Three Factors for Determining Real Estate Comps
Photo: © Cacaroot - iStockphoto
Whether you are buying a new home or selling your old one, "comps," or comparable sales, are important. As a seller, they can be used as benchmarks to properly price your house. The last thing you want to do is undervalue it, which could end up losing you money, or overvalue it, which could make your property sit on the market for way too long. As a buyer, comps provide a ballpark figure that you can expect to pay in the current real estate market and, thus, help prevent you from overpaying for a property. The following are three things real estate agents keep in mind when looking at comps:
Look at the Location
As a seller, one of the first things to consider when looking for comps is location. This means looking at homes sold in your neighborhood. The same goes for buyers, who should compare nearby houses for sale to determine their house's value. If you can't find comps from the same neighborhood, then keep other boundaries in mind, such as school districts.
When Was the Home Last Sold?
The real estate market fluctuates a lot over the years, which means values can rise and dip substantially over time. If you can, look at houses that were sold within the last six months for a good comp. Even better, look at pending sales. Pending sales are deals in place between buyers and sellers that haven't gone through yet, which means they are the most up-to-date comps you'll find. Obviously, pending sales are something you don't have access to on your own, so it's helpful to have the assistance of a real estate agent who does have access to that kind of information.
What Are the Home's Features?
Location and time frame are huge factors in finding a good comp but so are the home's features. A one-bedroom, one-bathroom home is a bad comp for a three-bedroom, two-bathroom home. These aren't the only features that should be compared, though. A house with a luxury kitchen full of updated, energy-efficient appliances may sell for more than a house with a normal kitchen full of outdated appliances. Obviously, the odds that you'll find a perfect comp, whether you're a buyer or seller, are pretty slim when you consider that most houses have different features. It's something you should keep in mind, though, when evaluating comps to get a better understanding of how the home you want to buy or sell compares in terms of value.