For some reason people love this tag line that I use. I think it’s because we all can relate. You are not selling and/or buying a home on a lark, you have something to accomplish. My approach in all things wherein I am giving professional advice is to discover what it is you want to accomplish (where you want to go), and then to assess the best way to get there given your own particular parameters (the journey).
Today I’m thinking about pricing and all the comparative things taken into consideration when looking at the market and deciding how to proceed.
We Realtors look at many aspects of the most current data available to help you accomplish your goals, and often the type of data or the methods used to assess them have acronyms or nicknames. Here are a few of those & some things to keep in mind on your journey:
“Comping” – it is said that a Comparative Market Analysis is a product of both art and science. The reason this is said is that, depending on any given property and it’s unique features, there is rarely (except perhaps in a new development) an apples to apples comparison available. Therefore there is a lot of give and take in the assessment of any “comp” when compared to the subject property. Let me give you an example:
~ Let’s say we have a property with great location and large lot size that is also remodeled, but is not on a public sewer line. Let’s also say that no properties right close in to it with similar square footage and bedrooms etc have sold in the last 6 months. What will your agent do to comp it? Well, there are several ways to go:
- One might go back farther in time to see if there are close-in comps. (This CAN be problematic given the volatile nature of today’s market… but might be necessary if no other options are available.)
- One might look at other properties with different ranges of square footage. (This CAN skew your comparison of price per SF as a smaller home typically will sell for more per SF than a larger one.)
- And/or one might go farther out from the subject property’s neighborhood while also looking at smaller lot sizes. (This can work if other neighborhoods with similar aspects are used to produce those farther-out comps. The Realtor really needs to understand the intricacies of the neighborhoods involved, and if moving into other neighborhoods, factors such as the desirability of being on a public sewer line may come into play, and additionally affect the picture.)
- Another thing that might need to happen is looking at properties built in a different time-range (i.e. if no comps can be found built in 1920, then you might need to use some built in the 50’s or 70’s with hopefully similar updating etc)
None of these is ideal, but depending on what comps are available, you may see your Realtor incorporating some of these techniques.
I bring all this up to point out that, while your Realtor will use the best method available to your particular situation in order to give the most accurate look at what your property will likely sell for on the open market, a lot of judgment is called into play while coming to this assessment. If a home has a completely remodeled kitchen and a comp does not, but has more bedrooms or a better location, or a much larger lot, then these might still be directly comparable depending on the other particulars involved, and how many of them are good matches to the subject property. Suffice it to say that your Realtor has the experience and discernment needed to weed through these brambles while bringing together the best information possible to help you determine market value, especially if they have expertise in your particular community. So, trust their advice, and know that it is a lot more complicated in most instances than most believe it to be.
***Another note on “Comping” before I step off my soapbox- ‘Active’ comps (in my opinion) are interesting to note in order to gauge where you will fit in competition. However, the only real ‘Comp’ is one that has Sold. You really only ultimately care what someone actually was Paid for that comparative property.
DOM / “Days on Market” – It is really interesting to note how long a property was on the market before it sold. Many want to know what this means, particularly in the context of a Comparative Market Analysis. Basically speaking, when a house has been on the market for an inordinate length of time, it means one of the following:
- It may have been priced too high to start. Most of the real excitement happens when a property is fresh on the market. When it sits for awhile, it usually loses a little luster to those who have already become aware of it and therefore if the price is too high, it often eventually comes down in increments before getting to ‘Sold’. ‘Sold’ is what someone is willing to pay for the property.
- It may be competing with properties that have more updates or better amenities. In this market there are so many properties to choose from, that when putting your home on the market, these things really need to be considered when pricing. This reason for a property sitting on the market still, again, boils down to price.
- It may have onerous viewing instructions. By this I mean that, while a Seller’s needs and desires absolutely need to be accommodated, a property is most likely to be shown the most often if it is easy to show. If a home has instructions that read “Call 1st”, then a call is made and an appointment time set fairly easily, and often for that same day while someone is, for instance, at work. If a property reads “Appointment Only”, then it is possible, and in my experience likely, that it will be shown less often than one that is more accessible, and often stay on the market longer. That said, when there are pets involved that need to be removed, or day-sleeping Sellers, or children whose nap times need to be taken into consideration, then your Realtor will do their very best to make the showing instructions as friendly as possible and assist in whatever way they can in order to make it as easy as possible for you. Just something to be aware of.
- It may have mitigating circumstances like location problems, or curb appeal issues, or any number of things,
- and/but the core reason can almost always be tied to price.
3rd party/REO’s – When looking at other properties and bemoaning the fact that there are so many that seem to be priced unfairly low (that is if you are a Seller wanting to list your own property), it is tempting to price your property differently than the ones in these categories if yours is not. What you need to know is that even though your property is not in one of these categories, it is still competing with them, and the comparable data is still valid. I know this is harsh, but the true value of your home is determined by the Buyer, so the market is just what it is. If a Buyer can get a comparable home down the street for a lower price because it is an REO (bank-owned) property or a Short Sale (3rd party), then those are just the facts, and you need to consider pricing accordingly.