Is That a Comparable? Or Your Competition?

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Real Estate Agent with Solutions Real Estate CalBRE Lic #01490977

Is That a Comparable?

Or Your Competition? 

How does the cost of your home compare to the competition?It's a fact - some homes are comparables, and some are competition. They are not necessarily the same. 

And depending on whether you are a buyer or a seller, and perhaps an agent, you will likely view these differently. And might not even consider them. 

Pricing is commonly based on comparables that have sold recently, generally within a fairly narrow geographic area, in the same complex or in that very building, depending on the market and availability of sold inventory. 

And as agents we focus on helping sellers figure out a listing price based on the comparables, which are typically in a fairly limited area. 

Is your home priced against the comparables or the competition?Sellers think their competition is the comparables.

A handful of properties that may or may not compare favorably, in their mind, to their own home. Which, of course, is "special."

It's a view they have that just might be exacerbated by our own CMA's that focus on comps, NOT the competition. 

Hah. Buyers, in many cases, are not looking just at comparables.

Unless they want to be in a particular building, or a certain complex. Their range of searching is far more likely to be possibly dozens of homes, or more - different styles, size, price ranges and views. Homes that are not just comparable to the seller's home but within some defined price range they are comfortable with. And likely not just in the seller's neighborhood. 

What if you picked a range of, say, $50K in the area of your listing? That's more likely to be the competition for your seller's, unless the buyers are persnickety and have a "must have" list of criteria that would choke an ox. And which places their wish into the realm of "I'm sorry but that does not exist for the price you want to pay." 

Mr. and Mrs. Seller - buyers are NOT just looking at homes comparable to yours.

They are looking at your competition. It's just the reality.

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Show All Comments
Rainer
122,144
Roger Newton
Roger Newton Real Estate - North Plains, OR

It is important wo watch your competition.  Are they nicer than your home?  Are they offering any incentives?

Feb 27, 2011 10:41 AM #49
Rainmaker
356,443
Sylvie Stuart
Keller Williams Check Realty 928-600-2765 - Flagstaff, AZ
Home Buying, Home Selling and Investment - Flagstaff, AZ

It's true, not all comparables are competition. And it gets even more interesting with all the short sales and foreclosures. Thanks for this perspective!

Feb 27, 2011 10:44 AM #50
Anonymous
Anonymous
Anonymous

Great post ~ the lat line "buyers are NOT just looking at homes comparable to yours. they are looking at your competition" says it all!

Feb 27, 2011 11:06 AM #51
Rainmaker
684,430
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

I've had people trying to compare the price of a 2500 square foot house to their 1500 square foot house.  I simply tell them that your house is 60% the size of that house, so your house is worth only 60% of that house.  Still they don't get it.

Feb 27, 2011 11:14 AM #52
Anonymous
Anonymous
Gloria Marina

Oh so true. Even in this market sellers often insist that their home is "special" and it is understandable that they would want the best possible price for it.  We all  do the usual --   closed sales within a certain distance from the property, since that is what the appraiser is going to look at. We  highlight those under contract -- because they show more up to date price trends. All of this well presented with details, pictures, graphs.  What I find has a real impact is a very simple black and white list of  everything on the market in the same price range. And I mean everything, not just in the neighborhood. The "visual" of the list alone is sufficient to make them accept market realities.

Feb 27, 2011 11:15 AM #53
Rainer
36,056
Brad Hornshaw
Brad Hornshaw Realtor Lynnwood, Bothell, Everett - Lynnwood, WA
Realtor, Listing Agent, Buyers Agent, Investments

Hi Jeff 

That is avery interesting spin on it I had yet to consider. Thanks for sharing.........Brad

Feb 27, 2011 11:35 AM #54
Rainmaker
296,207
ARDELL DellaLoggia
Sound Realty - Kirkland, WA

One of the reasons sellers do that is because they look at homes on the internet just like buyers do. Most public sites only show the interior photos of active listings and not sold listings, which keeps their focus on what is for sale vs what has sold.

The days when we can walk in with hard copy photos of the front of the house and a list of the details are pretty much over. If you send them a string of the comps by email through the mls,so they can see the interior photos of the comparables, it helps steer them away from "the competition" to which they have ready access.

Feb 27, 2011 11:42 AM #55
Ambassador
672,426
Karen Crowson
Alain Pinel Realtors, Pleasanton, CA - Livermore, CA
Livermore Wine Country Homes

Spot on Jeff.  I always include active competition during a listing appointment. Since we don't know what's most important to a would-be buyer, then everything in the relative size /price should be considered potential competition.

Feb 27, 2011 11:49 AM #56
Rainmaker
570,044
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos
Hi Jeff, Interesting post and comment thread. I believe you are correct in that the sellers' house falls into the price range but may or may not possess the right combination of features to satisfy the buyer.
Feb 27, 2011 11:49 AM #57
Rainer
66,863
Michael Ford
EncinitasHomes.com - Encinitas, CA
California+Oregon

well stated.  we've all had that call from a client to let us know they found a property five zip codes away!  we didn't even know that area was on  the radar!

many buyers are far more flexible than  they will admit.

Feb 27, 2011 11:55 AM #58
Rainer
124,538
Dori Kay
Berkshire Hathaway HomeServices California Properties - Huntington Beach, CA
Orange County, CA Realtor®

Great post Jeff.  It makes all the differences in "listing to list" or " listing to get it sold".  Thank you!

Feb 27, 2011 12:00 PM #59
Rainmaker
195,596
Olga Simoncelli
Veritas Prime Real Estate - New Fairfield, CT
Broker/Owner Veritas Prime, Candlewood Lake Area

Jeff, I agree this is an important distinction that sellers don't appreciate. Plus, in a declining market, the last "good" comp may no longer be competitive in the then current market. Whenever possible, I like to drag my sellers out to see the actual competition, which can be an eye-opener for them.

Feb 27, 2011 12:12 PM #60
Anonymous
Anonymous
Beverly Bayer

I could have written your blog.  As an appraiser (or agents doing BPOs) we are looking more at the sales and not the listings - to dertermine value.  What something sold for 3-months ago - is not now available to buyers - so it is not the competition (your buyer can't buy it now at the same {or any} price). 

I feel location proximity is less important than price and features.  We know buyers may expand their search for a home (beyond where they work) to areas where they can get more house for the money.

 

Feb 27, 2011 12:14 PM #61
Anonymous
Anonymous
Anonymous

You are so right!  Took my Sellers around to view the competition in person, inside the property and out - treated my Sellers as Buyers to see how they would view the other properties in the neighborhood and then come back home to reality.

Feb 27, 2011 01:12 PM #62
Rainmaker
1,259,115
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

There is a lot that goes into setting the price.  Of course you want to look at how the same models priced, but you want to look at the entire market, and each home is unique.

Feb 28, 2011 01:21 PM #63
Rainer
8,828
Stephanie Hosala
Century 21 Indian River Realty, II, Inc. - Melbourne, FL

Great post....and such a time appropriate reminder.

Feb 28, 2011 03:28 PM #64
Rainer
207,030
Eugene Adan
Adan Properties, Carlsbad, CA (760) 720-9710 - Carlsbad, CA
Carlsbad Real Estate

Jeff,

I had this very discussion with a future client last week.  I wish you had posted this a week earlier because you stated it here very succinctly.

Mar 01, 2011 11:24 AM #65
Rainmaker
337,446
Debra Gould
Staging Diva / Six Elements Inc. - Toronto, ON
The Staging Diva

Jeff I totally agree with you on this distinction. As a buyer, when I'm looking for a home I do have a price range that I look at and every home is competing with every other within the category of what I'm looking for.

While I may be willing to pay $400,000 for one house, it doesn't mean I won't be willing to pay $50,000 more for another one around the corner. I compare both options and decide which is more worth it to me for the given price. SO the two options compete with each other for my buying dollars, even though they may not be true "comparables" when viewed the other way.

Now while we're on the subject of the competition and have lots of agents here... I emplore all of you to take your home sellers out to actually walk thru the homes that they're competing with. I'm shocked at how few of my home staging clients have ever personally seen how they stack up versus their competition. Their agents haven't recommended it and for some reason they haven't thought of asking. As we all know, what's written on the MLS only tells part of the story, you actually need to know how the home shows to judge how buyers will react— and who will "win" the competition!

Mar 01, 2011 09:29 PM #66
Rainer
14,335
Dawnita Griffith
Keyhole Land Company - Wheatland, WY
It does matter who you hire.

I agree,  I have used this scenario with sellers for years, it works.  Sellers need to know if buyers are looking at their house, what else are they looking out and how do they measure up.  I appreciate how you explained it so other agents understand.

Mar 03, 2011 04:01 PM #67
Rainer
22,849
Pete Buckley
Independent Broker/Realtor, North San Diego County CA. - Del Mar, CA

Hit the nail on the head Jeff! Many variable to present to Sellers if you're interested in doing it right. I also follow through with updates when competition turns itself into a comparable. That can work wonders too!

Mar 05, 2011 11:50 AM #68
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Jeff Dowler CRS

Carlsbad CA Homes for Sale (760) 840-1360
What's my Carlsbad CA Area Home Worth??
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