How Real Estate Agents Price Your Home Using “Comps
Ever wondered how these high-end estate agents actually price up your miramar house for sale? It’s not some magic formula or gut feeling but all about something called “comps,” short for comparable sales. Let’s peek inside and see what makes it tick.
First, agents check out the similar properties that have sold recently in your neighborhood-similar number of bedrooms, bathrooms, square footage, etc. They’ll pull information from the multiple listing services, or MLS, that keep a robust amount of detail on those properties. Of course, that’s where it might get interesting, because no two homes are actually identical.
Suppose you have a three bedroom ranch style with a pool in Suburbia Heights. The agent is going to want to look for other three bedroom ranches that have sold in the past six months or so in the same general area. Here’s where it gets tricky: what if those other homes had a new kitchen while another had that bonus half-bath?
That means they’ll be adjusting for everything from conditions to amenities to account for those disparities. Think of it more like one of those seesaws: if one house had granite countertops installed last year and yours still has the laminate from 1985, they’ll make up the difference in value for that disparity.
Sometimes you’ll hear that “adjustments.” Those are not some figures just out of a magician’s hat; these are computed estimates developed to level the playing field in the traits and conditions of various properties.
But hold your horses! It is not all cut-and-dried math equations either; there is some art involved, too. Market trends-what is hot today may be cold tomorrow before one can utter “real estate bubble”-play a huge role here, too. Agents also keep their ears close to the ground zero in case something changes in buyer preferences, or the economic indicators affecting housing demand change locally.
Not to say that everything else doesn’t matter, but for the love of everything important, let’s not forget location. Ever hear the saying, “Location, location, location”? It’s no joke in real estate. Even if two homes are virtual twins, one closer to a top-rated school or a shopping district bustles, making all the difference in the price.
Agents will consider how long other similar houses had been in the market before selling. If other similar houses have sold days after listing, that might be an indication that demand is high, and therefore you can sell your house for a higher price. If those very similar homes were listed for months without many people looking, you may strike a better bargain to lure buyers. How about an anecdote? A friend tried to sell his home once without agency representation. He had a price for what he felt was fair, based on some cursory and quick online searches. He sat for three painful months with no offers. It wasn’t until he finally caved in and hired an agent-which correctly priced the property using comps-that he got several offers within weeks. What’s the moral of that story?
Setting the perfect price tag might seem so easy, but it’s more than what appears to the eyes.
What You will be learning from the comparables within your neighborhood
Clearly understanding what one is investing in is very important when it comes to investment in the real estate market. Here comes the best real estate agent in. Many times, real estate agents depend upon comparable properties, known as “comps,” to provide valuable insight that acts like a goldmine for buyers and sellers alike.
Think of an auction house where you are going to bid for some classic car. Now, where would you get the cue about your reasonable bidding? You will look at similar cars that exchanged hands recently, right? And that’s exactly how it all goes down with homes: those other vintage cars give the context-the comps.
Pricing strategy first: You look around at homes similar in size, age, and condition from yours and try to give a rough idea of what your home might sell or cost. Say you walked through three homes in your neighborhood listed for around $300k; it gave you an idea of what is reasonable without just pulling that number out of the air.
But wait a minute! It is not all about the price tags. As they say, “location, location, location”? Yeah, comps help there too. Maybe two homes have identical floor plans; one lies next to a busy coffee shop, while the other one looks out onto the woods. Differences in those respects count-a lot!
Then, there’s timing-the clock is always ticking in real estate! Are houses selling like hotcakes or sitting longer than leftovers? Knowing the speed at which similar properties are selling will let you know whether the time to strike is now or later when conditions get more favorable.
You’re probably thinking, “Great info so far-but how do I actually find these magical comps?” Enter stage left: online databases and public records, a veritable treasure just waiting to be unearthed! Websites such as Zillow and Redfin allow insight into recent sales data.
But the Internet doesn’t tell all. Sometimes, the old chat-over-the-fence-with-the-neighbors approach can yield some doozies. Perhaps Mrs. Smith down the street knows why that house sold for a song-perhaps it had foundation problems, or maybe it was haunted, tee hee.
Now, on to the renovation and upgrade section: If you think of cleaning up your place before you sell it, the comps can most definitely be your guiding star. If you realize homes with very modern kitchens do tend to sell higher, that might get you thinking about giving your kitchen a facelift.
And then come property taxes! Comps are going to at least give you an inkling of what the tax bill is going to be every year. Nobody likes a surprise from Uncle Sam, right?
And that’s not all: Comps aren’t just sellers’ gold; they’re buyers’ gold, too. “If you want one house, but that house is way overpriced compared to all the other similar homes in that neighborhood, then you’d better go in with guns blazing. How does all that tie together without feeling like Sherlock Holmes? That is where those best real estate agents we talked about a little earlier come in once again.
They have experience, and know-how in how to interpret these details so that you won’t have to be an overnight data analyst. Quite literally, knowledge of comparable properties is your ‘secret arsenal’ in real estate. This armament of knowledge against buyer or seller ignorance then goes on to ensure that every action taken is a smart one.
