When it comes time to sell your home, it goes without saying that you want to price it for all that it’s worth.
However, a house’s value is not so easily quantifiable.
The memories you associate with a home are priceless to you and your family, but unfortunately you can’t sweeten a deal with a photo album or heartwarming anecdote. In an ever-changing real estate market, sellers must find a more objective way to price their property.
The best way to do this is by taking a look at comparable sales—comparables for short—or, pithier yet, house comps. The process of bundling and analyzing similar, recently sold properties to price your home sounds old-school analog, but it remains the single most important tool in nailing down your home’s value.
Here are 4 ways comps put a reality check on your rosy-eyed view of your home so you can see it’s true market value.
You select comps based on facts and figures
Comps are a fancy term for recently sold properties in your area that have a lot in common with your house. Just like your home, they must love long walks on the beach, deep conversation…. Just kidding.
A house comp for your home is a carbon copy in size, location, structure, and features—all those big factors that impact a home’s value. Both real estate agents and appraisers rely on comps to value a home, and take into account the same criteria when pulling together their pool of comps:
Comps need to be homes within your exact neighborhood, which might be a thin north-to-south strip, zigzag based on the road or waterway layout, or otherwise, fall outside the boundaries of a neat radius.
Home values can vary dramatically between adjacent neighborhoods—go across the road and you may find heavy traffic, a change in school district, a garbage dump or power station, making it difficult to compare the home’s worth to your own.
Houses in the comp pool should be within a 10-20% your home’s size.
Number of rooms
To be truly “comparable” the number of beds and baths in the home should be an exact match to yours.
When the house was built
It should come as no surprise that new homes fetch a higher price than older ones. It’s not that old houses can’t be nice, it’s just that they’re less likely to be in a good of condition as a recently built one. The recommended age range for comps is 5 years.
Bells and whistles
A pool, hardwood floors, top-notch curb appeal—all desirable amenities lend clues to a CMA and appraisal.
When you’re working with dates, inches, years, and GPS coordinates, there’s no room for sentimentality to cloud the analysis of your home’s worth.
Sure, there is some subjectivity that goes into the calculation. Does the comparable home offer a scenic view of nature or directly face a neighbor? Is it modernized or outfitted with shag carpet and wood paneling? Is it besieged by barking dogs or the dulcet tones of birdsong?
But that’s all part of what defines a home’s value. In fact, it’s accounting for these nuances that makes a comparative market analysis (an official report your agent will put together after they evaluate the comps) stronger than an automated valuation tool, which won’t be able to capture these little details.
Comps sold in the past, so their price is final
As anyone who’s sold a home before knows, there may be a big difference between what you list your home for and the price at which you sell your home.
That’s why you shouldn’t use active listings as points of comparison in your analysis—only recently solds.
“Let’s just say I tell a seller that I think their home is worth about $300,000 and they tell me, ‘My neighbor’s listed for $375,000.’ Well, your neighbor hasn’t sold yet,” says Mary Jo Santistevan, who ranks in the top 1% of 24,082 real estate agents in Phoenix, Arizona. “So I make sure that they understand active comps are competition. Sold comps, which is what an appraiser goes by, is what we have to focus on.”
Comps are public information—buyers can see them, too!
Buyers do their research. They, like you, have a lot of money on the line and aren’t about to overpay for a house when they know you’ve overpriced it.
Buyers use house comps to inform their bidding. And if your house is $20,000 more than your neighbor’s down the block, a buyer is going to expect to find significant upgrades or perks during the tour.
Real estate agents have tools and access to real estate data to pull house comps information in a snap, but a buyer (even in their early stages of house hunting) can perform their own comps analysis with tools on the web.
You can count on them doing their homework, so you should, too.
The longer a house stays on the market, the more people start to wonder if there’s something wrong with it—a buyer’s imagination may run wild.
Comps can be a reality check on your buyer’s offer
Consider the real-life example of a property in Queen Creek, Arizona, that sold in early 2018.
In January, the sellers set the list price at $520,000, knowing that they were challenging the market. Cash buyers went under contract to purchase the home for $500,000 the following month.
Although a cash purchase, the buyers elected to have an appraisal done. The average price of the comps used came in at $457,571, leading to a final appraisal of $450,000. The property closed in March for $497,000.
Had that house been financed by a lender rather than a buyer’s cash offer, the low appraisal (driven by the comps) would have put that home sale on hold.
You see, a lender won’t finance a home for more than its appraised value. That puts even more weight on your agent’s comparative market analysis. If your agent’s done a thorough job pricing your home and reviewing the comps, your listing price shouldn’t be too far off from that of the appraiser.
Setting your price right from the start
If the price is right, your home will sell—period.
To get a ballpark idea of what your home is worth, our Home Value Estimator is a great place to start. This free valuation tool compares 5 leading AVMs from Zillow, HouseCanary, Eppraisal, HomeJunction and RealtyTrac to give you the most educated guess on your home’s value.
But don’t stop there or settle on an asking price based on a web tool alone, which can’t account for hundreds of minor details like your home’s proximity to restaurants, yard size, trending features or general buyer sentiment in your area.
Follow up by digging into the house comps research with the help of a top real estate agent in your area, and let the facts guide you toward a competitive price.
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