There are many aspects to buying Encinitas real estate or selling an existing home, but price is at the top of everyone’s minds. If you’re buying how will you know you’re getting a good deal? If you’re selling, what price is high enough to get the most money and low enough to be competitive? It’s the comps, or comparable values, that set the market trends. It’s a sales history of sorts that buyers and sellers use to price or make offers on homes. If you understand how comps work for you or against you, you’ll have more confidence about your home purchase or sale.
Everything that sells in your neighborhood is a comp. Whether it sells low or high, the next buyer or seller is going to be using that statistic to determine value. If your neighbor gets foreclosed upon and his home sells low at auction it affects everyone’s values in the neighborhood. If you use an agent unfamiliar with the neighborhood to sell you home and he doesn’t know about the history of each sale, he may recommend your home be priced to low or to high. If it’s priced to low it hurts everyone in the neighborhood because buyers will use those comps against the next seller. It hurts you because you made less money. That’s why it pays to at least talk to and consider using the agent that farms (mails to) you and your neighbors. It’s more likely that person can turn vulture like buyers into a buyer who understands neighborhood value because a foreclosure situation can be explained.
Comps are also used by appraisers. I get calls from them all the time asking about concessions or credits that were issued by the sellers or received by the buyers. They want to know how the deal really stacked up. Comps show up in the MLS or tax records as a single sale price. What does that price mean though if a home sold for $650,000 with a $30,000 roof credit? It means that the house really sold for $620,000 and the records don’t reflect that. This is why it’s so important to have a professional advocate working in your corner who is local and knowledgeable of an area’s sales history. At the very least, you need someone who is interested enough in doing the research to find out what the data really means.
Lastly, comps mean a lot to buyers because that’s what tells them how things are selling. It’s a gauge that let’s them know if buying a fixer is really a good deal. If a fixer house sells for $550,000 and the buyer needs to put $75,000 into it to bring it up to livable condition, how would he know he was doing the right thing by doing those improvements? That’s right, it’s the comps. If the same house down the street recently sold for $675,000 and it was all fixed up with similar improvements, the buyer of the fixer would now be $50,000 ahead. Make sense?
It never hurts to keep track of sales prices in your area or to visit a few open houses. Best bet is to talk to a real estate professional who studies comps in your neighborhood every day. In the long run you’ll feel more confident about your home purchase or sale decisions by having someone who can help you understand how comps affect a home’s value.
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