That home across the street looks just like yours: same model, number of bedrooms, and its lot is about the same size, you guess. So when it sold for the asking price, you figured your home would sell for the same, maybe even more. Unfortunately, it's not always that easy. While your home may seem like others on your street, there are several attributes to consider when determining true comparable properties:
Location. Usually true comps are within a half-mile to one-mile radius of your home, although search parameters may be extended if we cannot find similar properties nearby. Such may be the case, for instance, if your home is much older than other homes in the neighborhood or you live in a rural area. Neighborhood boundaries and features--both natural and man-made--such as water (lakes, rivers, ocean, etc.), golf courses, parks, wooded areas, major thoroughfares, transmission towers and transit systems, and view (or lack thereof) also can come into play.
Features. This includes such factors as rooms, size, condition, quality and age. Other amenities can also make a difference, including garage space (attached or detached) or street parking, if applicable. Lot size (corner lot, cul-de-sac lot, acreage), type of construction (brick, concrete block, stucco), fireplaces, storage, outbuildings, etc. are other features we compare. For condos and co-op floor plans, location in building, views, natural light, convenience getting in and out, access to amenities, parking spaces per unit and other features can determine whether or not a property is truly comparable.
Sales Date. Prices change over time. If a sale is not contemporary within the last three to six months, then market conditions may have changed so radically that a property is no longer a true comparable. In other situations, particularly with upper-tier properties, few recent sales may extend the comparable sale date.
Sale Conditions. For a sold property to qualify as a comparable, the sale must have been transacted to meet a normal market standard. Sometimes short sales, auctions, foreclosures, estate settlements, tax sales, condemnation sales, divorces and other distress sales may rule out a property as a valid "market value" comparable.
Financing. Prices can be influenced by non-market conditions or terms either favorable or unfavorable. For example, if a property sold with below-market financing that enabled a buyer to pay more, professional appraisers might cite "undue stimulus" and discount the property value as not comparable. A fair sale requires a competitive open market, with buyer and seller acting prudently and knowledgeably, to be a true comparable.
# posted by
Anna-Lise Troup @ 5:24 PM
