Whether you are a buyer looking for a home or a seller looking to sell your home, comparable prices are important. You cannot just set a price on a home based on how much you want for it. Likewise, buyers need to know whether or not they are overpaying on a home or getting a bargain. Real estate agents and other professionals count on what is known as comparable prices (or "comps" for short) to help buyers and sellers alike make sound financial decisions. Comps are prepared using data from sold homes that match the home in question at several key points. To find out about the factors that go into a comp, read on.
Price Matters Greatly
Without a doubt, the selling price of homes plays a huge part in comps. With the real estate market bouncing around every now and then, the timing of the home sold also matters. It makes no sense to compare the selling prices of homes sold a year ago when preparing a comp report. In most cases, the more recent the sale of the homes compared, the more valid the comp. Unless there are too few homes sold recently, comps used generally take into account sales in the last two or three months only.
Locations and Neighborhoods
Second to the selling price of recently sold homes is the location. You may know all too well how a home in a certain neighborhood that is exactly like one in another, less desirable neighborhood can vary in price by thousands of dollars. An accurate comp report should include homes in the same general location as the home in question. A home on the same street is the gold standard.
Homes are often valued by the square footage and that factor is not ignored with comps. Not only is the footprint of the home considered, but the lot size matters too, at least in many cases. Along those same lines, the number of bedrooms and bathrooms and the number of rooms, in general, may matter for some comps.
Features of the Home
Next comes the things that can add or detract value in a home. Features like new kitchens, finished basements, and new roofs can add value. Less desirable features that can lower the value might be a need for major repairs (a "fixer"), homes near industrial or noisy areas like a freeway, and more.
Lucky for you, buyers and sellers don't need to do the math when it comes to comps. Talk to your real estate agent about comps today and know before you buy or sell your home.
To learn more about residential real estate properties and comps, contact a local real estate agent.