Comps – or recent comparable sales – may be clear-cut to you but sellers may be confused about the comparisons.
The Quicken Loans Home Price Perception Index recently showed that home owners’ estimates of their home’s price, on average, are 2 percent higher than those of appraisers.
“It may not seem like home owners assuming their home’s value is 2 percent higher than appraisers’ opinions is significant, but it could make a huge difference in metro areas with higher average home values,” says Bob Walters, Quicken Loans chief economist.
Setting Them Straight
New Tools, Techniques in the Appraisal World
Sellers who are behind on knowing about the latest market moves are especially at risk of overvaluing their properties. Also, due to the latest market demand, comparables may need to be adjusted too. After all, comparable sales can stretch back one month to three months or more. But the seller may need to be educated about the market activity of what’s happening right now.
As such, Steffy Hristova of HomeSmart in Scottsdale, Ariz., says she helps sellers visualize the data and provide a more realistic picture of the comps by applying a formula that takes into account the latest marketing activity. For example, “I adjust the price according to the following schedules: If there are showings and no offers, 4 to 6 percent off; if there are low showings, 6 to 12 percent off; if there are drive-bys only, 12 or more percent off,” Hristova says.
Hristova says she reviews her regional MLS and The Cromford Report – a provider of residential real estate research in the Greater Phoenix Area. “I review statistics from the MLS daily and from available and reliable research sources, study the market dynamics in the neighborhoods, and in the substitute market for the object property, and review the demand and supply numbers for the ZIP code and neighborhood and the sales trends,” Hristova says.
Also besides taking note of square footage, number of bedrooms and bathrooms, age of the property, and energy efficiency in the comparables, Hristova says she also talks to her sellers about potential negatives that could impact the price of their home – such as location within the neighborhood and proximity to noise.
Source: “What Every Seller Should Know About Comps,” RISMedia (Oct. 17, 2015)