4 Signs Your Home Comps Are Not Accurate
In real estate, comps are used by both buyers and sellers. When you are purchasing a home, you need to know what houses, similar to the one you are looking at, sold for. When you go to sell a home, you will also want to find other recently sold homes that are similar to your house.
These are both called comps.
The thing about comps is that they are not an exact science, and you should ask questions if you are not sure how they are similar to your home. For a comp to be as accurate as possible, the houses need to be as similar as possible.
Don’t forget though that even the best comps are going to have some differences because every property is different. With that in mind, there are 4 signs to look for that may show that your comps are not accurate in relation to the value of your home.
1: The comps are not in the same area as your house.
As most of us have heard, location is key in real estate. It might seem simple to say that homes within even 10 miles are comparable, but that is not true. One school district is different from another. Homes in one subdivision are worth a lot more than homes in a different subdivision across town.
2: The comps are out of date.
This is especially true in a fast moving market. A home that sold only 9 months ago during a slow market is no comparison to the extremely hot seller’s market at the moment. This is true in reverse also.
When a market drops out, homes sold while the market was hot do not compare accurately to homes getting ready to sell now. Markets move fast, and using a comp from a year ago will give you an incorrect idea of home values in your area. Boyd recommends sticking with homes that have sold within the past six months; the more recent, the better.
3: The comps are not comps, but are really appraisals.
As mentioned above, there is no exact scientific or mathematical formula to find an exact asking price for your home. If a strict formula was used, it sounds more like an appraisal.
Comps are completely subjective, and rely on the input and expertise of the real estate agents involved. There are so many other factors involved in comps as well: Is the home updated? Does it have new major features, such as a roof? Is the neighborhood better? Does it have a large lot?
All of these factors, and more, go into determining a good comp. So as you can see, there can be errors.
4: Homes that are still for sale are used as comps.
To be a good comp, the real estate agent needs to know what the house sold for, not what the asking price was. This applies to both sellers and buyers. A home for sale could have been priced wrong by a different real estate agent, so agents need to let the market determine good comps, not what asking prices are.
As you can see there are a lot of things that go into getting accurate comps for homes. Do your due diligence in looking at the comps before putting the home on the market. If you see a red flag, don’t be afraid to inquire about it.