How the Appraiser Comes Up With Your Homes Value
“Comps,” or comparable sales, is a term anyone on either side of a real estate transaction should know well. It refers to homes located in the same area and very similar in size, condition and features as the home you are trying to buy or sell.
Buyers look at comps when deciding what price to offer on a home, and sellers use them to figure out how to best price their home for the market. Real estate agents look at comps all day long as a way to keep on top of their local market. If you are a buyer or seller, it’s helpful to have a strategy to analyze comps, because all comps aren’t created equal.
What is a Comparative Market Analysis (CMA) in Real Estate? via Kyle Hiscock
Location is the highest priority
If you are trying to price a home or figure out its value, you need to look nearby. The market is based on location, so keeping as close to the subject property as possible — meaning, within the same neighborhood — is the most effective approach.
Were you aware – a Lake Front Home’s value – is usually first, based on the number of ‘Square Footage of Lake Frontage’ the home has. Sometimes a Home – is not given much value at all… again it all depends on Location, Location, Location !!!
If you can’t get enough comps nearby, it’s fine to keep expanding out. But the Lenders have gone from looking at Year back , then to six Month’s back – to NOW 3 months back for comparable solds. This often creates Huge problems for the Seller, Realtor and Appraiser who can’t find enough comparable solds close to the subject property. Under these circumstances – the Appraiser will have to use homes that are less similar and then do a Plus Minus Cost Analysis for the home. For example – a home without a basement, only two bedroom, two full baths… will be subject to the Hardest of lending practices – and rightly so – to Protect the Buyer.
Say, for example, the only homes sold, within the last three months all have basements, 3 or 4 bedrooms and are larger in square footage. The Appraiser will then take the sale prices of those homes and start ‘Subtracting’ the ‘Value’ of the additional amenities, i.e. $10,000 off for a basement, $25,000 off for each additional bedroom, the additional square footage – price per square foot average – also deducted …. not to forget – Updated homes, have additional value for ‘Newer Kitchens, Newer Appliances, Newer Windows, Newer Roofs, Newer Plumbing, Newer Electrical, … and the list goes on. So, having a Experienced Realtor – from the beginning, makes all the difference, definitely NOT a part-timer, or “I’ll get my License – just to sell Dad’s House” – so really check out who you are hiring – it will make a Huge difference in the sale of your home. Top Home Seller Mistakes When Selecting A Realtor via Bill Gassett
The best comps are homes that are currently “pending.” Why? Because a pending home is a piece of live market data. A pending home means that a buyer and seller made a deal, and that deal will reflect the most up-to-the-minute stats on the market.
A good Real Estate Agent, can get a fairly accurate idea what the ultimate sale price or range is for a pending deal. Try to stick with sales in the past three months, and never go more than six months, because older data is not reflective of the current market.
Factor in home features
Once you have location and timeframe, it is key to look for homes with similar features that have sold, as opposed to comparing price per square feet. While the latter is helpful, it won’t consider factors like views, a new designer kitchen or a finished basement vs. unfinished.
If you have all three bedrooms on the top floor, look for something similar. Try to compare your subject property to like properties when it comes to traits like total size, the number of bedrooms and bathrooms, and the size of the lot. You can make adjustments once you have found similar homes.
Don’t overanalyze the comps
Putting your trust in a good local agent will keep you from agonizing over the petty details of each comparable home. Your agent is likely familiar with some of the recent sales, and can help shed light on why one comp fares better than another. You may not know that one home was next to a fire station or across from a parking lot, or that another didn’t have a real backyard, but your agent will. These small nuances will affect the home’s value.
Wendy Weir Relocation – Real Estate Agent, Relocation Specialist, Birmingham, MI
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