Why Comps Matter
With inventory still low in most places, it’s easy for buyers to feel like they’re in a race to find their home. But even while the market is competitive, it’s necessary for both buyers and sellers to corroborate what a home is really worth before taking action.
Evaluating other home sales is the best way to determine what a particular house might sell for in today’s real estate market.
A “comp,” real estate slang for comparable sale, is a recently sold property in the same area with similar characteristics to your home, or the home you’re thinking about buying.
One of the key factors in finding comps is “recently sold.” Homes that have sold within the past few months provide a more accurate assessment of how much buyers are willing to pay.
A comp doesn’t have to be equivalent to your house in every way – they can have different square footage and lot sizes, and even be in different condition than your house. The most important things are the proximity to the house you’re thinking of buying or selling and the time that’s passed since it’s sold.
Buyers can benefit tremendously from checking what homes in their chosen neighborhood have sold for. Putting in a strong, yet realistic, offer upfront is essential in a hot market. Usually, buyers who lowball are the ones who end up missing out.
What’s more, comps make a difference when it comes to financing. Lenders typically order an appraisal before approving any home loan in order to protect themselves. They are not going to approve a loan if it looks like the buyer is overpaying.
One of the methods residential appraisers use to determine the value of a home involves analyzing comps in the area. Appraisers normally use several comparable sales in the same neighborhood as a basis for calculating its value.
Realtors often run into issues with home sellers who have unrealistic expectations of what their home will sell for. Frankly, because of their emotional attachment to their home, it’s difficult for homeowners to objectively select the right price.
Comps can give home sellers an accurate idea of what their house might sell for. Most Realtors will likely pull recent comps before suggesting a listing price, known as comparative market analysis or CMA.
It’s tough to overstate the importance of coming up with a realistic price for your home from the beginning. Pricing your home according to the comps in the area as opposed to what you think you “should” get for it can make the difference between a quick sale and your house sitting on the market for several months or longer.
Keep in mind that comps aren’t a 100 percent precise way to determine your home’s value. Although you can see how much the home sold for, you don’t know all of the circumstances surrounding the sale. For example, if a seller agrees to pay the buyer’s closing costs, the listed sale price would be higher than the price the seller actually received for the home. Or maybe one of the real estate agents in the
transaction agreed to take a lower commission to help the sale go through. The point is that comps are a good way to determine the fair market value of a home, but not a perfect one.
The Platinum Group, Realtors delivers top Realtors with the best tools and resources to provide home buyers and sellers with platinum service and platinum results. The Platinum team can help you determine the best approach, including accurate pricing, for your buying and selling needs to provide the best experience possible.
With over 80 percent of their business coming from referrals, The Platinum Group, Realtors deliver top quality customer service the utmost honesty, integrity and attention.
For a no-obligation consultation, call today: (719) 536-4478 or visit PlatinumHomesSales.com.