You probably heard the term “comparables” or “comps” thrown around during your listing appointment. A comparable is a home that is similar to your home or a home you are considering. Listing agents use comps to advise you in setting your listing price and appraisers use comps to determine a market value for a home. Comparables can be a great tool when setting your listing price, but they can also be misleading. Don’t fall into the trap of relying on comps that might not be representative of what your home can sell for. In this article, we will discuss Don’t Get the Comparables Woes.
Timing is everything.
Homes are comparable if they were sold recently, in the same general neighborhood, and if they are the same size or style. However, “recently” is kind of a relative term. Some agents review homes that have sold in the last 90 days while others will look at homes sold in the last 6 months. Depending on the activity in your market, some agents may even look as far back as a year. Don’t let this be a determining factor in what you price your home at. Disregard the short sales and foreclosures. Short sales and foreclosures in your area can definitely skew the comps for your home. These kinds of comps may not be indicative of what your home is worth. But sometimes, the majority of recent sales in your area may have been short sales or foreclosures, which means that those are the only comps that an agent or an appraiser has to consider. So don’t be discouraged when comps for your area come back with results that include these kinds of sales. Your home does not have to be priced like the short sales or foreclosures in your area.
It isn’t always equal.
Always remember that comps only take into account what is similar on paper. Two homes with the same square footage, in the same area, with the same amount of bedrooms look the exact same on paper. But one of these homes may have been in serious disarray and therefore sold significantly lower than the value of the second house which may have been immaculately kept and updated. Also remember that variables like motivated sellers, contingencies, cash offers, and time of year affect price as well, and the comps don’t report those.
There’s always more to the story.
Depending on where your agent pulls comps from, a lot can be left out. If your agent is pulling from the multiple listing service, then properties that were for-sale-by-owner wouldn’t even be considered in the comps. So don’t rely solely on the comps you are provided when listing your home because chances are there is more to the story than they are telling. Comps are simply a tool that can aid you in the process of listing and pricing your home, but just remember that you always have the final say.
We hope you enjoyed this article on Don’t Get the Comparables Woes.