Compables are used differently by buyer's and seller's agents. How?

Asked by Jamesr, Chicago, IL Tue May 22, 2012

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12
Don Tepper, Agent, Burke, VA
Tue May 22, 2012
Well, generally the seller's agent will try to use the comps to justify a higher price . . . at least as high as the listing price. On the other hand, a buyer's agent will try to use the comps to justify a lower price.

That's more difficult to do if there are a limited number of comps, or if the comps are really good matches. For example, in a large condominium, you may have condos identical to the one being sold. Maybe they're on the same floor, maybe on different floors. The floors make a difference in price, as does the condition of the condo. But--for instance--if you have comps of $215,000, $210,000, and $205 for identical units, neither agent is going to have a whole lot of wiggle-room. Sure: A few thousand more for being on a higher floor, and a few thousand more because the unit's in better condition. But the age is the same. The location (address) is the same. And so on.

There's a lot more wiggle-room if the comps aren't perfect matches. And there's even more wiggle-room if there are enough properties that the listing agent and the buyer's agent can actually pick different properties. Example: My sister and I recently sold my mom's townhouse. There were no comps in the actual community. Close by, there were some newer but smaller condo townhouses. A bit farther away, there were some about the same age and about the same size. You really could have looked at either grouping to have tried to come up with a good market value.

Nevertheless, a good listing agent will try his/her best to figure out what the market value of the property is. It doesn't help him/her or the sellers to substantially overprice it. That'll result in no offers. Similarly, a good buyer's agent--while negotiating for the best price--knows that if the buyers' offer is too low (substantially below market value), it's more likely to be rejected or countered. So the buyer's agent probably will suggest an offer at the lower end of what he/she considers a reasonable market value.

Hope that helps.
2 votes
Don: Thanks for your response. My selling site for my condo is http://www.thisfinecondo.com. River facing condos vs. those on the opposite side of the building especially the sunny southern exposure are considered generally to be of greater value because of the protected water view, especially in a congested urban environment like Chicago. My site is http://www.thisfinecondo.com.
Flag Tue May 22, 2012
Andy Ogorzaly, Agent, Chicago, IL
Wed Jul 11, 2012
Well buyer's agents tend to look more at closed comps, whereas seller's agents tend to look at active, contingent and closed. While you should look at everything to get a better understanding of the area, the RECENT (past 6 months) closed ones are the most important. This is going to give you the most realistic price of what you will be able to buy or sell the property for.
0 votes
Edith Karoli…, Agent, Winnetka, IL
Thu May 24, 2012
I am not sure where your question comes from?

The Sellers listing agent will create a market evaluation (CMA) for the Seller at the time of the listing to determine what the home could be listed for, and then they usually build in some negotiations which will automatically happen when a buyer places an offer....

The listing agent for the seller also should keep the seller informed about changes in the market, i.e.
new houses have sold, new one came on the market and he is competing with those and a price reduction may become necessary to be competitive. Then also it depends on the situation of the
seller, have they put a lot into the home after purchase, are they in a hurry or do they have time to
sell...


For the Buyer's agent it is now and the last few months, comparing the property the buyer wants to buy to what very recently similar in style size and age and upgrade has sold, and that will be the
bottom line the i.e. the average sale price the buyer will try to negotiate with the seller, but of course the seller can counter and at one point the two parties will come to an agreement or not...

So hopefully this explains that there is a slight difference in what happens at the listing at the time of the listing and what happens with the buyer and the buyers agent when the buyer wants to make an offer....

More questions come back and keep on asking, we are here to help.

EdithSellsHomes@gmail.com YourRealtor4Life Working always in the very BEST interest of her clients Buyers Sellers and Investors alike, covering for @ Properties Brokerage the city of Chicago, all N and NW suburbs and the fine homes on the North Shore, and all of the US and worldwide offerings with my partner agents.... Edith speaks several languages ....
Have a great day :)
0 votes
Seth Captain, Agent, Chicago, IL
Thu May 24, 2012
This is like saying there is an obvious problem with affordable healthcare, but why do the Republicans give one solution and the Democrats another?

An agent's duty is to his client, much as a politco's is to his constituents. As much as appraisals make house values appear to be a science, it is an art, with certain scientific foundations, like many of the things that occur in our daily lives!
0 votes
Joe Schiller, Agent, Chicago, IL
Tue May 22, 2012
same way deserts are compared.. you highlight what supports your case
0 votes
Bill J Delig…, Agent, Naperville, IL
Tue May 22, 2012
Each side tries to justify it's price, but the numbers are the numbers. Size, geography, schools, condition, ameneties are all factors that can determine price.
0 votes
Matt Laricy, Agent, Chicago, IL
Tue May 22, 2012
I am sure this is the case in some regards, but numbers never lie. If there is a comp out there, you cant avoid the number it sold at. When comparing comps, a good agent should weigh everything. View, floor, updates, layout, etc. This is the proper way to do so.
0 votes
Tom Kelley, Agent, Chicago, IL
Tue May 22, 2012
There are a couple of ways to look at this. I use comps with two distinct purposes in mind when I am working with the buyer -- 1) What is a solid and fair offering price and what do I think would be a good price to come to terms. 2) Probably most important - what do I think an appraiser will come back with so that the deal can be funded and close if we do come to terms. Ultimately, getting a mortgage funded is probably the more important part. When working with a seller -- 1) Looking for the best and most reasonable asking price. 2) What price range should be acceptable for coming to terms. 3) Will the deal appraise out? I do find it amazing how many agents do not think about the appraisal during either the pricing or the offering. I also try and discuss the comps with the other agent in the deal -- it's very helpful to see what and how they are thinking.

Tom Kelley
Dream Town Realty
Chicago, IL
Web Reference:  http://tomkelleychicago.com/
0 votes
Suzanne Hami…, Agent, Orland Park, IL
Tue May 22, 2012
The numbers may be the same but the way you search can be different. Just as in any statistics, point of view and what your trying to achieve can make things different. Use of different comparable properties, etc. As said, you are trying to prove your case. What is considered fair and who they believe is in the eye of the beholder.
0 votes
Philip Sencer, Agent, Chicago, IL
Tue May 22, 2012
Of course they are. Agents for buyers try to find and use comps with lower prices and agents for sellers try to use comps with higher prices. Depending on the property/location/specs it might be possible to find a variety of comps at different price points, but they usually are not hugely far apart.
0 votes
Phillip: Thanks for your response. Comps are history. Market price is described as the price that a buyer - just one, not any more - has offered above or below the closest comp price on recent (6 months to a year) records. So it takes only one buyer to raise or lower the comp price.
Flag Tue May 22, 2012
John Gall, Agent, Chicago, IL
Tue May 22, 2012
Each home and property can be very unique. Anytime negotiations are occuring in a real estate transaction, the savvy listing agent or Buyer's agent is going to use comparable properties to support their argument for price. Market value is determined by the price that a Buyer (representing the marketplace) is willing to pay for a home.

If you would like an unbiased evaluation or value, hire an appriaser to conduct a more comprehensive price analysis. He/she will use comparables in the area as well and apply them to various value approaches to the subject property.
0 votes
John: Thank you for your answer. I like the Market Value vs Comp Value analysis based on the actual property that is being sold and how it differentiates the buyer's reasons for paying a different price based on values he perceives as important, My seller's site for this property is http://www.thisfinecondo.com. I have tried to build in as much hidden value that sometimes is not apparent in a buyer analysis where comp value seems to be the only rule so far. The buyer's seem to say regardless I will not pay a higher price than the comps dictate. An appraiser certainly would not appraise my place for any amount larger than the most recent comps in my building. He is not the potential buyer who can establish his own market value, just an appraiser and recorder of real estate history.
Flag Tue May 22, 2012
Suzanne MacD…, Agent, Succasunna, NJ
Tue May 22, 2012
Comparable sales are used by all realtors to estimate fair market value of a home. Since buyers would like to pay less and sellers would like to get more, there may be a small difference in opinion between buyers' agents and sellers' agents, but if those numbers vary wildly, then something is wrong with the analysis.
0 votes
Suzanne: Thanks for your response. I guess the only time that you can generate a higher price is when you have 2 or more buyers come in at approx. the same price based on comps and you can have them rebid on the basis of best offer. That could raise the comp value to equal fair market value.
Flag Tue May 22, 2012
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