If you’re thinking about selling your house, you’re probably thinking what is your home worth. Having sense of how much your house is worth in today’s market is important because it will give you a good idea of how to price your house.
Your real estate agent will look at comps or comparables so that you can go over the data together. However, there are also things you can do to find your property value. You can get a personalized estimate from real estate websites such as Trulia.
Knowing your comps will give you a ballpark figure on how to price your property. Here are some things you need to know about comps.
Comps refer to the price that was paid for recently sold homes that are comparable in size, style and location. Comparable sales are a critical part of assessing the current market value of a house’s property. To determine the value of your house, a real estate agent and appraisers analyze the recent comps in your area. However, choosing which houses to include and even the word “recent” can be subject to debate for most realtors.
Some real estate agents define recent as 90 days, others 60. However, there are brokerages that go back as far as 6 months. Houses to include in the analysis can also differ from realtor to realtor, but ideally they include 3 or more properties of the same size and characteristics.
When it comes to real estate, location is important and proximity is an important factor in comps. Aside from the neighborhood, school district is also a crucial factor in determining comparable sales.
Real estate agents and appraisers usually arrive at different comps. The former usually wants values that are closer to their transaction while the later is usually like a third party observer. Because real estate agents have a stake in their real estate transactions, they usually come up with a higher price. However, they are also more likely to find value in intangible qualities of a property. This means that realtors consider stainless steel appliance upgrades or quality of workmanship to motivate potential buyers.
Real estate agents are also more likely to know reasons why a seller has priced their home accordingly. They are usually more in touch with the market and know reasons why sellers were motivate to price the house in a certain way. Appraisers on the other hand are an objective participant in the process and are asked to provide information for the lender. In most cases, appraisers most likely did not walk through the house or know the sellers.
The sales comparison approach is used when appraising the value of a single family home or 2 to 4 storey residential units. Previous sales of houses is compared to the subject being appraised to arrive at an estimate of the property’s value.
For example, Joe the real estate agent needs to appraise a 3 bedroom, 2 bathroom, 2,500 square-foot house in a typical suburban subdivision. Joe found out through research that houses of the same size sold for and average $250,000 in the last 4 months. These houses are referred as comps. Based on the size, location and sold amount, the appraised house value may come in at $250,000.
There are also tools that you can use to find out how much your house is worth. In the recent years, online sources have emerged to help you determine the value before consulting with a real estate agent. Most online tools make use of publicly available data and are run through computers to give estimates of your house’s value.
A good tool to use is Zillow. This real estate website allows home owners to add data about their properties through their Price This Home tool. They will then receive private estimates using the comps they submitted. Other similar websites to check include ForSaleByOwner.com and Redfin.com.