After the last few years of rampant house sales, the American real estate market is cooling to the extent that 25% of home sellers cut their asking prices this year.
That makes things a little more difficult for keen sellers who want a fast sale but also need to profit from the deal. Now, pricing your home right is more important than ever.
Selling a home is an emotional decision, and it’s easy to allow sentiment to cloud your objectivity when pricing your home.
House comps can help you get the balance right. Keep reading to discover more about this pricing factor and how to find ”comps for my house.”
What are real estate comparables?
Real estate comparables, commonly known as house comps or closed comparable sales, are completed home sales with similar characteristics used by various professionals such as real estate agents, appraisers, attorneys, lenders, and estate planners to determine home values.
Market conditions greatly impact home values, and active sales or historic home sales may not accurately reflect current market values.
To overcome this, it is best to focus on the last three months of closed comparable sales. While this method is not foolproof due to several variables impacting home sales, it provides a good starting point for pricing a house or setting a budget for purchasing a home, ensuring a fair price for buyers and sellers alike.
Where to find comps for your house
Unlike most things today, you can’t find a quick online solution when looking for “comps in my area.” Working with house comparables takes a lot of research.
Here’s where to start your investigations:
View home comps on a real estate website
Real estate listing websites like Zillow, Trulia, and Redfin, take information from the MLS to assist home buyers in their search. They also have data regarding past home sales.
The best websites let you filter this information to match your home closely. Use the following steps to find houses that compare to yours:
- Search for homes in your neighborhood
- Adjust the filter to include only sold homes
- Select a time frame within three to six months
- Specify more details that match your home
Most of these top websites will have very similar search functionality. Plus, if you know of a home like yours that’s sold recently, you can type in the address to discover its sale price.
You can also search for more homes nearby to compare prices.
Use online valuation tools to find home value
Free online valuation tools use information gathered by experienced real estate agents to compile valuation reports for homes anywhere in the country.
Interested in your home’s current market value? Receive a free online home value estimate!
They’re easy to use and will provide you with a good starting point for determining fair market value. Many of these tools use data from the MLS to calculate valuations.
Some of the best websites for online valuation tools include:
While they’re no substitute for a professional appraisal, they’ll give you a good idea of what you can expect to get for your home.
Working with a real estate agent
Local real estate agents are your first port of call for expert property advice in your area. They can provide boundless advice on how to best price your property, compile a cost comparison report for you, or refer you to a reputable, licensed appraiser.
Only licensed real estate agents have unfettered access to the MLS, where they can find up-to-the-minute information on homes for sale in your neighborhood. In this way, they can tell you at the outset whether your expected price is realistic or not.
A good realtor is aware of which neighborhoods are gaining popularity. They can also advise you on whether to sell now or hold out for the rush.
Investigate public property records
Your county’s public property records are accessible to everyone, and you might find much useful information contained in these documents.
These records only display the last recorded sales price, which can sometimes date back too far for your needs, especially if you live in an area with sparse real estate transactions.
You can search these records online for free in most states and only pay if you require printed copies.
It’s easy to find them by visiting your city or county website and searching for property records. You can also visit your county deeds office to search through the archives.
These websites commonly have information about individual properties’ taxes and the last price they sold for.
Request a comparative market analysis
A real estate agent may provide a free comparative market analysis to help you navigate the home comps process. They do these reports in the hopes of attracting more sellers.
These reports usually include a comparison between three to five properties in your area and may list:
- The property addresses
- Detailed property descriptions
- Square footage of each property
- The sales price for each one
- Adjustments for any differences
- An adjusted sold price per square foot
Although a CMA isn’t comparable to a professional home valuation, it provides a reasonably accurate reflection of your home’s current value. It has several important uses, depending on your circumstances.
Home buyers can use a CMA to submit a more competitive offer on a sought-after property. It’s also a useful tool for setting up a home-buying budget according to their wish lists.
Most homebuyers compare prices as a matter of course while shopping for a home, so it’s worth making the extra effort involved in comparing the finer details. This prevents buyers from looking at homes worth more than they can afford, or from over-paying for a property.
With house-flipping profits at their lowest ebb in a decade, a CMA is invaluable for fix-and-flippers juggling the costs involved in buying and refurbishing a home vs. the expected sale price.
CMAs help homeowners calculate if they have the required 25% equity to refinance their homes.
Real estate agents look at specific aspects when they compile a comparative market analysis. You can use the same real estate comparables to craft a DIY CMA for your home using a reliable real estate website:Location
Real estate value can vary widely in different locations, so start looking for houses sold within a mile from your home. If you don’t have any success, you can expand your search to a maximum five-mile radius.Neighborhood
Neighborhood features and amenities have a significant impact on home prices. Conveniences like schools, stores, public transportation, and hospitals drive prices up, along with variables like proximity to lakes, rivers, oceans, and parks.
A study by the University of Florida indicates buyers will pay as much as 46.2% more for waterfront properties.
Comparing a home with others in the same neighborhood helps you identify unique selling points that can add to its value.The Age of the Home
Buyers assume that older homes will need more work. That means a more recently built home will always have a higher price initially.
Homes in disrepair are cheaper, as the buyer must spend money on improvements before they can move in. Likewise, homes with an awkward layout and small rooms will fetch lower prices.
Age aside, a well-maintained older home stands its ground among more recently built properties. If you’ve inherited a home, and have little knowledge about its maintenance history, a house comp can help you value it more accurately.
Keep these things in mind when comparing prices in your area. Look deeper into homes with unusually low prices to see if they share similarities with your house. Square Footage
The size of a home plays a major role in its market value. It only makes sense to pay more for a larger home.
Always compare homes with square footage that nearly matches that of your home. You can calculate the price per square foot by dividing the sale price by square footage.
This figure helps you determine an approximate value for your home when comparing it to larger or smaller properties. Bedrooms and Bathrooms
Usually, the more bedrooms and bathrooms the house has, the higher the price. Remember, a home with small square footage and more rooms isn’t an attractive option and should have a lower value. Upgrades and Improvements
Upgrading a kitchen or bathroom usually increases the value of a home. If your home has outdated bathrooms or an ugly kitchen, it will affect its value negatively.
Look closely at the photos of your selected properties. Do they feature high-interior finishes or superior appliances?
These aspects can add to the home’s value. Unless you’ve furnished and equipped your home in a similar or better style, the other one is worth slightly more.Timeframe
Pay attention to homes sold within the last six months or less. Last year, houses sold at all-time-high prices, representing unrealistic market values.
The drawbacks of house comparables
While there’s no denying that house comps offer many benefits for pricing your home, you should guard against information you receive online.
Some of the things that can go wrong on this platform include:
Inaccurate sale prices
Real estate agents use ‘for sale’ listings as marketing tools to attract buyers and sellers. So, they’re very dedicated to uploading prices, targeting their listings, and updating the prices.
Once a home sells, they’re not as quick to make the relevant changes to the selling price. It’s easier to update the home’s status to ‘sold’ than adjust the price manually.
Sold prices don’t usually take seller concessions into account either, so they aren’t an accurate reflection of how much the seller received for their home.
Incorrect listing information
The data represented online comes from the MLS. While the MLS always has the most up-to-date information on available properties, real estate websites only update this information occasionally.
Depending on the website, this may occur weekly, daily, or hourly.
Some listings, known as pocket listings, aren’t featured on the MLS. These are private sales that agents sell to a private network of buyers.
Although you won’t find prices for these homes published anywhere, they can affect your home’s current market value.
It’s common practice for sellers to complete remodeling projects or upgrades to attract more interest from buyers. They don’t often update these details on their original listing.
That means you might end up comparing your home with one that now has additional features not mentioned in the original listing.
Avoiding the pitfalls of online comps
The above factors don’t mean you should avoid using online sites for house comps. Here are a few things you can take note of to help ensure you’re comparing apples to apples:
- View only sold homes
- Pay attention to listing descriptions
- Study the photos closely
- If possible, visit the properties you’re comparing
- Take different home styles into account
- Adjust your price according to seasonality
Asking a local real estate agent for help when comparing prices can keep you on the right track when working with real estate comps.
Get a reliable offer online
House comps are an excellent tool for determining home values, but the right price is no guarantee of a fast sale. You also can’t account for the inevitable haggling that occurs once you attract interest from a buyer.
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