Take it from a Veteran Realtor: Don’t Just Look at Sale Prices — Look at the “Why”
If you’re going to take the bold step toward buying or selling a home, understanding real estate comps is vital. Whether pricing your home for sale or making an offer on one your dream home, location, condition, and market trends are key factors in determining true value. It’s not just averaging the comps.
What are real estate comps?
Real estate comparables, or “comps,” are recently sold properties within the same area that share similar characteristics—such as square footage, age, and condition—with a subject property. For the most accurate valuation, Realtors and appraisers prioritize homes of the same model within the same subdivision that have closed escrow within the last 90 days.
Exact matches aren’t always possible, but an experienced agent can help you understand which comps to use in determining a home’s value. That same agent can also tell you tales of homes that failed to sell because the seller priced too high, or buyers who failed because they offered too little, ignoring the comps.
A Case Study in Comps – four homes of the same model, all within 1,000 feet of each other, that sold for vastly different prices, ranging from $659k to $755k.
The Properties
Property 1: Located on a cul-de-sac, adjacent to a bike trail and open space. Nicely updated.
- Listed at $749k, sold for $755k (50 days on market, closed Sep 30).
Property 2: Situated at the neighborhood entrance, a corner lot on a busy 45mph street with a retaining wall as a back fence. Some updates.
- Listed at $759k, dropped to $668k, and sold for $659k (70 days on market, closed Nov 5).
Property 3: (My Listing): Located between Property 1 and 2, with open space behind it, newer appliances and kitchen counters. Similar upgrades to Property 2, but with a much better location. Not quite as premium as Property 1.
- Based on comps and location, I suggested pricing at $719k; the seller opted for $725k. We received three offers and sold for $718,500 (22 days on market, closed March 20).
Property 4: This home, located toward the back of the neighborhood with open space behind it, was the most updated of all. Only Property 1 had a better location.
- Listed at $749k, it sold for $770k (5 days on market with multiple offers, closed April 9).
Lessons Learned
Pay attention to the ‘why’s’:
- Property 1 set the high bar due to its prime location and significant upgrades.
- Property 2 sold for considerably less because of its poor location and the end-of-year market slowdown, when buyer activity typically decreases and prices can soften.
- Property 3 found its sweet spot, balancing a great location with moderate updates.
- Property 4 came along while property 3 was pending sale, and with a premium location and nicer upgrades, but unsure how where the market was headed, priced at $749k
For Buyers: Make Your Best Offer:
- Consider the couple who visited Property 3 three times, with their agent expressing how much they loved it. Despite their emotional investment, their offer of $659k ignored Property 1 and relied solely on Property 2 as justification. They never had a chance.
- Another offer came in $25k below list price, hoping to negotiate. Many buyers’ agents ask, “Why didn’t they counter?” The truth is, sellers are not obligated to counter or even respond. If a clean, fair offer arrives, they could simply take it.
For Sellers: Price Correctly from the Start:
- Correct pricing is more crucial than ever. While prices are rising in some areas, they’re softening in others. Buyers are increasingly selective, and have a world of data at their fingertips. ‘Start high and drop later’ is a losing strategy. It teaches buyers to wait for the next price cut, or signals that the home may have a flaw, while it sits on the market, causing the seller to worry, or blame their agent for not marketing it enough.
- Understand the “why” behind your neighborhood comps. Your home’s condition and features, combined with its specific location, will dictate its value in the current market.
- While inventory may be a bit low, there are enough homes for sale for buyers to compare and choose from. Make yours stand out.
I hope this little lesson was of benefit and helps you understand real estate comps, and how to use them. What are your thoughts? Any questions? Comments? Don’t hesitate to reach out.
Steve Heard – eXp Realty of Northern CA, lnc – DRE#01368503 – steve@myfolsom.com
What are real estate comps?
Real estate comparables, or ‘comps,’ are recently sold properties within the same area that share similar characteristics—such as square footage, age, and condition—with a subject property. For the most accurate valuation, Realtors prioritize homes of the same model within the same subdivision that have closed escrow within the last 90 days.
Why do similar homes sell for different prices?
Even identical floorplans can vary in value by $100,000 or more based on ‘The Why.’ Key factors include micro-location (cul-de-sac vs. busy street), internal upgrades, and seasonal market timing. Understanding these nuances is vital for setting a competitive list price or making a winning offer.