Comparative Market Analysis--huh?

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?

www.cheyennehomevalue.com

Until next time, 

Steve

Do I need an agent to sell my home?

Sorry I've kept you waiting--we've had a busy few weeks, including the R4 convention in Las Vegas, and just yesterday had our annual awards breakfast.  Check out the honorees!  I love how technology lets us share the accomplishments of our great team of agents.

Isn’t technology great?  Because of technology, we have so many more marketing tools available than ever before—websites, mobile apps, even the ability to text makes scheduling a showing almost painless.  

With so many tools available to everyone, “Do I really need an agent to sell my home?” is becoming a common question.  I know you might think I’m biased, but it is my personal and professional opinion that you absolutely do!  I could go on all day about all the reasons why, but I don’t want to bore you, so I’ll stick with three: legal protections, market knowledge, and saving money.

Perhaps the easiest case to make is legal protections.  Remember all the papers you had to sign when you purchased your home?  There’s a good chance that they are now considered “outdated,” since they may not reflect the most recent regulations in your area.  Legally, the party who writes or presents the contract gets the least favorable interpretation of that contract if something goes wrong.  If you’ve presented buyers with an outdated contract, you are liable for any errors it contains.  How sure are you that you researched all those regulations thoroughly? Are you insured against any errors you might make?

How about omissions?  Are you required to tell buyers about something that isn’t yet a problem with the home, but might become a problem later?  Do you have to tell them in writing, or just verbally?  Where does that go in the contract?  

Stephanie can probably find me a really nice blazer.

That list of questions is getting pretty long!

If only there were someone out there who knew all about this stuff…

Speaking of knowing stuff—a huge value to having a seller’s agent is market knowledge.  Many home values are public after a home has sold, but gathering and sorting all that information, then taking into account current market conditions, the condition of those homes at the time of sale, and many other factors takes time and yes, experience.

I'm a French model.

There is no shortage of websites that want to give you a home value, and it’s tempting to take those estimates and ask for that amount.   Those estimates are based on data that might be years old and based on homes only vaguely similar to yours, and often don’t account for current market trends.  If it’s on the internet, it has to be true, right?

Real estate markets are often different from national trends.  Right now, Cheyenne is a seller’s market—since January, I’ve had two different homes go under contract within one day of being listed! Trulia and Zillow, the big names in online home values, estimated one of those home’s value at 10% and 20% less than the home’s purchase price.

Which brings me to what is arguably the most important reason to hire a seller’s agent—saving money.  If the seller in the above scenario had listed their home in the middle of the two online estimates, they would have asked for 15% less than the eventual purchase price.  Would they have negotiated down from there?  Either way, they would have missed out on thousands of dollars.

As the seller’s agent, it was my job to really know the area, the home’s features, and the market.  We worked together to set a price right at fair market value, and then I had a professional video walkthrough of the property produced to preview on our Facebook page.  The result was a happy seller with a sold home, for more than the online estimates had suggested.

Thank you for the wonderful review!

That’s a great example, but it’s not necessarily uncommon. “FSBOs (for sale by owner) accounted for 9% of home sales in 2012. The typical FSBO home sold for $174,900 compared to $215,000 for agent-assisted home sales.”  That means that, on average, FSBO properties sold for 19% less than those listed with a seller’s agent.

Now, commissions are negotiable, but let's say the commission for these FSBO properties would have been 6%. Selling on their own and "saving" that 6% actually cost the DIY sellers 19% of their home's value.  You read that it right--it would have been "cheaper" to have had a seller's agent.  13% cheaper, to be exact!

So, how do you feel about needing a seller's agent now?  I'd love to hear your thoughts!

Until next time, 

Steve

Why do I have to clean so much?

Getting ready to sell your home?  You might be surprised at the amount of “elbow grease” you’ll need to put in, even if your home is in pristine condition.

A first impression of a home should always make potential buyers wonder “Why are they selling this home?  It’s amazing!”  Realtors know this, so one of the first instructions they give their sellers is to clean, declutter, and then clean some more!  Just when you thought you were finished getting your home ready to sell, you find out it has to stay that way—all the time.

We often hear from sellers that keeping your home “Ready to Show!” is the hardest part of selling a home.  Getting the kids to keep their beds made and toys put away is hard enough when you don’t feel pressured to also clean the kitchen, the bathrooms, and everything else every day!  “They know someone lives here, they can’t expect it to be perfect all the time!” sellers say.  And while buyers know that it isn’t realistic to expect a family to keep a home spotless, the subconscious doesn’t always see it that way.

Let’s say you’re moving because your family has simply outgrown your home—maybe you’re still in a “starter home” that was perfect for a family of 3, but just doesn’t have enough space for your family of 5.  Of course there will be clutter and dishes, because you’re out of room!  A family of 3 should be able to see that they won’t have those problems, right?  Wrong!  All they’re going to see is that maybe they will also outgrow this home, and what if that’s soon?  Where will they put everything?  If you can’t find a place for everything, why should they think they will?  After all, you’ve lived here longer, so if the house had enough storage, you would already know.  

Since the house doesn’t have enough storage, it seems small.  Even 4,000 square feet feels cramped if you have to step around toys, the counters are full of dishes and small appliances, and you can see things spilling out of closets and from underneath beds.  A freshly cleaned home feels welcoming and cheerful, and decluttering helps the space feel larger, and these things together give that first impression Wow! that makes your house feel like a desirable home worth the asking price.  

You chose your listing agent because you trusted their expertise—their advice is valuable, and if you follow it carefully, it will definitely pay off in the end!  Even if you aren’t ready to buy or sell yet, take a few minutes and browse current listings.  See which homes make you want to see more, and which homes you know right away you don’t want to see—I bet you’ll see how valuable a clean, uncluttered house shapes your opinion!

Until next time, 

Steve

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Do you agree or disagree?  Have a real estate question?  Or just want to give some feedback?  Leave a comment below!