Table of Content
On a 2,000-square-foot home, that’s an offer price of $330,000. Acreage value varies by location but, all other factors being equal, more land means more value. Even if the houses are pretty comparable, if one sits on 2 acres and the other sits on 10 acres, you need to take that into account when determining the value of both properties. A large lot near a popular urban center could be countless times more valuable than a rural plot of land the exact same size. Whether you’re buying or selling, pulling comps is a critical step toward making sure you make the right financial decision.
Once you put in all your must-haves, the database will produce a list of homes that fit all or most of your criteria. These homes will also be similar in terms of square footage, number of bedrooms and other features. Your agent can then advise you on how much to offer based on the comps and general trends in the housing market. A seller’s agent can offer unbiased listing recommendations based on local comps. For example, your agent may recommend a starting price that’s a little higher than the comps to create some wiggle room in the negotiation process. Real estate comps provide a few critical insights when it comes to selling your home.
Hire an appraiser
Investors should always start by looking at properties that have recently sold. Currently, properties are typically not the most accurate representation of property value on the market, as they could be over or underpriced to sell. It is also smart to drive by the locations of certain properties to get a better idea of the area and surrounding amenities . Investors also need to be careful to study the listing photos presented on the MLS.
We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Hosted by expert investor Than Merrill, you'll learn how these time-tested strategies can help you to find success in real estate. Find the price per square foot by dividing the sale price of a property by its square footage and compare that number to your own price per square foot. Many real estate investors have found workarounds to this challenge, mainly through symbiotic relationships with licensed agents.
When comps work—and when they don’t
Agents also have access to any pending sales, which would affect real estate comps and CMA reports. The sales volume in your area will also drive the fair market price on any home being listed for sale. For example, if your housing market is currently a seller’s market and homes are selling quickly, buyers may be making higher offers than they would be in a market that’s not so competitive.
Most lenders require an appraisal to make sure the home is worth the purchase price, but some sellers also use an appraiser to accurately price their home. The old adage holds that the three most important things in real estate are location, location, location. But judging by the importance levied on house comps, comparable sales may be the most important thing in real estate pricing.
Using Comps To Determine Home Value
Real estate agents use comps to conduct a comparative market analysis . A CMA is an examination of recently sold local properties that are similar to a home you’re interested in buying or selling. This helps an agent determine the market value of your property. One of the most important steps to completing the sale of a home is the appraisal. This process, usually initiated by the buyer’s lender, calls on a professional appraiser to determine the market value of the house in question.
Buyers want to find a place to live, but they don’t want to overpay. And they’re also concerned about a mortgage lender’s appraisal. You’ll receive a detailed analysis of your home straight to your inbox immediately. Simply tell us a little bit about your property and how soon you’re looking to sell. Comps give you a range for its “market value,” which you can then add or subtract from based on your home’s unique characteristics and features.
Location
In rural areas where distances from property to property tend to increase, a five-mile radius is acceptable. The MLS also provides data points such as listing prices, sale prices, and number of days on the market. When you work with a real estate agent, you’ll have access to multiple listing services , which are helpful tools for observing local markets. An MLS is a database of all homes listed and sold in your area that includes details like the year the home was built and upgrades made by the seller. You can set up email alerts for homes similar to what you’re looking for, and the system will send you a daily or weekly digest of home sales in a particular area. An agent or broker will use comps to suggest a listing price for a home that’s about to go to market and represents a fair market price.
However, your local real estate agent has the resources and expertise to walk you through the process. They can help you nail down a good price to list your home. Scrolling down slightly on the same page will also show the most recently sold homes in the same neighborhood. If you scroll down even further to the bottom of the page, you’ll see a heading titled “Nearby Recently Sold Homes,” and a “View More Recently Sold Homes” button right below. Your home will fall somewhere between the highest price comp and the lowest. After you’ve made all necessary price adjustments, add up all the comp prices and then divide by the total number of comps.
Let’s explore how to find real estate comps for your area. Real estate sales data is a product of the Multiple Listing Service, or MLS, as it is commonly called. Every board of Realtors has an MLS, but only Realtors, real estate agents, and their affiliates have access to MLS data.
As a result, while you can approximate what you think are the best real estate comps for your home, you may need professional guidance to know for sure. Sellers who live in rural areas, or in places where the real estate market is sluggish, may need to extend their radius or their timeframe to find a few comps that are appropriate. Although a lot of sellers formulate a list price based on the amount they paid for the home, this is not necessarily the most useful or appropriate metric. Some properties might look like a near-perfect match on a screen, but in reality, they could have key differences that impact their value. One home might be on a cul-de-sac with stellar curb appeal, for example, while another might have ever-present noise from being near a highway. If possible, see the properties in-person — or reach out to the agents who sold them to get additional details that may not be obvious in an online search.
By compiling a few similar properties, the goal is to determine your home’s current market value. When in doubt, consult a real estate agent who can do their own search to find comps for a house and help you accurately price your home. Your goal is to find the average value per square foot of your comps, giving you a base number to estimate the market value of your own home.
Too high a price for the market value of the home could keep potential buyers from viewing the property. Keep in mind that you might not be able to sell your home for what you bought it for, depending on the market. When looking at recent sales in the area to determine the value of the home, recency is a big factor. Comparing your subject home with a house that sold a month ago is going to be much more accurate than if you’re looking at one that sold 2 years ago.
Prior to Sundae, Josh was Founding Partner and SVP of Sales at LendingHome, and before that, he was Co-Founder and CFO of Purpose Built Investments. Josh graduated with honors from Stanford with a BA in Economics, BA in Spanish, and an MA in Latin American Studies with a focus in Economic Policy. At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote stricteditorial integrity in each of our posts. What Not to Fix When Selling a House If you're selling your home, you don't have to fix everything.
No comments:
Post a Comment