Comparable sales are the most commonly used method to determine property value. By comparing similar characteristics between homes of comparable size, value, age, and location, you are better able to determine the true property value of your property.
Four Key Factors When Comping Properties
Many factors come into play when comping properties, but four key factors are location, size (square footage), number of bedrooms and bathrooms, and condition. Many more details are considered by professional appraisers to get a “true” value, but these four factors are easy to use, easy to find, and will give you a good idea of the value of your property.
- Location – You may have heard that, in real estate, the main three things to consider for value are location, location, and location! Location is extremely important when comparing properties. Where possible, consider only homes in your same neighborhood or within a one-quarter to one-half mile radius.
- Size – Appraisers prefer to use homes with no more than 20 percent more or less in square footage than the target property. If your property has 1,000 square feet, look at similar homes that are 800-1,200 square feet. The closer in size, of course, the better. If there is nothing of similar size nearby, use the cost per square foot method (which I covered in the last post, Pricing Your House to Sell – Determining the Correct Amount).
- Bedrooms and bathrooms – The number of bedrooms and bathrooms is extremely important. A three-bedroom home with 1,200 square feet might be worth more than a two-bedroom home with 1,300 square feet. It also matters where the bedrooms and bathrooms are located. For example, the main floor is preferred; the basement is not so good. At least one bedroom on the main level is highly desirable.
Three-bedroom homes are generally more valued than two-bedroom homes because more families and even couples want the extra space. Likewise, having two bathrooms is a big plus over one bathroom.
- Condition – Even if you think your home is in good condition, look again. Buyers will consider the following: Are the appliances new? How old are the roof, heating and air system, carpet, and paint. How well are the other homes in the neighborhood maintained?
The comparable sales method is used for both buying or selling a home. When buying, finding comparable sales will help you see whether or not the home you have found is priced appropriately. When selling, comparable sales will help you determine a selling price based on market statistics, facts, rather than emotion which can sometimes lead a seller to overprice their home.
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