Comparable Sales – The Tool Used To Establish Market Value

: Comps Establish Values For Both Buyers And Sellers

One of the most frequently heard terms in real estate is the word comparable sale or comps for short. Comps is a real estate appraisal term which refers to properties that are similar as possible to the subject property whose value is being established.

Gathering comps is a vital ingredient of the establishment of the listing price of a home for a seller, and for determining a buyer’s offering price for a home that is listed for sale.

A practical definition of a comparable sale:

A comparable sale is sale that would be considered an alternative choice to a buyer considering a subject property

A comp for a property should possess as many as possible of the same characteristics and amenities of the subject property. These traits include, but are not limited to physical compatibility such as square footage, number of bedrooms, location, condition, home style, and age. The conditions of the sale, financing terms, local market conditions also factor into the valuation of a home.

When looking for comps real estate agents and appraisers look for similar properties in the same town or boro, and within the same school district as the subject property. The school district compatibility is important due to the large factor a district and it’s reputation and taxes play in the market value of a home. However the school district does not play as an important factor as the town or boro of the property. Locally for instance, it would not valid to compare a split level home in Swarthmore with a split level home in Wallingford.

When establishing value for a home it is common practice for appraisers to look for 3 to 4 settled listings with the same characteristics of the subject property, and the combination of either 1 Pending and Active listing, or 2 Active listings. Obviously the final sales price of a Pending or Active listing is unknown, but an estimated sales price can be extrapolated based upon the percentage of selling price to the last price data that has been established by similar settled listings.

For a more accurate depiction of a home’s market value it is preferable to use homes that have sold within the last 3 months, and at maximum homes that have sold in the past 6 months. Market volatility over a longer period of time can skew the results of the use of properties that have sold outside those time parameters.

The number of bedrooms will trump a home with a the same square footage that has one less bedroom – the value of a home with an additional bedroom will have a greater market value. Also location plays a big part in the valuation of a home as it pertains to a home’s proximity to a busy road. It is not uncommon to see the value of a similar house on a double yellow line road be $10,000 to $15,000 less than a home located on a neighborhood street.

The task of finding comparable sales can become challenging in slow market conditions that we have experienced over the past several years, or when a property is unique – such as a historical home among an area of new homes. In such conditions the gathering of comps may use the inclusion of properties that normally would not be utilized, and by using price adjustments, increasing or decreasing the value of the subject or comparable property, for traits that are present or not present, derive at a valuation of a property.

Comps play a vital role in establishing the value for a property for people on either side of the buying and selling fence. A agent should put the time into gathering valid comparable data for his/her client. Don’t buy or sell a home without it!

Wallingford Real Estate – Wallingford, PA 19086

S. Clark Kendus