Because of their access to large databases of properties in different neighborhoods, real estate agents have always had the upper hand when it comes to comparing houses to value them.
But the tide is changing fast now, and with the availability of so many resources on the internet, you can compare your house to others to value it for free and save money.
Using different sites, a homeowner can now find out how much money houses similar to theirs sold for, in the recent past, and in their neighborhood. They can make data-informed decision to price their home appropriately, and hopefully, sell it soon.
The comparison process is not only about pricing, but it also involves learning how to comp your property effectively. This method goes steps ahead to give you an idea of how long the house might take to sell and the trends, such as lowering prices, that similar listings followed in the recent past. It is all about comparing apples for apples, since you want to compare the home to others that look like yours or are as close as possible.
Comparing your home is not only helpful when you are selling, but also when you are seeking a refinancing or investment.
Keep reading to see how knowing how to leverage on the comp process can help you make a lot of headway when selling your home.
Real estate comps
What real estate comparable means is … take your home, consider it the center from which you will operate. Go east, west, north, and south within a given distance. Look at all the homes listed, or sold recently in that area. Try to get homes that are similar to yours in (size, design, and price). You can then compare the prices, duration of listing, any price reviews, and other details.
To do a proper comparison, you need to compare homes that are similar. Or as close to yours as possible. That’s why we said you compare apples for apples. If you have a detached house, compare it with detached houses in your area.
If you have a beaten down house but you are planning to renovate it, it is okay to compare it to the recently sold, similarly sized and priced houses. This comparison will show you how much the house should fetch once you have renovated it.
Why is an accurate home valuation important?
At a time during the duration of your mortgage, you will find the need to get your equity out of your home. HELOC (home equity line of credit) and cash-out refinancing are some ways to get equity out of the home.
When you decide to get some equity out of your home, you need to know its value. This helps you to filter out other homes in your comparison list. You can also predict with reasonably good accuracy whether your home’s value will go up or down.
Comparables are also handy when:
- Buying or selling a home
- Borrowing against your equity in your home
- Buying, fixing and selling
- Investing in properties
It is also okay to do comparables of homes for sale in Cincinnati to satisfy your curiosity, just to see the current price of your home. Being familiar with the process also prepares you for that time in the future when you might want to sell your home, or get refinancing.
Another way in which doing the comparables helps is when you want to get a hard money loan. This kind of loan comes from alternative lenders, and it is advanced against investment or commercial properties.
The process of comparing properties
Start with about three other properties. This means you will be comparing four properties.
Realtors use Multiple Listing Services (MLS) for comparables. However, you do not have this luxury because you are not a real estate agent. Don’t let that faze you because you can find more listings online. While you might not find a home that compares to yours 100 percent in every aspect, at least, ensure the square footage comes really close.
How accurate are comps?
Comps are a guideline to give you a close idea of where the value of your property is going.
Calculations are required to compensate for the differences in factors like square footage, age, and the time of sale t give you a price point.
If you are in the business of flipping properties (buying, fixing and selling), comps will let you know how much your property might fetch after renovating it to match the condition of the comparables. This will also guide you on setting your renovation budget.
When buying a home, do a comps to get an idea of what the homes cost. If the real estate agents use comps, it is because they know the value that they derive from them, so use them!
Compare with homes that sold fast, because it means the buyers were happy with the homes. That way, you can try to bring your home up to speed to match such.
Real estate agents, sellers, and buyers benefit a lot from comparing properties. However, if you want to invest in real estate, or refinance against your equity in the property, comps will come in handy.
If you are in the fixing and flipping business, you need to know how comps work. That is the only way you can secure your ROI on the properties you deal with.
Sure, this will not be as accurate as MLS, but it comes close, it is free and most definitely, it is better than no comparison at all.