“Outlier” Comp’s — Both High & Low
Wanna guess the single best way, bar none, to know for sure the Seller got a (very) good price for their home?
It’s not whether the house sold especially fast, for full price (or higher!), or even received multiple offers.
All those metrics can be misleading, for a variety of reasons.
It’s when, a few months after the sale closed, the listing agent (representing the Seller) receives a phone call from an appraiser who’s trying to value a similar, nearby property that’s now under contract, but hasn’t closed.
The reason for the call?
The appraiser, representing the bank vetting the Buyer’s mortgage application, can’t account for the home’s sales price.
There are only two things that pique appraisers’ interest: 1) Comps (“Comparable Sold Properties”) that appear to have sold for too much; and 2) Comp’s that appear to have sold for too little.
When that’s the case, appraisers will contact the listing agent to get the scoop.
And, a good, veteran agent will give it to them.
The most common reason(s) for an inexplicably high price are unremarked (“stealth”) updates; multiple offers leading to a bidding war; and plain, good ‘ol marketing (including strategic use of virtual staging).
By contrast, the most common reasons for an abysmal sales price are inordinate market time (invariably coupled with stale marketing); Seller financial duress, i.e., the Seller needed the money fast, in a slow time of year; and/or the opposite: the Seller didn’t especially care about the sales price (or even really know).
That last scenario can be the case with wealthy estates, long-absentee owners, or corporate transferees who are essentially transferring title to a relo(cation) company as part of a buyout package.
Statute of Limitations
Of course, the majority of the time, appraisers can find three Comp’s that support the sales price of the property they’re trying to value.
Then, there’s no need to call the Realtor who sold one of the Comp’s.
Too, such calls are time-limited: after more than six months have elapsed, a sold home is generally disqualified as a Comp, because market conditions are presumed to have changed.
That leaves perhaps 10% – 15% of home sales where the price is an outlier — at least until the agent can provide the explanation(s) . . .
P.S.: Whenever I field the good version of such a call, want to guess who I call next?
My (hopefully appreciative) client!