When you put your home up for sale, there is a lot that happens “behind the scenes” in order to come up with the right price. You’ve heard about comparable sales (or “comps” as they’re often referred to) and they are hands down one of the best ways to determine the asking price for your home. There’s rarely a perfect apples-to-apples comparison, so a pricing decision often relies on comparisons to several recent sales in the area. It’s both an art and a science and finding the balance between the two is the key to successfully pricing a home. Here are a few of the things we look for when working on pricing your home and preparing a CMA (comparative market analysis).
Location. Homes in the same neighborhood typically follow the same market trends. Comparing your home to another in the same neighborhood is a good start, but comparing it to homes on the same street or block is even better. We typically will start with a very narrow focus (street level, neighborhood) and then widen the scope to look further out if we’re not finding a lot of sales in the area.
Date of sale. We don’t want to use homes that sold too long ago as market conditions shift over time. A good rule of thumb is to look within the last three months, although exceptions can be made for unique properties that are not as easy to define. The closer the date, the better for comparable purposes as even a couple of months can shift the market in a different direction. Other factors, like time of year should also be considered (ie a home in the springtime market is more likely to sell faster and for a higher price than one sold in December).
Home build. Look for homes with similar architectural styles, numbers of bathrooms and bedrooms, square footage, and other basics. We will often try to compare to the same builder or floorplan if possible. Knowing who built in a neighborhood and where else they have built can be a huge help in knowing where to look for potential comparable sales.
Features and upgrades. Remodeled bathrooms and kitchens can raise a home’s price, and so can less flashy upgrades like a new roof or HVAC system. We want to be sure to look for similar bells and whistles. If properties with similar upgrades can’t be found, adjustments can be made to compensate although it is worth noting that these upgrades never come with a dollar-to-dollar value.
Sale types and terms. Homes that are sold as short sales or foreclosures are often in distress or sold at a lower price than they’d receive from a more typical sale. These homes are not as useful for comparisons. Other items like seller paid closing costs and concessions should be looked at as well. A home that sold for $10,000 over asking price that included $10,000 in seller paid closing costs isn’t the same as a house that sold for $10,000 over asking with no seller concessions.
image courtesy of AlanH2O