COMPARABLE HOME SALES FOR BUYERS

HOW ARE COMPARABLES USED IN HOME SALES

Comparative-Home-SalesHow relevant are comparables when submitting an offer on a property?  If you are a buyer looking for a home they are extremely relevant.   An agent hired to list a property for sale relies heavily on comparables to establish a competitive listing price.  Not all comparables are created equal and that is what I’d like to talk about today.

An agent representing a buyer would be wise to discuss comps with their client when determining an offer price.  We make it a habit of submitting with our offer, the comps that we feel represent the property best.  What usually happens is that we get into dialogue with the sellers agent and explain to them how we arrived at our offer price.  I don’t leave it up to the sellers agent to get my offer accepted.  I like make it a point to show the sellers agent how and why we arrived at our offer price.  For the most part I usually get a good response from sellers agents and they thank me for the supporting evidence.  Occasionally we get a counter offer with comparables that they use to try and support their pricing.  This is where the fun begins.

Having an appraisal background helps me to see a property through the eyes of an appraiser as well as the through eyes of the lender.  To determine the value of a house, an appraiser or an agent will typically look at three to five comparable sales, or “comps” as they are known in the industry. Agents and Appraisers have access to the Multiple Listing Service, known as the MLS, which is a database of all the properties in a given area that have been listed “for sale,” are in process of being sold (pending,) or have already sold. Without being an agent or an appraiser, you may have a harder time accessing this information.   This is where the value of a real estate agent can be enhanced.

An agents fiduciary responsibility is to represent the market as accurate as they can so the public can make educated decisions.  Buyers and Sellers want two different things and its the agents’ responsibility to join these two forces so a property can be sold.  Buyers obviously want the most house for the least amount of money, who doesn’t right?  I think its only fair to your buyers though if you educate them on the market and how sometimes a low ball offer is not good.  When an agent can show their client the comparable homes sold and explain an offer price based on those comparables the agent is creating trust and establishing themselves as the professional.

It is important that the agent is able to objectively look at these homes and determine any price adjustments that need to made reflect the home they are submitting the offer on.  Any variation in lot size and livable square footage should not be greater than 15% otherwise you would need to use a different property for comparison.  I like to keep my comparables at a tighter 10% because this allows for greater accuracy.  The next thing you look at is the condition of the property.  Roof, windows, kitchen, bathroom and hardscape are the big ticket items that can add or subtract value when comparing properties.  A clean kitchen is no comparison to a gourmet kitchen.  A clean back yard with concrete and plants is not comparable to a backyard with extensive hardscape i.e., brick and stone work.  When a seller uses those comparables to justify pricing for their listing and the home they are representing does not offer those amenities they are not doing their clients a favor, rather they may be missing the boat on a good solid offer.

Even more important is location.  In large cities its ever more important that comparables that are used are in close proximity to the subject property, not in an entire different neighborhood.  Many factors can carve up a neighborhood.  Schools, streets, shopping centers to name a few.  In todays market there are a lot of sold properties that can help an agent and their client come to a good educated decision for home values.

Chris Vigil is a former Real Estate Appraiser and now Broker Owner of Chris Vigil Real Estate in Whittier, specializing in selling single-family residences. He can be reached at ChrisVigil.net or 562-945-4422 or on Twitter @chrisvigilre.

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