Using comparables to get the most money for your home
It’s a term that real estate professionals like to throw around. Comparables, or “comps”. This terms refers to the process of reviewing other homes in the general area that are similar in size or location and style which have recently sold. It’s part of the analysis to see how the property considered for sale stacks up against the competition. While you want to consider what similar property types are currently listed at to see where you might fit it, it’s the recently sold properties that will give you a truer picture.
Comparables aren’t black and white
There are some grey areas when it comes to comparables. While it is sort of a science, there are lots of variables which can be open to interpretation.
For example, it’s important to look at recent sales activity but what exactly is “recent”? Within the last 30 days? Or is 60 or 90 days still recent? How about going back six months ago to see what the final selling price was on neighbouring properties.
Also, how many properties with similar characteristics should you examine? Three listings? Six or eight?
Then there’s finding properties with “similar characteristics”. If the home is in a cookie cutter neighbourhood, or perhaps in a condo development or townhouse complex, most homes are indeed similar. But houses on the same street, particularly in old neighbourhoods where a lot of changes have occurred over one or two generations of buyers, it can be a bit more difficult. Similar square footage is important with a 10% variance on either side often works. And similar location is important. However, a REALTOR® should be familiar enough with the area that they can navigate through the location of each comparable that’s been pulled up.
Case in point
The North West communities of Highwood and Highland Park are just across 4 St NW from each other. Highwood was built in the mid-1950s and features mid-century bungalows in various states of renovation. Highland Park is a much older community with small bungalows built anywhere from 1910 to 1949. There is some redevelopment occurring in this community and new infills are popping up. Comparing a 1,200 square foot bungalow from one community to the other doesn’t work. Property values are very different in each of these communities despite being next door to each other.
Arriving at a fair market price
Once an average price is reached using comparables, the task of determining a fair asking price for the property at hand can be tricky. Should you add an extra $50,000 onto the price and see what happens? You could but you might be wasting your time. You don’t want your home to be the most expensive house in your area.
Upon the advice of your real estate agent, you want to be a little lower so you can get people exciting about your property. Why chase the market. For example, TV’s Property Brothers have told their audiences that they like to list homes at 5% under the market value that’s been established by reviewing the comparables. It’s important to note that just because you may list a couple of thousand under the market value doesn’t mean that you have to accept undesirable offers. Better to be under than over unless you have a lot of time to kill. But again, why waste that prime time – those few weeks after your listing hits the market when the largest segment of buyers is going to see your home for the first time.
Trust your agent to do the research and to bring you the right comparables to help you establish the right market price.