Raise your hand if you watch a lot of HGTV. If you’re reading a real estate blog and don’t have your hand up, then you are probably reading the wrong blog….
OK maybe not everyone has 10 hours of Property Brothers on their DVR, but if you’ve watched even just a few home shows, you’ve probably heard the word “comps” while someone is holding a stack of info sheets about other houses. They throw out some prices of these “comps” and everyone (usually) agrees and the show moves on. What are these powerful, mysterious comps, and what do they have to do with your house?
“Comp” is just a more fun way to say “comparative market analysis,” or CMA. A CMA is usually performed by a real estate agent and/or appraiser, and is best done by someone familiar with the area. CMAs look at a lot of things, but especially location. While most agents know that a house with a direct view of a power plant is likely to be worth less than the exact same home in a gated community with a lake view, local agents will also know things like the reputation of the area schools and whether there are new developments in the works for your area of town.
So what happens when someone “pulls comps” or performs a CMA? They need to see your home, of course, so they can assess the overall condition, see the lot/property, and check out any upgrades you’ve made.
They’ll also look at current listings, and see which ones are most similar to your home. “Similar” can mean a lot of things, but in general, what counts is location, number of bedrooms and bathrooms, similar condition, and square footage. So while the ranch style home 2 miles away might not look like your mediterranean style home, it’s possible it will count as a “comp”—or maybe it won’t, but there’s only one way to know, and that’s to look at all the data that’s available!
|At least real estate agents get pictures.|
So what’s available besides current listings? While the rules can vary from state to state, agents and appraisers can generally use pending listings (homes that are currently under contract), canceled or expired listings, and sold listings.
Here’s where it can get tricky—all those paper numbers are great, but what we do with them is what really counts. No two properties are going to be exactly the same, so we have to make adjustments for differences. A few hundred square feet may not mean much for very larger homes, but for smaller homes, it can mean a huge change.
|Is that structural damage or just cosmetic?|
And what if most of the comp homes are overpriced and have been sitting on the market for months? Should you overprice your home because you want “top dollar,” or so people don’t think it must be priced lower because something is wrong?
A great agent is not only going to know these things and how to point them out, but is also going to know that “top dollar” doesn’t mean overpricing a listing. It means selling your home for true market value.
So, are you ready for your own CMA?
Until next time,