I’ll bet you’ve heard the term comps before from your agent. If you’re listing your home, the realtor will show you comps to help determine the right price and if you’re buying a home, you’re agent will “do comps” before making an offer to make sure you’re not over-paying. But comps are not just lookalike homes. What are they? Keep reading!
I “do comps” every day for my sellers and my buyers to make sure that the pricing is absolutely correct. I also have a certification in Pricing Analysis so I guess that makes me kind of an expert. Pretty fancy title, don’t you think? I know the way to do them to make sure my sellers aren’t watching the days tick by with no offers and my buyers aren’t over-paying.
First of all a comp is a comparable home that has sold recently. It’s not the competition, although that’s important, too, when selling. The seller can’t expect to sell their home if it’s similar to a boat load of other homes that are priced well below.
Here is the breakdown of a comp.
Style of the Home
Obviously, you compare a colonial with a colonial and a cape with a cape. However, if the style you are looking for doesn’t exist in the “Sold” reports in the past 3-6 months, you can replace one style with another. For example, if a cape has all the bedrooms upstairs, you can compare it to a colonial. A ranch can be compared with a raised ranch if the downstairs is not used as main living space. And a ranch and a bungalow are also comparable. Look at number of garage stalls, as well.
The Age of the Home
Oftentimes a seller will argue that his house is worth more because of the brand new homes just sold in his neighborhood. It’s not. In order to truly be a comparable the sold properties need to be 10-15 years older or newer than the subject property. Unless the home was completely gutted in which case it can be compared to new construction.
The size or square footage of the comp must be close to the square footage of the home in question or you need to add or subtract from the amount it sold for. Try to stay as close to possible in size.
This is important but not vital. If the rooms are tiny but there’s more of them, is that worth more? Would you rather have 3 good sized bedrooms or 4 postage stamp sized bedrooms? These are important questions to consider.
Upgrades or Renovations
Is the home stuck in the year it was built? Are the bathrooms mint green or mauve? Is there orange shag carpet in the main living area? Are the appliances Avocado? or does it have some upgrades like quartz counter tops, bamboo or vinyl plank flooring? These add both value and appeal.
Where is the comp? You can’t compare a home evenly that’s in an executive neighborhood with a home on the main drag. Nor can the comp be on the other edge of town. The comparable home should be within 1-2 miles of the subject property. And it definitely can’t be in the next town over even if the subject property is on the border.
So I hope that helped. Know your comps or count on the Realtor to know how to do comps before you list your home for too high a price or over pay for the home you purchase.
To gather more information before selling your home, please get your hands on The Guide to Selling your Home digital ebook: https://deewebsterrealtygroup.com/home-sellers-guide/