Thursday, December 17, 2020

How to Price a House With Real Estate Comps

Real estate comps can be pulled from data on the MLS, a database of properties that have been sold or are currently for sale in a given area. Licensed real estate agents can access this system to identify similar properties within a neighborhood to draw comparisons. When pulling MLS comps, agents typically search for listings that are similar in size, condition, features, and age. Ideally, these listings are sold within the past six months and within a one-mile radius.

comp prices for homes

This gives you a fair initial estimate of your home’s market value. Comps help determine the selling price for your home, or its value for a home equity line of credit or refinance. While a seller can pull some data themselves, there’s no substitute for an experienced agent who knows the local market and recognizes the pricing pitfalls that home sellers need to avoid. Once you have accurate comps, you have a more realistic idea of what you could get for your home. There are a few instances — a highly unusual property for the area, a home in a rural area with a farm attached — where you might need the services of a professional appraiser. But for most homeowners, you’ll be able to find what you need online.

Hire an appraiser

Ideally, urban comps should be within a couple mile radius. If they’re in the same school district or near the same amenities such as parks or public transport, even better. When a homeowner updates a bathroom or renovates a kitchen, their home value typically increases. Consider any renovations or upgrades you see in your real estate comps and how those compare to your home’s features.

If you're the buyer, knowing how to accurately estimate a home's value lets you spot a bargain and keeps you from overpaying. Later on, it helps you gauge your home's equity if you want to borrow against it. Angela Colley writes about real estate and all things renting and moving for Realtor.com. Her work has appeared in outlets including TheStreet, MSN, and Yahoo. “Price per square foot is another excellent tool in pricing,” says Joshua Jarvis, founder of Jarvis Team Realty in Duluth, GA.

When comps work—and when they don’t

During a home appraisal, an appraiser relies on comps, as well as a number of other factors, to determine an accurate value of a property. This can make or break a transaction, making it one of the most important processes real estate comps are used for. Listing information is from various brokers who participate in the Bright MLS IDX program and not all listings may be visible on the site. Some properties which appear for sale on the website may no longer be available because they are for instance, under contract, sold or are no longer being offered for sale.

comp prices for homes

Real estate comparables – known as comps for short – are one of the most important tools used to determine how much a home is worth. Price your home too high due to those inflated comps, then it simply might not sell. Your Realtor can drop the listing price—again and again, if necessary—but then buyers might wonder if something’s wrong with the place. Price it too low, and your home will probably get snapped up right away—but you’ll walk away with less than you could have netted. Ideally, when you are looking for real estate comps, smaller distances will provide more accurate representations of homes in your area. Try to narrow your search to about a quarter to half-mile radius from your home.

Using Comps To Determine Home Value

Realtors do not normally charge for showing someone the comps; however, just getting the comps isn't enough, you need to assess them. Just like real estate agents, appraisers usually check the MLS listings. They look for recent sales of homes similar in size, location, features, age, and amenities. But online tools may have their limitations, especially in areas where homes are further apart or where subtle differences in location can have a big effect on home value. Online sites also may not differentiate between homes in better or worse condition, cautions Albert.

comp prices for homes

Whether you’re a professional in the real estate business, or just an eager home buyer or seller pulling comps, there are some key features to consider. They will assess whether the sale price aligns with current market value and whether a mortgage loan is commensurate with the home’s true value. In addition, viewing house comps can inform sellers which features to highlight in a listing. If the house was in disrepair and needed a lot of work and investment to make it livable, the price the home last sold for may reflect a fixer-upper. However, on the surface, these deals would show up in comps the same as if the house was move-in ready.

Location

The expired and withdrawn properties in your area can help inform you of what listed prices were unsuccessful. If you want to explore comps but aren’t ready to work with an agent yet, you can monitor home sales through other real estate listing sites. These sites may not provide as much detailed information as the MLS but could be a great starting point. Most real estate listing sites, including the MLS (which you need an agent’s help to access), display the final sales price and the date sold. Real estate agents use the MLS to pull real estate comps, which are then used to run a comparative market analysis. This allows them to give the best advice possible to their clients, whether they’re buying or selling property.

It’s not uncommon for information within an online listing to be a little embellished. Listings are, after all, written by sellers or real estate agents interested in getting the home sold. They may take a little creative license, which you don’t want to influence the calculations you make for your home’s value. Known as pocket listings, these are private listings that agents sell for their clients within their own private network of buyers. Even if they aren’t in the MLS, the sold prices on these pocket listings can impact your home’s current market value.

Here is a list of our partners and here's how we make money. So you need to know the different comp-skewing dangers and how to deal with them. Try to find properties in relatively the same condition, however, be sure to factor in any renovations and improvements.

comp prices for homes

Pay close attention to other amenities, too, such as whether parking is included. “Banks will use comps to determine the fair market value by hiring a third-party appraisal company for when homeowners refinance a property,” Ameralis adds. And appraisers will also use comps to inform their assessment of what a property is worth.

By compiling a few similar properties, the goal is to determine your home’s current market value. When in doubt, consult a real estate agent who can do their own search to find comps for a house and help you accurately price your home. Your goal is to find the average value per square foot of your comps, giving you a base number to estimate the market value of your own home.

An appraisal will take comps into account, but it also considers the city or county’s valuation for tax purposes, the site, hazards, improvements and overall condition. It will also examine factors such as rental income or fees, HOA dues and the cost to build a similar home from scratch. Ameralis typically recommends looking for properties that have sold within the last six months. If the housing market in your area has been slow, you may have to look beyond the six-month mark — but that’s not likely these days.

However, there are a number of objective metrics experts use to determine the statistically best list price for your home. Bankrate is compensated in exchange for featured placement of sponsored products and services, or your clicking on links posted on this website. This compensation may impact how, where and in what order products appear. Bankrate.com does not include all companies or all available products. Conversely, if the home you’re evaluating is unlike what has sold nearby, or is in a rural or sparsely populated area, you may need to relax your search criteria. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.

comp prices for homes

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