Understanding Home Comparisons
When you think about comparing homes for sale, you might start comparing the layout, the number of bedrooms and other features. When your realtor talks about “home comps”, they’re talking about something a bit more involved.
By understanding how a home comparison is made, you can get a better grasp on how to dive into the market and get what you want at a fair price.
Define home comps. You’ll often hear the term “home comps” used instead of house comparisons or comparable sales. This is just industry talk for the same thing — a value based comparison of similar homes. Knowing how a home stacks up against others gives you the power to make smart shopping decisions.
DIY home comparisons. To figure out a home comp on your own you need some basic knowledge about the home and other newly-sold homes in the surrounding area. Most comps look at the age and condition of a home, location, square footage, the number of bedrooms and bathrooms as well as other major factors that can increase or decrease the home’s value.
Making your own home comparison is actually pretty easy for a consumer to do with the myriad of websites dedicated to home sales. These sites often offer a list of comparable homes that is instantly compiled based on your search. By viewing each home’s sales page you can determine if they are similar in value and price. You can even customize your search to focus on a certain area, price range, number of bedrooms, etc. This gives you a tailored comparison.
What are home comps used for? The goal of this type of home comparison is typically to establish a fair price or value. If you’re selling, this gives you an estimate of your current market value. If you’re buying, this is a great gauge of current market trends. And, for both buyers and sellers, it paints a picture of the neighborhood.
In addition to your interest, others involved in the process will need to know the area comps. Your realtor, banker/lender, appraiser and inspector will be interested in how the target home stacks up against others and if it is priced fairly. If you’re a buyer, the lender’s review of the home comp may be of particular concern to you. If your appraiser decides that the home you want is drastically overpriced compared to similar homes, they may not agree to your loan amount. While this may be disappointing, it will also save you from paying too much for a home that just doesn’t have that level of value.
Keep shopping! Persistence and research will help you find a house that fits your lifestyle at a fair price. Once you find that gem, make sure you connect with your American Family Insurance agent to get customized home insurance to protect your new home.