Under Off the Radar
In theory, to do a market analysis for a given home, you (“you” being a Realtor or Appraiser) log on to MLS, and do a search for similar, nearby homes that have sold within the last six months.
Those are called “Comp’s,” and the magic number is three, good ones.
Step #2 consists of “comparing-and-contrasting” each of the Comp’s with the subject property (the one you’re trying to price), to come up with an adjusted sales price.
Blend all three such prices, and — Voila! — you have a projected market value for the subject home.
So, when is that process unreliable?
When the best Comp never made it onto MLS.
I’m pricing an upcoming listing in St. Louis Park now where the most similar sold home was a private transaction last Fall where the Buyer and Seller hired a Realtor to act as Facilitator.
Wanna a guess who that Realtor was? (Hint: they have a terrific blog. 🙂 ).
Once upon a time, the practice was to run such a deal through MLS, after the fact, with minimal statistics (essentially, the real estate equivalent of “name, rank, and serial number”).
However, MLS now requires full-blown input forms for such transactions — which means that Realtors simply skip it.
That’s also why MLS can under report Realtors’ sales production. See, “When Realtor MLS Statistics Are Misleading.”