What Is — and Isn’t — Relevant Pricing a Home
Wait a second!
Why, in early July, am I discussing homes that sold last December?
Because they pop up as “Comp’s” (Comparable Sold Properties) for at least 2 relatively unique homes that I’m trying to price for clients now.
No doubt (many) other Twin Cities agents are running into the same issue.
Given the typical 6-12 week lag from the Purchase Agreement to closing, that means deals struck late last December likely closed in February or even March — still within the six month interval deemed relevant to both Appraisers and Realtors for determining July, 2016 prices.
Multiple Choice Test
With that as prelude, test your grasp of residential real estate by answering the following question.
“Which of the following variables are relevant doing adjustments on a Comp (“Comparable Sold Property”) to arrive at an estimated fair market value for what Realtors and Appraisers call the “subject property?”
A. The Comp has a newly remodeled Kitchen.
B. The Comp has 30% more Above Finished Square Feet.
C. The Comp sold on Christmas Eve.
D. The Comp sold 13 months ago.
Answer key:
A. Yes, that’s a classic adjustment.
B. No — that’s a trick question. A Comp that’s more than 30% bigger than the subject home . . . isn’t a Comp.
C. Yes. If price is a function of supply and demand, it stands to reason that, when demand weakens (as around the holidays), motivated Sellers may accept deep discounts to get deals done. That can be important for pricing a home set to debut on the market in July — or, for appraising a home that’s under contract now.
D. No. Also a trick question. The maximum “shelf life” for a Comp is typically six months. Older than that, and a) the market is presumed to be different; and b) newer, more relevant sales have likely superseded it.
How’d you score??
See also, “Which of These Four Factors Are Relevant for Pricing a Home?“; “More Than This, Less Than That“; “Why the Neighbor’s Home Isn’t a Comp“; “Real Estate Bracketing ” Advanced Beginner Version;” “The Science ” and Art ” of Doing Comp’s“; and ““Bracketing,’ Explained.”
