What are comparables and how do brokers find them?
Comparables are simply homes that have sold, are under contract, and in some cases what are currently listed for sale. They are a great indicator for what you should pay or ask for a home. They are available through your real estate broker. You can find them as well but your broker will have a better idea on how to analyze, compare and adjust them to your specific subject property.
As I just mentioned comparables are properties in various stages of the selling process. Common sense will tell you that the most accurate comparables will be the properties that have sold, are closest to the subject property and the most recent transactions. These sale numbers are public record so they are an accurate account of what the market is willing to pay for that particular property at that specific time.
The next most accurate would be the under contract (AKA Pending sale). The reason it is not as accurate as the sale is the number that we see in the listing number. We do not know the actual purchase price until after the sale has closed. This is done to protect the seller. If the deal falls through and everyone knows what the seller accepted on the last offer, he has no negotiating stance for the next offer.
The least accurate comparable would the listed property. I personally try to never use this as an actual comparable. Why you ask? because the market hasn't actually said it is willing to pay that price yet. I tend to use listed properties more of a comparison for pricing a property by telling my clients "Mr. Pumpernickle over there has his house priced at $400k and your house is nicer and has a bigger lot, maybe we can go a little higher".
I cannot stress the importance of the method you use to pick your comps enough. This is why I don't recommend my clients use those national real estate website's estimates. There is a human element to a CMA that an algorithm just can't achieve. You first need to find homes close to the subject. The closer the better. The next step is to only go back about 6 months if possible. If it is very expensive property or a very unique property you may need to go out farther and longer back in time. As a side note: it is very difficult up here in the mountains to find similar properties. There are very few homes that are similar. Not like Florida where you can find the exact same model and yard in the same development that just sold and have almost a perfect comp. I'm not picking on Florida, I actually lived there for a while, it's just that they have many homes that are exactly the same. Back to our CMA. Now after you find some properties that are pretty similar, you (by you I mean your broker) can look at the pictures and see what homes are similar to yours. Decor, age, have they been updates? Many things need to be researched for a CMA. Then you come up with a range. Say between $400-$430 then you decide where your home falls on that scale. Is it nice and new? That would push you to the top. Is your roof towards the end of it's life? That would push you down. You get the idea. If you would like a FREE CMA just click here
This is not real estate or legal advise. It's just the views of an Evergreen Realtor.