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What You Need To Know About Comps When Pricing Your Home To Sell

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Updated May 24, 2024, 09:45am EDT

Housing inventory is at a historic low, but this doesn’t necessarily mean that you can name your price when putting your house on the market. That’s why it’s important to know the selling price of surrounding homes (comps) when deciding on the best listing price.

“Comparables or comps are properties in your surrounding area that have similar features as your home,” explains Jason Gelios, a realtor serving the Southeast Michigan market.

In addition to helping sellers get to a price which makes them feel comfortable, he tells me that comps are helpful in other scenarios as well. “Comps are used by real estate professionals, appraisers, and even lenders using automated valuations to determine a home’s value,” Gelios says. In addition, he notes that comps can be used to resolve estate settlements, insurance claims, and even divorce situations.

Desiree Avila is a realtor at Charles Rutenberg Realty in Fort Lauderdale, Florida – and she’s also a pricing strategy advisor (PSA) who has done hundreds of comps. Avila tells me that pricing your home for sale is an art. “If you get the price wrong, the entire endeavor of selling it can go sideways,” she warns. While some people may look at websites like Zillow and Redfin Redfin , Avila says those are just the starting estimates. Zillow’s Zestimate has a median error rate of 2.4%, and the Redfin Estimate has an accuracy rate of 1.99% for homes on the market.

However, Avila says you need a human to get you to a number closer to true market value. “The human you choose to do so should be a real estate expert that really knows your area, since I can’t underscore how important that local knowledge is,” she says.

Factors To Consider

When using comps to help determine the price of your home, these are some of the factors to keep in mind:

Broker Julia Hoagland at Compass in New York City tells me that one thing she really likes about her city is the level of data transparency. All sales are recorded by law, and she says they’re available to be viewed by anyone with internet access. “As the true value of something is what someone else is willing to pay you for it, anyone can investigate the relative ‘value’ of their property,” Hoagland says.

However, since data is historical by nature, Hoagland explains that using comps is essentially an exercise in using the past to predict the future. “So, while we start with the quantitative analysis, it's critical to also consider qualitative factors such as inventory — if there was more inventory available when the comps priced than there is when you are listing, you have more leverage and may be able to price higher — economic state, election cycle, interest rate trends, et cetera,” she says.

According to Broker Kimberly Jay at Compass in New York, you should also consider comps that have occurred within the past six months. But she says looking at sold properties isn’t enough. “It's equally important to examine the current market and properties that are under contract to get a real-time understanding of the market dynamics,” Jay says.

And to do a true apples-to-apples comparison, these factors should be taken into account.

Location

When looking at comps, focus on properties as close to your home as possible. “This includes the same street, building (if applicable), or nearby similar streets and if you live in a gated community, stay within your community,” Jay says.

In fact, Avila recommends not going further than a mile away. But if you have to go beyond that geographic area, she says you should try to stay as close as possible to your home.

Ownership Type

Conduct comps on similar property types. “A cooperative cannot be directly compared to a condominium,” Jay explains. And for cooperative properties, she says you should also consider comps that have similar financing requirements.

Size And Layout

When looking for comparable homes, Jay says you should also look for properties that have similar square footage, and an equivalent number of bedrooms and bathroom. “Also consider properties with similar flow and use of space,” she notes.

Avila agrees, and recommends choosing at least 5 comps that most closely resemble your home. If you have a 3-bedroom/2-bathroom house with a pool, compare your home to other 3-bedroom/2-bathroom homes in the area with a pool. “If there are only a few 3-bedroom/2-bathroom houses with a pool in the area, it is preferable you choose other houses in the area with a pool — such as a 2-bedroom/2-bathroom home with a pool or a 4-bedroom/2-bathroom home with a pool — and make adjustments to those values, rather than go beyond the 1-mile radius,” she advises.

Ceiling And Floor Height

Ceiling heights make a difference when comparing properties. Jay recommends considering homes with similar ceiling heights for a fair assessment.

“And if you’re buying a home in an apartment building, keep in mind that a higher floor is worth more,” Jay says. So, if you live on the first floor, a home on the 4th floor wouldn’t provide an apples-to-apples comparison.

Age, Style And Lot

“Properties built during the same time period with similar architectural styles are more comparable,” Jay says. So, a contemporary home from the 80s is not equivalent to a recently built home.

In addition, consider the size and usage of the lot. “A property with half an acre is distinct from one with two acres,” Jay says. And a home situated on flat, usable land with a large backyard is quite different from a home that has a hilly background.

Condition And Renovations

“Look for properties that possess similar levels of renovations, upgrades, and overall maintenance,” Jay recommends. A house that has been renovated 10 years ago may already have an outdated appearance. So, it can’t be compared to a property that’s been recently renovated. “A home in need of renovation should take into account the cost to renovate,” she says.

Views

Look for homes with similar views as well. “In Manhattan, an unobstructed view of Central Park or the city skyline significantly adds value to a property,” Jay says. A view of an ocean or lake also adds value, whereas a view of a brick wall or the neighbor’s backyard wouldn’t be comparable.

Amenities

Comparable amenities can include a swimming pool, tennis court, outdoor space, and gardens. “In Manhattan, it's important to consider building amenities like a gym, roof decks, common areas, and yoga rooms, as well as the condition of the lobby and hallways,” Jay says. “In Manhattan, a newly constructed condo with abundant amenities holds a different value compared to one without any amenities.”

So, be sure to make adjustments if the house has something that is either desirable or undesirable. “For example, being on a busy street is an undesirable characteristic and the value of the subject should be adjusted down,” Avila says. If the property is on a large corner lot, the value should be adjusted upward.

And in addition to being sure your comps are close by (in the same ZIP code), Avila says they should also be in the same school district.

No Two Homes Are The Same

However, when using comps to help determine your home’s selling price, keep in mind that no two homes are the same — unless you’re in a cookie-cutter neighborhood, and even then, it’s likely that homeowners may have implemented design trends to help their homes sell for more.

“Not all square footage is created equal, so it's important to consider again the qualitative factors that influence value — such as how much hallway space versus truly usable space there is, how dramatic the space is,” Hoagland says.

Be Realistic

As a general rule, data can be manipulated to say anything you want it to, but Hoagland warns that the buyers are generally educated. “It's important to be realistic about the comps you lean on to value what is often the most valuable asset you own,” she says. That’s why homeowners are advised to check their feelings at the door, and avoid making emotional decisions. “If you miss the market by pricing too high, you never get a second chance to make a good first impression,” Hoagland says, adding that pricing too high can take equity out of a seller's pocket.

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