Setting your Price. What are comparables?

By
Education & Training with House Proud Ottawa-Ontario-Canada

How do REALTORS® and people selling privately determine the price of a property?  The key element is to research the market and find comparable properties.  Making comparisons is a blend of good research and market knowledge.  Some basic guidelines to finding comparable homes (both sold and currently for sale) are:

  • The closer in physical proximity to your home, the more comparable.  Houses in Vancouver are unlikely to make good comparisons to similar homes in Ottawa.  Some out of town Buyers are amazed at the market differences.  There really aren't comparisons that can be legitimately made across the country or across the city.  Remember the adage:  Location, location, location.
  • The closer in date to today for a sale or another listing, the more realistic the market indicator. 
  • The ability to be honest with yourself about what makes a comparison.
  • The knowledge of sold prices.  While you may know what your neighbour asked for his/her home, you may not know what the final sold price paid was and if there were any concessions such as decorating bonus, closing costs, redone roof prior to possession, etc..  The sold price, more than the asking price, is the real indicator of realistic expectations. 
  • The ability to adjust prices between similar properties that have differences.  For example, adjusting the price for the difference of a two car garage in one home and only a parking pad on the other, the former will have more value.  (If the garage is functional :-)If one has an updated kitchen and the other is all original from 1970, then the former will have more value.  While location is key and timeliness is vital, features cannot be ignored.

Be honest with yourself about your ability to get good comparisons.  You may find the "Free Market Evaluation" that most REALTORS® provide is a start.  Talk to people in the business.  If you think a salesperson is going too low, you might want to get the opinion of two or more REALTORS®.  Be wary of an estimate that seems too high - even though you would celebrate selling your home for that price.  You might not have the time to have your house on the market for 6 months or longer waiting for some naive person to pay the price.  I recommend having an agent help you determine the asking price for your home and to list and sell the home, thus keeping you current on changes in the market during the sale and giving you peace of mind that you are appropriately competitive and able to have your home sold.

On a regular basis, I post informationabout current selling prices in Ottawa neighbourhoods and also the sales history.  Look under the "Comparable Properties Sales Statistics' category if you are interested in more information.

 Photo credit:  old garage @ http://www.flickr.com/photos/lafattina/3870226487/

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Re-Blogged 6 times:

Re-Blogged By Re-Blogged At
  1. Cheryl Ritchie 01/27/2011 07:25 PM
  2. Pam Dent 01/28/2011 09:56 AM
  3. Tony Marriott 01/28/2011 10:53 AM
  4. John Alesi 01/28/2011 02:01 PM
  5. Gene Riemenschneider 01/29/2011 08:50 PM
  6. Gabe Sanders 01/31/2011 11:26 AM
Topic:
Home Selling
Location:
Ontario Ottawa Carleton Ottawa Civic Hospital Area
Groups:
"Whacked"!!!
Realtors®
Ontario Real Estate and Information
Most Active ActiveRain Blogging Agents
BananaTude
Tags:
zingers
selling
pricing

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Rainer
59,906
Stephanie L. Solano
J. Philip Real Estate LLC Westchester County NY - Pleasantville, NY
Licensed Real Estate Agent

Good advice Valerie.

Jan 28, 2011 11:16 AM #49
Rainmaker
575,760
Valerie Zinger
House Proud Ottawa-Ontario-Canada - Ottawa, ON
Home Organizer

Tony and Suzanne:  What a challenge - to be competitive you have to be lower that other sales and anticipate any further declines during the sale!

John:  Forgive you?  Heck no, I applaud you for such a well written, thorough and thougt out comment.  Thank you.

Tammie:  Nearness in place AND time.  So true and yet so difficult for a Seller who want the same or more than the neighbour.

Gail:  I like your approach - after all the comparables are made, one house may sell faster and with a better offer simply because it shows well and is in move-in ready condition.

Jan 28, 2011 11:16 AM #50
Rainmaker
156,361
Mike Reyman
Berkshire Hathaway HomeServices Fox & Roach Realtors - Media, PA
Delaware County Real Estate

Love this picture.  I think the appraiser for my last listing (5 br / 3 ba) used the home in this photo!  I enjoyed the read.

Jan 28, 2011 12:10 PM #51
Rainmaker
859,677
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

These are points that sellers need to understand - but often don't. In addition, I see agents in our market who haven't learned how to choose comparables or make the required adjustments. They seem to think those on-line forms are "good enough" to use in setting a price. Not so!

Jan 28, 2011 12:14 PM #52
Rainmaker
65,744
Brenda & Ron Cunningham
West USA Realty - Phoenix, AZ
Realtors, Homes for Sale - Phoenix Metro

Nice post.  Right pricing is certainly key!

Jan 28, 2011 12:36 PM #53
Rainer
36,256
Brad Hornshaw
Brad Hornshaw Realtor Lynnwood, Bothell, Everett - Lynnwood, WA
Realtor, Listing Agent, Buyers Agent, Investments

Hi Valerie

Good post great info. Now all you have to do is convince mister seller his Home is not so much better as he thinks it is LOL.........Brad

Jan 28, 2011 01:47 PM #54
Rainer
56,657
Dennis & Terri Neal
RE/MAX, Big Bear - Big Bear Lake, CA

Knowing the market well and knowing what properties are true comparables is an art. Many FSBO sellers show me properties that the think are comparable to their homes and just aren't. This will make or break your sale.

Jan 28, 2011 03:05 PM #55
Rainmaker
575,760
Valerie Zinger
House Proud Ottawa-Ontario-Canada - Ottawa, ON
Home Organizer

Stephanie:  Thanks.

Mike:  Did it sell?  LOL

Marte:  That is why a Seller needs to see if the Listing agent knows the neighbourhood and the market.  It is so important.

Brenda and Ron:  Thanks

Brad:  When you know the magic words, would you sent them to me?  :-)

Dennis and Terri:  I live in a unique home and am constantly on the alert for any other places that I would consider to be similar (same architect, same neighbourhood, same size).  When I go to sell I am going to have to ask for help in the office because, of course, my house is better.

Jan 28, 2011 04:02 PM #56
Rainer
24,941
Joe Woutersz
HUNT Real Estate ERA - Queensbury, NY

Valerie,  One of the issues that has plagued me in this market is the problem of the declining market.  For years , I gave the seller the benefit of the doubt and priced the property slightly higher than market with an intent of reducing dependng on activity.  What I have found with the declining market is sometimes it's hard to get on the right side of the curve;  meaning if you are losing value at a $1000 a month and you are $5000 too high,  you may never catch the market and end out with an expired.  It's been tricky getting this point across to the sellers. 

Jan 28, 2011 09:25 PM #57
Rainer
26,391
R Grodin
Worland, WY

Good Job Val. A Comparative Market Analysis (CMA) Must Be Researched Diligently to be of Any Value, then exploited as Guidance, Not Gospel.

 

Jan 28, 2011 10:24 PM #58
Rainmaker
575,760
Valerie Zinger
House Proud Ottawa-Ontario-Canada - Ottawa, ON
Home Organizer

Hunt:  Holy cow - $1,000 per month may mean that you never catch up.  I feel badly for your sellers.

Randall:  Good graph.  Imagine knowing that you will get 60% of potential buyers coming to see your house and deciding that you would rather price it high and get only 10% 

Jan 29, 2011 07:52 AM #59
Rainer
300,234
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Kimo's Lifestyle Solutions

A seller asked me if I was a ordinary salesperson or a superior salesman, so I responded, what is your definition between the two? He replied, a superior salesperson will close a sale regardless of price or other objections. So, I said that I'm neither an ordinary or superior salesperson, I'm a real estate adviser who is looking out for the best interest of my clients and not mine.

After he told me what he wanted to net from the sale of his property, he challenged me to sell it, so after I illustrated all the facts and the sale prices in his neighborhood and recommended my marketing strategy, he was still adamant, so, I politely declined his offer. However, another agent listed his property for the price he demanded and naturally after many months, it hasn't sold.

When a yard sign remains on a property for any length of time, what does that say about the agent and their business? Shouldn't that be a concern to the Broker, the agent and the seller? Apparently not, however, it does to me. So, the seller lost me and the sale of his property, but that's our business, isn't it? 

Jan 29, 2011 11:37 AM #60
Rainmaker
575,760
Valerie Zinger
House Proud Ottawa-Ontario-Canada - Ottawa, ON
Home Organizer

Kimo:  Excellent comment.  You are so right.  A horribly overpriced house is going to stay on the market until the listing expires.  At the same time, it become stigmatized and the neighbours and the traffic begin to think that the agent cannot do his/her job.

Jan 29, 2011 02:32 PM #61
Rainmaker
844,401
Lyn Sims
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago - Schaumburg, IL
Schaumburg Homes

A realistic price could mean the difference between selling or sitting. An inexperienced, overly hopeful agent will also do the seller no benefit with an unrealistic price.

Jan 29, 2011 07:30 PM #62
Rainmaker
1,286,370
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Really nice post covering the basics of setting the price.  Thanks.

Jan 29, 2011 08:47 PM #63
Rainmaker
575,760
Valerie Zinger
House Proud Ottawa-Ontario-Canada - Ottawa, ON
Home Organizer

Lyn:  Some agents are all about list - list - list.  But if the house doesn't sell and word of mouth is a primary way to get listings then the non-realistic price is way to kill future business.  Thanks Lyn.

Gene:  Well, thank you for that compliment.  Appreciated.

Jan 30, 2011 06:32 AM #64
Rainmaker
576,051
Chris Smith
Re/Max Chay Realty Inc., Brokerage - New Tecumseth, ON
South Simcoe, Caledon, King, Orangeville Real Esta

Valerie, another great post.  I think this a the major reasons why data driven programs on the internet will never be able to truly give a good CMA.

Jan 30, 2011 08:40 PM #65
Rainmaker
575,760
Valerie Zinger
House Proud Ottawa-Ontario-Canada - Ottawa, ON
Home Organizer

Chris:  So true.  Unless you can refine your search, the general data is just way to loose. 

Jan 31, 2011 07:04 AM #66
Rainer
157,250
Rhonda Abbott
Howard Hanna - Wadsworth, OH
Wadsworth & Greater Akron, OH

Fantastic post - very helpful for a newer agent like myself.  I do try to do exactly what you've said, but I find that the sellers just want to disregard that information and price according to what they owe instead of what they can really sell for.  They don't get it when I tell them that pricing even $10k above what the comps suggest as a fair price will hinder their efforts to sell as much as it does.  It won't sell if the owner's "best offer" (their asking price) is higher than any potential buyer's may be.

Jan 31, 2011 10:26 AM #67
Rainmaker
575,760
Valerie Zinger
House Proud Ottawa-Ontario-Canada - Ottawa, ON
Home Organizer

Rhonda:  Thank you and keep on doing the right thing.  Listing a house that never sells is not good for you or the Seller. 

Jan 31, 2011 07:53 PM #68
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