Foreclosure in 60302>Question Details

Jane, Home Seller in Oak Park, IL

How do you price a comp?

Asked by Jane, Oak Park, IL Fri Sep 14, 2007

I realize you compare neigborhood to neigborhood (or block to block as the case may be) and bedrooms to bedrooms, etc., etc., but I'm wondering what else you look at. Do you look at how recent an update was (like an addition done 10 years ago)? And, if so, do you look at the quality of the update (oak versus cherry cabinets)? Do you look for things like Kohler versus Delta faucets? Do you look at the color scheme of the room ("Pottery Barn" colors versus neutrals)? Does it matter how "trendy" an update is? How do these things figure into your comps, or do they at all? Can not keeping up with the Joneses make a significant difference in price?

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"Comps" in this market can be extremely mis-leading. I believe a Realor or Agent specializing in a certain neighborhood are now worth their weight in closed escrows. This is because our "Comps" are now not just limited to "What" they consist of; square footage, features,lot size, schools, etc but "HOW" they became a "Comp". Let me explain: We have a whole different seller in today's market just like we had a whole new type of buyer over the past 5-7 years. Our buyers, some would argue up to 40% of the market, were NOT the average home buyer of years gone by. They were "speculation" buyers. Even if some where actually living in the houses they bought, many owned to take advantage of the spectacular surges of home prices of 10,15,25% a year appreciation. Zoom forward to today--now we have different "Sellers" who are creating "Comps" and "competition" which is irregular and I feel, somewhat UNFAIR to the regular home seller who wishes to move up, retire, or sell and downsize. The "Shor-Sale", Foreclosures, Investor's, New Home Builder and REO (Real Estate Owned) Sellers are "dumping" product, slashing prices, offering incredible incentives to buyers and Agents and generally skewing and skewering the general homeowner who does not have the resources of these folks. So the "area-expert" can tell a homeowner what the "lay of the land" is in the current market for their area. Is it infested with "junk" sellers like the ones above? Or is it more stable consisting of homeowers with a minimum of "junk" influences. If you go up against the big boys you are goign to loose. Also, if you're buying and buy into a "junk" neighborhood be forewarned!! Your area is most likely to face many more "junk" sellers in the next two to three years as all the 2/28's and 3/27's loans start resetting with foreclosure consequences some 90-125 days out!! In conclusion, it's not so much as "What" the comp is as "HOW" they got there!! It's a brave new world out there!
1 vote Thank Flag Link Sat Sep 15, 2007
It's really not about keeping up with the Jone's. When a CMA is conducted we search for the like and the +/- scenario.

In other words; this house sold for this and the price affects this home +/- the larger number of BR's or the presence or absence of a basement or 2/3 garage.

We don't however nit-pic to include a +/- for "colors" or "staging" - these steps are for "selling". The bottom line is time is money. If you want to sell in a more timely manner - than those costs are intangible - but have great impact on success or failure.
1 vote Thank Flag Link Sat Sep 15, 2007
The reason we buy kholer rather than Delta is so that WE enjoy these items when we live there. We don't expect these things to increase the price of a home. Things such as beautiful paint, expensive fixtures, etc will make a difference in how quickly the home sells, but have a neglible difference in price.
1 vote Thank Flag Link Fri Sep 14, 2007
When choosing comps, yes, size, style and neighborhood are the first and main criteria. Size of the rooms, house, and property are considered. Not all 3/2's are equal. Does it have a garage? parking? How do lot sizes and lot quality compare? What about basements and attics? What about location...corner, busy street, next to a commerical bldg?

We have combed all of the above, and now let's talk about age and condition. What year was the subject property built? What about the comps?

Condition applies to mechanics, systems, and updates. How old is the roof? What about the heater, a/c, etc? Are the systems maintained? How is the house taken care of? Is there deferred maintenance, or are thing in great shape?

The pottery barn colors won't increase the price, but it sure will help it sell over the compeition. If there are quality fixtures throughout the home, it will add value. Yes, an updated kitchen w/ cherry cabinets is worth more than pressed board, or painted wood cabinets from the 60's. In the total view of the room, the quality of the cabinets, countertop, appliances, and age of the update will impact the value. Color schemes, fixtures, and trendy images will help you sell if you are priced the same as a similar home that does not show as well. If you add $$ to your price for these trendy decor items, you will end up being overpriced and not sell.
1 vote Thank Flag Link Fri Sep 14, 2007
Deborah Madey, Real Estate Pro in Red Bank, NJ
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Not much for setting a listing price. If your property is nicely updated with cherry cabs, designer paint, and higher end fixtures, it will "show" better than the competition. These pleasantries, along with basic staging - i.e., "white glove" cleaning and meticulous attention to curb appeal don't add a lot of $dollar$ value to the LISTING price. But they do benefit you greatly. Where these will pay off for you is in the side by side comparison by the buyers in the price range with your competition. If the trendy house and the plainer compettion are at the same list price, the buyers are likely to offer on "the Joneses" house instead of the dull one. Buyers might be persuaded to come closer to the list price in their offer instead of offering ridiculously low. If you ask a higher price for the prettified house that is in other respects comparable, you will be helping to sell the plainer, duller house instead.

My suggestion for the owner of the dull house: Instead of spending $ on redecorating, undercut the competition by a few hundred dollars and (or) offer a gift certificate to a local home improvement store.
1 vote Thank Flag Link Fri Sep 14, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
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While pricing a comparable sale is done by making adjustments to the sale price based on features that make the comparable property either superior or inferior to the subject, I don't think that it is realistically possible to go into details such as the brand of fixtures that was used and how old the addition was. You have to remember that most appraisers and real estate agents don't have access to the interior of the comparable sold homes. Actually, the chances that a local real estate agent may have seen the interior of a comparable sale when it was still on the market are better than that the appraiser who will do the appraisal actually saw the interior. I do a lot of valuations for banks and for the most part I am limited to making adjustments based on exterior appearance and what the MLS detail shows. I make adjustments based on the age of the roof, whether the comparable was recently remodeled, exterior condition and other more obvious differences that have an impact on value in my opinion. Many people spend too much on high end materials not realizing that they will not really increase the fair market value of the house.
Web Reference: http://www.go2kw.com
1 vote Thank Flag Link Fri Sep 14, 2007
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
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I agree with the others that the brand of faucet and similar small details are not included in a pricing analysis... even at an appraisal level. However, oak cabinets (for example) are the cheapest cabinets, and therefore keep a home on the lower price of the overall market. Likewise linoleum bathroom floors, formica countertops and laminate (Pergo) floors are low-end options. Buyers know that and react accordingly.

I tend to approach value as a range of prices, and I speak with sellers about what their goals are, in addition to price. If they need/want to move quickly then are they willing to lower the price to shock the market into action? Or are they in need of walking with a larger amount of money, and are willing to wait it out to get their price?

I generally come up with a top price, a "hoped for" selling price and a third price: this on is "I won't sell it for one dollar less than $xxxx.

Likewise I generally put my sellers onto an MLS distribution of listings in their own town, so they'll see the competition as it comes on the market. I encourage them to attend local open houses so they will see what condition other homes are in.

I recently had a home that languished on the market as the divorcing couple grappled with their differing goals. However, when they realized that their price for their 8 year old home with peeling linoleum and stained carpets was only $5000 less than new construction (which included granite countertops in the price) a mile away, they began to see that they needed to lower their price if they wanted to be able to sell their home at all.

You know, the most stressful part of home selling is the time on the market. Sellers hate having to keep their home picture perfect for weeks and months on end. The longer it's on the market, the more likely it is that sellers will begin to let things start to slide.

So the very best thing for sellers to do is to get their home in tip-top shape, and price it realistically so that it is more desirable than any other home in that price range. The greatest attention to a home is paid when it first comes on the market. In a buyers' market, realistic pricing is critical. If they do that, and do all the other things that home sellers are told to do (de-clutter, de-personalize, paint where needed, repair where needed, etc) they have a better chance of getting their home sold and moving on to the next phase of their lives.

Good luck,
Rita
0 votes Thank Flag Link Sat Sep 15, 2007
You look at updates, particularly kitchens and baths. Does the kitchen have new appliances - did they go upscale with it or did they do cheap upgrades. You look for finishes...hardwood floors over wall-to-wall carpeting. You try to also compare apples to apples. For example a beautiful one-of-a kind pre-war house will sell for a great deal more than a raised ranch or split level from the 60s or 70s - all other things being equal. Around here a pre-war home and brand new construction sells at a premium. As do renovated homes. Other homes tend to sit and sell for less.
0 votes Thank Flag Link Fri Sep 14, 2007
Jane
I would say the easiest way to answer your question is that all homes have a "look". That look is the sum total of EVERYTHING. Meaning neighborhood, street, lot, lot layout, structure design, age, maintenance, staging, etc.

If the sum total of your home is one that shows like a "new" home--meaning it has been maintained to the point where a buyer would simply have to move in, that homw will show that way.

Most homes do not automatically show well because people are busy living in their home. That's why sellers always want to know the answer to this question: what do I need to do to get this property ready for sale?

So that means if the entire package is perfect. yet the kitchen has never been remodeled, the kitchen will, by contrast, look bad. On the other hand, if the kitchen has been remodeled, and the rest of the home needs paint, cleaning, new carpet, furniture, etc., there is a problem

NAR surveys have shown the buyers want "move in ready". The best advice I can provide is that if we properly maintained our homes, we'd enjoy them more, and would have a lot less to do to prepare our home for market. However the world is not perfect, we never seem to have time and money simultaneously...so we compromise.

To put it another way, since very few homes are perfect, Realtors and home stagers can help your home look it's best/ Consulting with a Realtor before you have to sell will allow you more time to figure out what you are willing to do to get top dollar when you sell your home.

Good luck. Lots of good points in these posts.
Keith
0 votes Thank Flag Link Fri Sep 14, 2007
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
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Best bet is get a realtor to run comps in the area. Color schemes and faucets have little to contribute on their own, versus "needs updating" with curtains from the 60's versus granite countertops.

Look at the BIG picture.
Web Reference: http://www.iansellsnola.com
0 votes Thank Flag Link Fri Sep 14, 2007
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