A Guide to Comparables for Home Buyers and Sellers
How Real Estate Agents Estimate
Prices of Homes For Sale in Silicon Valley
recent Quicken Loans Home Price Perception Index revealed that
homeowners estimate their home on average 2% higher than appraisers.
This is a significant difference in metro areas with higher average home
values such as Silicon Valley. The disconnect can often be reduced by
generating comps, which is the first activity done by Realtors for their
in the real estate language refer to “recent sales of similar
properties in nearby areas of the property of interest to clients”.
Comps enable real estate agents and appraisers to get the information
they need to price a home at a fair market value
Here are a few tips to better understand the intelligence behind comps:
Home sellers can expect their home to be evaluated against properties
with similar square footage, as well as properties with same number of
bedrooms and bathrooms.
- Condition of the Property:
The impact of physical deterioration or functional obsolescence (e.g.
faulty design) is one of the key components to arrive at a selling price
for any property. The deterioration of a
property from use, age, neglect, and the natural elements can be either
curable or incurable, meaning that it can be economically sound (or not)
to correct the issues and the value added will exceed (or not) the cost
of the repairs.
One can never stress enough the importance of this factor. Two new
selling points have emerged in connection with the location of any given
property: Walkability score and easy access to public transportation.
They now play an important role when selling a property event in areas
with economical obsolescence.
- Environmental (aka Economical) Obsolescence
which corresponds to a loss in value caused by factors located outside
the property such as environmental hazards, changes in zoning, etc.
- Schools Ratings:
It is no secret that houses in areas with good public schools sell for
more compared to an equivalent property with less reputable schools even
if both are located in the same neighborhood.
bear in mind that comparable sales analysis can stretch back 3-6
months. Depending on some of the above-mentioned factors and the
velocity at which these factors change, there can be a discrepancy
between past and current values.
regardless of the comps price, remember that asking price should always
be slightly lower than the expected selling price to allow competitive