How to Use Comparable Sales to Price Your Home

How much can you sell your home for? Probably about as much as the neighbors  got, as long as the neighbors sold their house in recent memory and their home  was just like your home.

Knowing how much homes similar to yours, called comparable sales (or in real  estate lingo, comps), sold for gives you the best idea of the current estimated  value of your home. The trick is finding sales that closely match yours.

What makes a good comparable sale?

Your best comparable sale is the same model as your house in the same  subdivision—and it closed escrow last week. If you can’t find that, here are  other factors that count:
Location: The closer to your  house the better, but don’t just use any comparable sale within a mile  radius. A good comparable sale is a house in your neighborhood, your  subdivision, on the same type of street as your house, and in your school  district.
Home type: Try to find comparable sales that  are like your home in style, construction material, square footage, number of  bedrooms and baths, basement (having one and whether it’s finished), finishes,  and yard size.
Amenities and upgrades: Is the kitchen  new? Does the comparable sale house have full A/C? Is there crown molding, a  deck, or a pool? Does your community have the same amenities (pool, workout  room, walking trails, etc.) and homeowners association fees?
Date  of sale: You may want to use a comparable sale from two years ago when  the market was high, but that won’t fly. Most buyers use government-guaranteed  mortgages, and those lending programs say comparable sales can be no older than  90 days.
Sales sweeteners: Did the comparable-sale  sellers give the buyers downpayment assistance, closing costs, or a free  television? You have to reduce the value of any comparable sale to account for  any deal sweeteners.

Agents can help adjust price based on insider insights

Even if you live in a subdivision, your home will always be different from  your neighbors’. Evaluating those differences—like the fact that your home has  one more bedroom than the comparables or a basement office—is one of the ways  real estate agents add value.
An active agent has been inside a lot of  homes in your neighborhood and knows all sorts of details about comparable  sales. She has read the comments the selling agent put into the MLS, seen the  ugly wallpaper, and heard what other REALTORS®, lenders, closing agents, and  appraisers said about the comparable sale.

More ways to pick a home listing price

If you’re still having trouble picking out a listing price for your home,  look at the current competition. Ask your real estate agent to be honest about  your home and the other homes on the market (and then listen to her without  taking the criticism personally).
Next, put your comparable sales into  two piles: more expensive and less expensive. What makes your home more valuable  than the cheaper comparable sales and less valuable than the pricier comparable  sales?

Are foreclosures and short sales comparables?

If one or more of your comparable sales was a foreclosed home or a short sale  (a home that sold for less money than the owners owed on the mortgage), ask your  real estate agent how to treat those comps.

A foreclosed home is usually in poor condition because owners who can’t pay  their mortgage can’t afford to pay for upkeep. Your home is in great shape, so  the foreclosure should be priced lower than your home.
Short sales are  typically in good condition, although they are still distressed sales. The  owners usually have to sell because they’re divorcing, or their employer is  moving them to Kansas.

How much short sales are discounted from their market value varies among  local markets. The average short-sale home in Omaha in recent years was  discounted by 8.5%, according to a University of Nebraska at Omaha study. In  suburban Washington, D.C., sellers typically discount short-sale homes by  3% to 5% to get them quickly sold, real estate agents report. In other markets,  sellers price short sales the same as other homes in the neighborhood.
So  you have to rely on your REALTOR’s® knowledge of the local market to use a short  sale as a comparable sale.