Comparable Sales (Comps): Accurately Price a Home

When appraising real estate, the most effective way to determine a home's value is to see what others have paid for similar homes in the same neighborhood. This is called the sales comparison approach, or more commonly "comparable sales". The difficulty in doing comparable sales (shortened to "comps") is that no two houses are the same. This article describes what you can look for when doing comps on your own home if you are planning to sell or try to refinance:

- The big stuff: Obviously the first thing to look at when deciding on comparable sales is the number of bathrooms and bedrooms, the square footage of the house and lot, the general condition of the home, and the total number of rooms.

- Presence or absence of similar characteristics: aspects such as number of chimneys, front or back decks, more than one stairway to a level, walk-in closets, oversized bathtubs, and even the number and size of windows can be significant in comps.

- Exact location: Even in the same neighborhood, the views, distance to stores (if nearby), proximity to where there is sidewalk, and the density of the placement of houses can be different and must be factored in a comparable sale study.

- Property shape and features: Even homes right next to each other may differ when it comes to comps due to the shape and contours of the land. A flat grassy backyard is more valuable than a rock ledge or sandy area, for example

- Age of property: The overall age of the home, including a compilation of the ages of any additions or improvements, is important because the need to fix major items such as roofs, electrical, plumbing, and siding/exterior paint should be taken into consideration when looking at comparable sales.

In addition to these issues, one must take basic aspects of supply and demand into consideration when doing comps. Are homes selling in that neighborhood, or will the owner have to lower their price in order to sell? In a related way, are there too many homes for sale in the neighborhood, leading to the same effect. Also, what is the expandability of the home - can an addition be added, or would that be impossible given town rules? Is the unfinished basement finishable, or is the ceiling too low?

Finally, one needs to look at floor and ceiling values in the neighborhood. A house that seems too big for its neighborhood might not sell for the same price as a similarly sized house in a different neighborhood. Likewise, even a small house will benefit from being in the same neighborhood with more expensive homes.

Good luck with your own comps. Whether it is to arrive at a price to sell, or to refinance, the comparable sales procedure is vital. While the information contained here should be helpful, it is imperative that you use a trained appraiser if your primary reason for doing comps is to get a sale for the most money possible, or not overpay for your next home.