Here are some strategies for determining your home’s appropriate asking or selling price. I’ll also demonstrate how to get the most return on your money.
Similar homes are used to determine an accurate market valuation. The asking price of a house may give you a general idea of its worth. What matters most when choosing a home’s worth is not the asking price but the selling price in a given market.
So, it’s possible to find houses in a particular area that are advertised for extremely high prices. When priced that expensive, nobody buys them. They receive bids, and they reduce their asking price before finally selling. The selling price is the most relevant data point if you’re trying to decide how much you should ask for or give on a home. Alternately Named Virus (average retail value or after repair value). The comparables provide a method for calculating ARV.
Comps should also be in the same area and be of a comparable age to the home being sold. When I say “same location,” I mean that they should be no more than a mile apart. You prefer a sale date less than sixty or even thirty days in the past. Comps should only be done on recently sold houses because of the market’s volatility. Your comparables will provide the most reliable information if they are closely situated to your topic property and recently sold.
We’ll get into where you can find these examples now. First, a Realtor or the Multiple Listing Service can provide comparable sales information. If you are a real estate agent, you know exactly where to find them. If you are not a Realtor but know someone who is, you can pay them to run comparable listings for you for around $20 to $25. Realtors help obtain comparables because they have received formal education and training.
Remember that they MIGHT want to increase the price slightly when dealing with a Seller to earn a higher commission. They might even do it for nothing sometimes. Do them a favor and give them a listing every once in a while, and you’ll eventually discover a real estate agent who can help you. The issue is that many real estate agents are unwilling to repeat the process. They are willing to complete a few but do not wish to be your primary supply of samples. It’s not uncommon to require 5–6 per day.
Comps can also be obtained online, but you should exercise caution. You can research the going rate for homes in your region online, but getting an accurate assessment of your home’s value can be difficult; estimates can range from as low as $50,000 to as high as $50,000. Unfortunately, the free internet resources are not very reliable. I would advise against doing so. Buying a home for even $15,000 more than it’s worth is extremely bad. Then you’ll be a motivated vendor, precisely what you don’t want to be.
Going to court is another option, though it’s time-consuming for a single defendant. You can contact them to obtain data on the selling prices of houses in a specific location.
For my competitions, I make use of a web-based tool. When I enter the property’s location, the tool compiles a list of all recent sales in the area, complete with details such as the sales prices and loan amounts for any existing homes. Not everyone, however, is willing to shell out the cash required. It’s well worth the price if you’re a serious investor who just wants to settle down, click a few buttons, and get a list of comparable properties in front of them. You can proceed with making bids and negotiating with sellers and buyers now.
So, how do you rate things now? It’s simple if all the houses in a neighborhood are identical, like if they were all built using the same blueprints. That simplifies things greatly. You can determine the home’s value by taking an average of the selling prices once you have several. In a condo, it’s as simple as moving across the corridor to another identical unit. Verify that sufficient time has been allotted. Invalid comps would sell three equivalent units seven, nine, and eleven months earlier. You have to account for the period’s unique market conditions.
If the homes are of various types, you must use alternate criteria. More investigation is required. House age and dimensions are important factors to consider. Two identical houses, one 50 and the other five years old, will have vastly different market values. Check out the homes’ current states. You should check out the house’s optional features. Perhaps one home has a three-car carport, while another has only one or two spaces. There’s a home with a pool. You’ll need to make some adjustments. One house with a pool will command a higher price than a comparable home without one.
You can always ask the seller what they think the home is worth, and it will probably be a lot. Inquire as to the rationale behind the quoted cost. Perhaps they will mention that they worked with a real estate agent who provided them with a comparative market analysis (CMA). Verify that at all times. Competitions must be held constantly. Don’t ever believe what a vendor says. Do your investigation always.
The area technique also exists. Suppose you have eight comparables for homes in the same area, but they are all distinct. The one on top always gets thrown out because it’s too lofty. Then I’ll throw the bottom card as well. Next, I research how much other homes are selling per square foot. I calculate the average price paid per square foot using the homes’ floor footage and sale prices. I keep track, and then I take an average to give you an indication. To estimate the home’s value, multiply the average price per square foot for recently sold homes in the neighborhood by the home’s square footage. That should net you a reasonable compensation package. It’s not a precise science to repeat. A modicum of life experience is required for this.
It’s something you pick up as you explore the area. Many of you are focusing on one single field. But if you tell me it’s a one-bedroom, one-story carport in Chicago’s Country Club Hills, I can tell you how much it’s worth before deducting for wear and tear. This is due to my experience in the field in question. However, you should check the comparables if you are investing across the nation or in a central metropolitan area. To save time, I’d instead hire a service than calculate the site manually.
There are factors to consider and parameters to tweak now. Low-priced house sales must be eliminated at times. You could have eight or ten homes sold within a $20,000 range and one for $30,000 less. You need to investigate the thirty thousand dollar price drop. Was there an issue with the structure’s base? Was it a quick sale or foreclosure? You should be conscious of the prevalence of short sales and foreclosures in the current market. Whenever you examine your comp list and notice that one or two houses appear unusually high or low, you must either discard the entire list or investigate further to determine why. These bankruptcies are causing a drop in property values.
This is what I do now whenever I am marketing a home. I use the highest sales in the neighborhood when I have an appraiser come in and when I set the price for my home. When making an offer on a home, negotiating with the seller, or conducting a BPO, I always provide the BPO Agent with the lower comparable sales in the neighborhood and let him know that our offer is based on these sales. So, when selling, use the higher comps and lower comps when purchasing.
You can use these guidelines to assess comparable properties once you have collected data and learned the market price for homes in your area.
To avoid using listed rates, only use sold prices.
Properties with more than four apartments are considered commercial and are valued differently than single-family homes.
o, Use comparables as close to the subject as feasible (ideally within a mile).
Comps should be “fresh” or no more than 30 days outdated.
Rather than contrasting houses three decades apart in age, you should evaluate them side by side.
o, Investigate the cause of a property’s pricing discrepancy if it is noticeably higher or lower than average.
o If the comps are very dissimilar, use the price per square foot for the region as a benchmark.
o When negotiating, use high comparable sales when offering and low comparable sales when purchasing.
Full-time real estate investor, coach, and mentor Nick Cifonie. Nick runs a site where interested parties can join for free and access numerous instructional films on real estate investing.
Read also: Helping A Real Estate Agent To Sell Your Home
