Pricing a Home When the Comp’s are Tough
“You have to know the rules before you know when you can break them.”
Normally, the standard way of doing a CMA (“Comparative Market Analysis”) is to limit your focus to three Comp’s, or “Comparable Sold Properties.”
By definition, those are the nearby homes most similar in style, condition and size, that have sold the most recently (within six months or even less, ideally). See also, “Why the Neighbor’s House Usually Isn’t a Comp“; and “Bracketing,” Explained.”
But what if there aren’t three good Comp’s?
Or, the Comp’s that exist yield a murky picture (at best) of market value? (essentially, the same thing).
That can happen when: 1) a home is a traditional sale and recent, nearby sales are all lender-mediated (short sales or foreclosures); 2) vice versa, i.e., the subject home is lender-mediated, and recent, nearby sales are all traditional; or 3) the subject home’s size, features, and/or price point (e.g., upper upper bracket) are especially unique.
In such cases, step #2 — surveying the nearby, competing “Active’s” — can be very instructive.
I’m doing a CMA for a Plymouth home right now where the Comp’s are all over the board.
However, the Active homes which align most closely with my client’s are all clustered around $350k — and have been sitting.
My pricing advice to my client?
List at $324,900 (or lower).
Of course, the problem with overrelying on Active’s is that you don’t know what price they’re ultimately going to sell for.
Or, if they’re going to sell: something like 50% of all MLS listings in the Twin Cities these days don’t.
The listings are either cancelled or expire, and the homeowner either stays put or temporarily rents.
The Comp’s are still controlling — but the price range they suggest needs to be carefully tested against the “Active’s.”