strong. Reviewing the comps can provide a lot of insight about sales in your neighborhood.
Your agent will most likely have seen many of these houses up close if they work regularly in the neighborhood and their expertise will provide them with an understanding in regard to what works best and sells fastest. Listen to their advice.
In the end, it’s important to keep in mind that if a house on your block sold for $400,000 last week and another close by sold for close to the same amount a month earlier, that doesn’t mean that your house will automatically be valued the same.
For more information about comps, contact our office today.