by Admin Staff
on Monday, March 8th, 2021 at 12:43pm.
"Comparables" in real estate refer to comparable home sales. You might even hear this abbreviated as "comps." Comps help sellers and their agents identify an accurate listing price for a home — one that captures more buyers, minimizes time on the market and clears the path for a smooth transaction. Home buyers reference comps to decide how much to offer on a home, so that they make sure they're not over-paying. An appraiser sources their own comps to help accurately assess how much a home is worth. When analyzing real estate comps, it's important to heed a logical criteria of comparison. Let's go over the four most important criteria, so that you can understand how to accurately and fairly price your home when the time comes to sell.
1) Compare Using SOLD Houses
There's a common misconception that people have when first starting out. Using homes that are actively on the market as reference points will harm your outcome. People can ultimately list their homes at whatever price they want! The truly valuable points of reference you want to use are houses that have sold. These prices tell you what the buyer and seller agreed upon, indicating fair compromise. These sold houses should be in the same price range you're in, same or similar location, and similar condition. It's a fun point of interest to see what the house down your street is selling for, but realize this price is still pending - the listing is active.
2) Proximity Is Only One Point Of Comparison
The "house down the street" is the most commonly known point of comparison when evaluating price, but it is not, and should not, be the only point of comparison. The look of homes in neighbourhoods within the city do tend to look similar, but they are not the same. Each home has different square footage, upgrades, upgrade condition, overall house condition, yard landscaping, interior layout, etc. These different factors all add up in determining the price of each home. The proximity of the house down the street that sold for X amount of dollars is certainly something you should look at, but don't let it be the only thing. Your home has different aspects than that home down the street, and all of those aspects will definitely influence the final price you arrive at.
3) Recent Sales Are More Valuable To You
The housing market isn't wild; it doesn't fluctuate to extremes every week. However, it does shift over the course of a year. Environmental, social and economic factors can influence the shifts faster. This is why it's important to prioritize home sales that have happened in the last year, with emphasis on analyzing sold properties within 6 months. If you go back too far, the numbers don't reflect what's happening in the current market. This can hinder your findings.
4) Make Sure You Compare Apples To Apples
Comparing apples to pears does not provide accurate results. What makes an apple taste great is what indicates a pear isn't ripe yet. Real estate is a lot like this. For example, comparing the sold prices of homes that are on different sides of the city is like comparing an apple to a pear. Your house may have the same amount of bedrooms, bathrooms, similar square footage and modern conveniences as another home that sold across the city (just like an apple and pear are both fruits). However, your home could be in an established neighbourhood with parks and bike trails. This other home could be in a younger neighbourbood, still under development. Or perhaps your home was constructed by your great-great grandfather, and this other home was built by a company who built many other homes in the neighbourhood (just like how colour, texture and smell differ between apples and pears). The point is, when you're comparing your home, make sure to compare it to a sold home that's similar in almost every fashion.
Of course, there's more to evaluating house prices than the four truths we've talked about here, but this will give you a good starting point and basis of understanding. Our Realtors study these things every day, and so their experience allows them to interpret the market effectively. This makes having a Realtor an incredible asset during your selling process!