Comparing Other Properties to Determine Sales Price

Article highlights:

• Assessing value by comparing sold homes
• Adjusting price based on features
• Other factors that can determine price

No one wants to pay more than they have to, but comparing home prices is not always black and white. If you’re interested in a condominium that’s part of a development featuring similar units, it’s easy to figure out a price. But if you’ve picked a vintage Victorian or something one-of-a-kind, your price will probably be more ballpark.

When comparing the price of other homes, don’t bother with properties that are currently for sale or under contract. Wait until a home’s sale closes, so you can get a more accurate comparable value. These “comparable sales” homes, as they are called, are very similar — features, age, square footage and location — to the home you’re interested in. Your agent will research sold comparables from the last six months to figure out if the home you want is priced correctly.

Adjusting price based on features

Homes in developments or subdivisions are the easiest to compare. If the same 3-bedroom, 2-bathroom ranch model has some recent comparables, use these as a baseline. If your ranch has a new kitchen with granite countertops and stainless steel appliances, while the sold comparable home has an older kitchen in need of updating, you need to raise the price of your new home — or lower it, if your home lacks what a comparable home has. Your agent can help walk you through this process.

Comparisons get hairy when you’re buying a one-of-a-kind home that can’t be sized up to anything else in the neighborhood: a Contemporary in a sea of Colonials, a new construction among 100-year-old homes, the only three-flat building in a neighborhood of bungalows, or the only 1-bedroom condo in a building of 3-bedroom units.

Comparing sales prices is a good way for you to understand home values in a neighborhood. They should be guidelines and not absolutes. Sometimes a very motivated seller will dump a home below market value to be rid of it, or a property is popular and gets multiple offers that drive its price over the list price. Your protection against overpaying for a home is to include a clause in the purchase contract stating that the home must appraise for at least the contract price.

Next article: How Home Valuations and Appraisals Work >>