Whenever I hear folks talk of selling or buying a home, the subject of looking at comps of similar properties is always a large part of that conversation. You may hear the conversations at parties and gatherings similar to this, "my friend bought a house just like the one I'm looking at and it had the same features and she paid way more than me. I don't think it's worth what they paid!" Or, "I just saw a piece of property the same size of what I purchased, and I paid this amount, did I pay too much or I think I paid the correct amount?"
Of course, most of the time these statements are based on never having been inside the property they are comparing, or even driven by. At worst, he/she knows nothing about the subdivision or the property location, or at best merely visited a few websites, saw similar properties and came away with a dollar conclusion on what THEY think it's worth. To this I say, actually doing just a little research is better than simply taking a guess.
This is where I stick my proverbial foot in my mouth but I'm all about helping the customer and my clients! Do you NEED a Realtor in-order to pull and research comparables? Not in my opinion. BUT, as the old saying goes, two heads are definitely better than one and if you want comparables backed by experience and education then I would highly advise the services of a Realtor. The real estate agent's knowledge based on experience and training does, and will play a huge roll in getting to the correct pricing.
Just remember, real estate agents are not appraisers (and we are obligated to disclose that to you in writing depending on what your state law requires when presenting comps.) We are in the information age where the internet, mobile apps etc. are at everyone's fingertips. There is so much information out there especially when it comes to real estate, and if you have average skills and can organize the information you've researched, you should be able to come to a reasonable conclusion of pricing and or value. BUT, if you have not had the training as to what to look for and if you don't know what amenities in a home may not be of value vs. ones that will play a role in the home pricing, you could be hitting on the wrong cylinder or come up with an opinion of value that I like to call "fools gold".
If you truly wanted to avoid all of the comparable research you may just call a bank for a simple appraisal and get to your value that way. Of course, this appraisal will cost you, pricing could be as high as $700 or more (depending on the bank, mortgage company or appraiser service.)
Let's take a look at the important parts of comps in relation to residential real estate property. I will also touch on a few important amenities that have always been of higher value and have been for a number of years.
You have heard it all before, location, location, location. This has been an overused term in defining the value of a real estate property based on its location. I'm not here to burst anyone's bubble but times, they are changing and so is the consumer's attitude. We are in the times of "let's make a deal". And while yes, location is important, I'm saying it here...it's not always. If your property is listed at a great price (or what the perspective buyer perceives as a fantastic price) in a not-so-great location, you may be putting a SOLD sign up on your property in no time.
The location could be not so great for many reasons. High traffic noise, a too-long driveway, a railroad behind the rear yard or a rear deck overlooking a neighbor's 100 pigeon coops. If the price is right, the property will sell. And let me tell you, when the price is right to a ready and financially able buyer, those pigeons begin looking pretty cute.
Without trying to belabor the point, I've heard buyers set the criteria for themselves that goes something like, "a two-car garage is a must, the yard must have a fence and the kitchen must have granite. Oh, and the home we purchase must be turn key" (meaning no work).
And guess what? They come across that home that just happens to be priced right, and the financing payments fit perfectly in their budget and then all of a sudden that home is exactly what they want! You will hear that buyer say, "You know that home that we saw two months ago with no garage, a nice yard with no fence and by the way, it does need some TLC and had no granite? Yes, that one, the price was so fantastic, we want it! What the heck, we can do a little work."
Am I saying if you are a seller to ignore the other amenities that could or will up the value of your home? No, not at all. What I am saying is that price is the #1 reason on my list of why a home does not sell. My #2 is overall condition of the property. #3 is location.
When researching comps, you want to find at least five homes with a minimum of three that are as close of a comparable to the subject property as you can find. They don't have to be twins, but as close as possible. If the subject property has a two-car garage, do not try to compare properties with a one car garage. All other amenities being close or equal. If the subject property has 3 full-baths, then research the comps to include three full baths. To put it in simple terms, every amenity that you are missing from the comparables that the subject property includes leaves you guessing as to the value of the additional amenity. You don't want to do that. If you are not an appraiser (and by the way I am not), your guess will be 100% wrong in my opinion.
And by the way, if you're a seller and you have a garage, do not use it for storage while you're trying to sell your home. When a perspective buyer walks into your gargage, you want them to see space, not junk. You want that buyer to envision pulling their car/s into the garage. Garages are one of the most valued amenities of a home. So sellers if the home is on the market, and it has a garage the garage should be clean. Install shelving,place your important stuff neatly on shelves, and get rid of the junk.
Stainless steel appliances can really make a kitchen pop. I've only heard of one home appraiser say, the difference between two homes was the kitchen stainless steel, one with one without. All other specs the same, room sizes etc. He appraised the stainless steel for more. That's an indication in my opinion, when comps are tough to come by, the little things will count. Even though I always knew that a kitchen with stainless steel appliances held a little more power over one without. I had never heard an appraiser actually admit to it until recently. Granite the same, however, there are so many other new types of materials on the market for less expense that do a fantastic job of making a kitchen the bright spot of the home. But none truly grab the value more than granite. And in most buyer's minds, granite and stainless steel are worth the value in my opinion. Of course, overall condition is important, so if you're a seller you want to make sure these products are well taken care of. With both materials you may purchase polish and cleaner at most of your home improvement and supply retail outlets and of course on-line. So, if the subject property includes the above amenities, try your best to pull comps that include them also.
Let's touch on the all famous guest bathroom. First of all, the more bathrooms a home has the more value it has, period. I can't tell you how many times I've heard a buyer say, "it's not a great home, but it has 5 baths and the other two even though they are nicer only have 3." My point is this, most buyers refer to a home as having 2 baths, 3 baths, 4 baths etc. It's normally the seller that calls that additional bathroom set by itself in a hallway on the second floor, for an example, the "guest bath".
So, if you are a seller and your home has what you would call a guest bathroom and most if not all, tend to be full baths, not half, you should not be investing a ton of dollars on style and design for a guest bath. Fresh paint, maybe more stylish floor vinyl tile and a new set of faucets and showerhead but that's it. If the room has granite and or ceramic tile, good for you. But if it does not, keep the room simple but somewhat stylish. This is an inexpensive update and you're keeping it simple which is what you should do with a so called guest bath. If the home or subject property has no guest bath but has a main level powder room which is mostly a half bath and a coat closet, the value is more than the guest bath. At least to the buyer's I've helped.
Now, the master bath is an all-together different story. According to Dictionary.com the definition reads as follows, "a private bathroom adjoining a master bedroom." A full bathroom in the hallway NEXT to a master bedroom is not a master bath. It must be attached or adjoining the master bedroom. Why the importance of defining a master bath? Because it's one of those rooms that tend to hold much value over a hallway bath. And this is very important in your comparables.
And if you are able to invest the money in just one room, I would suggest the kitchen, and if you are able to invest in two rooms, then by all means invest in the master bath also. Again, it goes without saying, if the subject property has the above amenities then the comps you pull should also have the same.
The basement. If the subject property has a finished basement, then the comps should also. Add a full bath even a half bath to the basement and your home's value will certainly increase. An unfinished basement should be finished, but I understand the expense of finishing a basement may be cost prohibitive. If the basement is unfinished it's a similar situation to the garage. Keep it clean and neat and a potential buyer just may at least give you a few points for the effort. And again, when pulling comps, if the basement of the home you are selling or buying has one and it is finished, then the comps should have finished basements also.
And here is one last pointer on pulling real estate comparables, regarding location. It has been my experience that if appraisers are not able to find usable comps nearby the subject property, they will move the search out a little at a time. Normally going from subdivision to subdivision. If they must, they will go to another zip code but remain as nearby as possible to the subject property. And before they move out of the subject property zip code, they will move the time frame out. If they were searching comps within the last 3 months, they will go back to maybe the last 6 months. On rare occasions, within a year but to my knowledge I've never had an appraiser move the time frame of sold properties to a two year period.
And here's a warning, never go to another county for comparables (other than in rare circumstances). For an example, if your subject property is located in Baltimore County, you would not take your search to Anne Arundel County. So my point is, you must do your best to keep your comp search as close as possible to the subject property. Some counties such as Anne Arundel have different zoning laws and or different regulations than Baltimore County and Harford County. Some zoning laws will affect comps and there are other issues as well. Simply put, the distance would be just too far appart.
I hope that this information was of help to those of you that are researching your own comparables.
Front Door Realty, LLC is not an appraisal service, Gregory Alford is not a licensed appraiser. This blog was written based on the real estate experience and education of the author. If you have questions concerning an appraisal or you are in need of an exact value to a certain property, please call a licensed appraiser.
A Day In The Life Of A Real Estate Broker
Ever wonder what it's like to operate a real estate brokerage? The CEO and Broker of Front Door Realty, LLC is the subject of our Summer 2016 blog.
A Day in the Life of Gregory Alford, CEO, Founder and Broker, Front Door Realty, LLC
I usually wake around 6:30 - 7:00 am. I'm returning any text messages and emails that have come in. I'm in the gym early, I spend about an hour on my routine. I've always been very active, I work out about 3-4 times a week. After my workout, I'm in and out of the shower and back at my desk with breakfast, my laptop and cell phone in front of me. I review my active transactions and the schedule I've set out for the day. I'm normally pretty deep into my work by 10 am.
If today were Monday, I'd spend most of the day uploading any new listings I've obtained over the weekend onto the MLS. I'll upload home photos, room measurements, and update websites and social media with new listings. Today is Tuesday, I normally spend about 45 mins to an hour researching the MLS for new listings, checking market stats and looking for any units that closed the week before.
Today I'm devoting most of my time to researching Harfod County in and around the Abingdon, Aberdeen, Bel Air, Fallston and Forest Hill areas by driving in and out of various subdivisions. I'm looking at any new listings that I've found on the MLS, keeping myself up to date with new construction in and around our market area. I'm also looking for FSBOs (homes For Sale By Owners) and expireds that I've found online -- I can certainly help them reach their perspective buyers by utilizing our services.
I've seen our competitors' listings with the signs broken and hanging on one hook, the flyer box empty, sometimes missing it's cover to keep out the rain. At FDR, LLC, we pride ourselves in helping our sellers keep a clean and professional curb appeal appearance. Driving by our listings every so often gives me a view from a buyer's perspective what they might see when they drive by or stop to pick up a flyer.
The flyer box is kind of an old fashioned way of marketing, but it is my belief that in this day of high tech, the so-called old fashion way of marketing may still be the foundation of success. And that buyer you've been looking for just might be the one who pulls the flyer and calls his or her agent! If there are no flyers and or the curb appeal is not suitable to the buyer's eyes, sometimes that's enough to turn them off.
12:30 - 1:30 pm. There are days where I might have a lunch meeting. These are generally with mortgage reps or title reps.
Today, I've also had to make time for texting and emailing agents currently involved in my seller's home inspection. Also keeping in touch via text with my other live transactions. I've also had to call listing agents to provide my buyers feedback on the home showing appointments I took them to over the weekend. Most of the time, I'm interrupting other sheduled events in order to take the time to make feedback calls and emails. It can be a problem, I'm busy with a lot going on. It's a good problem to have.
2:00 - 3:00 pm. I have a meeting with our new sign manufacturer, supplying them with our sign measurements, logo specs, pdf colors, etc. I'll also be dropping off our older signs for updating our old website address with the new website URL.
3:30 pm or so I'm now back in the office putting together materials for a 4 pm new agent meeting You can meet our new agent and his bio on this very website.
5:00 - 6:30 pm I'm putting together referral letters and emails to send to my previous clients. If a realtor gives great service, that means the client is 100% satisfied, and that's what we all strive for! In which case, I believe you can feel comfortable asking your clients for a written commendation letter for your good service. And, if you are consistently out and building sincere relationships, you will have a constant flow of referrals coming in. Here at Front Door Realty, LLC, we strive to give that service that creates 100% complete satisfaction with our clients.
Unless I have showing appointments scheduled for the evening between 6 and 8 pm, I'm normally at home putting something together for dinner for my wife. I never forget my two cats, they get treats and dinner too! And this time of year, I generally like to take in a baseball game on TV. I'm actually always on the MLS and various real estate websites, so in the evening I periodically have my head in my cell phone.
The length of my workday varies, sometimes shorter, sometimes longer. All in all, the world of real estate is an extremely challenging business. I love the challenges and I love meeting people and building relationships. It's also a business where you never stop learning, and I hope to continue to learn for a long, long time.