A comparable market analysis is sort of like a jigsaw puzzle. Each piece represents a different market element that needs to be considered in determining the fair market value of a property. Done properly, all the pieces of the puzzle should give you a picture of a reasonable, quantifiable fair market value.
Typically, I go through the following steps;
1. Find out everything I can about the property. At a minimum;
• Location (street, neighborhood, municipality, county)
• Total square footage
• Number of bedrooms and baths
• Basement yes/no
• Year built
• Recent renovations
• Interior finishes of note
• Any extraordinary features (swimming pool, pole barn, deck, etc.)
Retrieve the Property tax record for the property.
This tells me who the owner (decision maker) is, what the assessed value is (value the property taxes are based on), what the property taxes are (higher property taxes could lower the appeal of the house), square footage, if there is a recorded mortgage and for how much, and how long the owner has owned it.
Gather previous sale information for the property on MIBOR’s Broker Listing Cooperative.
This can be incredibly helpful. It shows what information the previous Realtor collected in order to list the property. This can be the room sizes, updates to property, amenities, how many days it was on the market and what it sold for. Days on the market are important because it tells me if the property was priced right. I can then compare it to the average days on market for all the other houses in the neighborhood that were sold around that time. If it sold extremely quickly, that might tell me that it was priced to low.
The price it was listed and sold for is also relevant. It gives me a starting point based on market conditions. If the property sold three years ago, and the general price of homes in the neighborhood has risen 5% in the past three years, the previously sold price and the general movement of the market can be combined and become a huge clue as to what the current market value is. Most helpful are pictures of the property. Seeing interior pictures of the house from past sales helps me see the design of the house, which helps me determine how to market the house in the future if I list it.
Search the Broker Listing Cooperative for houses that were sold in the past 6 months, in the neighborhood, like the subject property.
I am looking for apples to apples comparison. I look for the type of house (one story or two), bedrooms and baths and square footage to begin with. Normally houses that are built in the same neighborhood are built within a couple of years of each other so the age of the house is not very important. Looking for like conditions is important. You can usually tell by the pictures. Same with the updates. If I can’t find any comparables in the neighborhood, then I would have to extend my search. I could also go back 12 months but the market might be different at that time. If I extend my search outside the neighborhood, age of house becomes important. If my subject property was built in 1995, then I want to look for comparables in the 1990 to 2000 range.
Going outside that range become problematic. Builders tend to follow what the market wants. What the market wanted 10 years ago is not the same today. Also, styles change. In the end, I want at least 3 comparables. If I can’t find them, then I have to use what is the closest and make adjustments in price to the comparables. Lastly, I look at the following;
• What is actively on the market in the neighborhood, how it is priced and how long has it been for sale.
• Same goes for pending sales in the neighborhood.
What is happening in and around the neighborhood?
This can affect the neighbor as a whole. Are low rent apartments going in next to the neighborhood? Is there going to be a strip center one block away? Is there going to be highway construction going on during the listing period? How far away are the bus stops? Does the neighborhood have a good reputation? Does the homeowners association have an active Board of Directors? All of the above can affect the sale one way or another.
Lastly, key the address into Google and see what you get.
You may be surprised.
There are two different types of comparable market analysis. One is where I do not tour the interior of the house. I only come up with a value based on my research. Generally, I would give a high/low range value. If I can tour the house, I can give a precise value.
A COMPARABLE MARKET ANALYSIS IS NOT AN APPRAISAL. An appraisal has to be done by a licensed appraiser. There are very few Realtors that have an appraisal license. Realtors do a comparable market analysis for free. Appraisers charge close to $500 and usually work for banks but can work for a seller. Can a Realtor and an appraiser come up with different values? Yes. Two Realtors or two appraisers can come up with different values. It is not a science. It is an art form.
Want to know what your house is worth on the market today? Contact me…