Selling a house means more than simply listing the property’s features. It can be like putting together a puzzle. You have to factor in intangibles such as curb appeal and concrete data such as amenities and square footage.
Determining a home’s true value also means comparing recent nearby sales to see what price they fetched on the open market. These nearby properties are called “comps,” or “comparables.” Using them means looking at the age of the property, the number of rooms and many other factors. If the property you’re selling differs in some small way from the comp, it can still be used to determine this true value so long as the necessary adjustments are made.
Buyers can also use comps to get a better picture of the value of the homes in a particular neighborhood. Here’s one example: If a property is priced at $300,000, yet nearby properties are selling for $250,000, the buyer might consider coming in with a lower offer. Buyers can also use comps to back up an offer they’ve made. If a homeowner says “no,” the comps will demonstrate that your offer was based on the specific market you’re in. Showing that you’ve done your homework will help in negotiations.
Real estate agents/managers use comps to create a Comparative Market Analysis (CMA) for their clients. If you are a seller and you would like to get your own comps, a reputable real estate site like Zillow.com will let you search for homes sold in a particular area in the last six months. But even where the Internet has given buyers access to information once available only to agents, remember that agents are the ones who have the insight that comes from marketing and selling many homes. There’s no substitution for expertise. What are local buyers looking for? How does a particular property measure up? An agent knows the answers and can guide a buyer or a seller through the process.
Technology means there are more avenues these days for agents and their clients to find accurate information about a property. Here are a few sources for real estate market data that you can use to build your own comparative market analysis:
- Local property tax records let you look up the most recent sale price of the houses in your neighborhood.
- Local building permit information lets you find out what your neighbors have done to improve their properties.
- The Federal Housing Finance Agency House Price Index shows property value trends for each state.
- The FHFA House Price Calculator projects what a house purchased at a given point in time would be worth today if it appreciated at the average appreciation rate of all homes in the area. The calculator doesn’t include the value added by improvements or subtracted by something like a distress sale situation.
- Access to the Multiple Listing Service—where the best sales information can be found—is restricted to agents in many areas, but the Internet is changing that. The MLS includes information about a property’s history, short sales and more.