Determining home value: What makes a good “Comp” for your home?

Photo of home and patio

In real-estate-speak, a “comp” refers to a comparable property used to help you, the homeowner, determine the current market value of your home.

Most any real estate broker will happily prepare a complimentary CMA for you as a preliminary step to listing your home for sale, but a CMA can also be useful in other circumstances. For instance, you may want a CMA to present to your bank prior to paying for an appraisal when refinancing your home loan, or when helping an elderly parent assess their assets.

It’s helpful to note that not all CMA’s are created equally, i.e. with the same degree of attention and care. Don’t be afraid to ask more than one agent to prepare a CMA for you. Their willingness (especially if you are not yet committed to listing your home) and the quality of the report can help you decide if they are the best agent to help you, whether now or down the road.

What should a carefully prepared CMA look like?

First, it will show homes in the same neighborhood with similar statistics for the basics such as number of bedrooms and bathrooms, lot size, year built, and amount of living space. These numbers need not be exactly the same, but the variance should be within about 10%. For example, a home with 1600 square feet of living space could be compared with others in the range of 1400-1800 square feet.

The architectural style of a home is also significant in determining value. Comparing a two-story home to a home that has one-story and a basement or a split-level will call for some adjustment in the value. This is because buyers (and appraisers) tend to assign less value to a remodeled basement than to a finished second story.

Location within a neighborhood can also affect the value of the home. Is it on a busy street? A corner lot? Across from a run-down property? On a dead-end street? If few homes in your neighborhood have sold recently, you may need to look at home sales in similarly valued areas within a few miles of yours.

Older homes should not be compared to new construction, of course. And homes built more than 20-30 years ago should have similar degrees of remodeling/restoration. I.e., a home with the original 1945 kitchen is not going to compare favorably with a home that has new granite countertops and stainless steel appliance. This is one of the main reasons that it is so difficult for automated (i.e. computer generated) home valuations to be accurate. They lack the advantage of the human eye.

Parking accommodations are also a financially significant factor when calculating property value. Is there covered parking? If so, is it attached? Detached? Garage or carport? Is there space for multiple cars, for a boat or an RV?

A seasoned agent will be able to estimate how much each deviation between the properties being used for comparison affects their respective values. For instance, two properties may be comparable in almost every way EXCEPT one has a garage and the other has no covered parking. The agent should be able to tell you that the garage will be worth an extra “X” number of dollars to the average buyer in your market.

As you can see, estimating the value of a home presents some significant challenges. The number is somewhat of a moving target. Keep in mind that list prices are merely a wish, and sold prices are yesterday’s news. That makes pending sales the most valuable source of information because they indicate the price point at which a buyer was enticed to make an offer today.

Contact me today to request a CMA for your home.

Posted 2/1/17

Good News in Seattle Real Estate

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The Good News In Real Estate courtesy of Prudential Northwest Realty Associates, 2012 ‐ 4th Quarter Quotes, Issue 71

Excerpted from The Seattle Post Intelligencer ‐ December 5, 2012

Seattle‐Area House Prices Surge…King County house prices rose by nearly 20% over the past year, according to a new report. The median price of a King County house that sold in November was $385,000 up 19.7% from a year earlier and 4.1% from this October, the Northwest Multiple Listing Service reported. The median price in Seattle was $425,000, up 18.1% from last November and 1.2% from October. “Incredible,” said Glen Crellin, associate director of the Runstad Center for Real Estate Research at the University of Washington. “I’m surprised by how much they’ve jumped.” Price increases close to 20% sound like the sort of jumps we saw during the bubble years. So is this reason to worry that the market may be bubbling up again? “It would be if it weren’t for the fact that we’reat a point in the housing calendar that is going to lead to slower levels of activity anyway,” Crellin said.

“Once the prime season starts again next spring, an influx of homes for sale should ease the pressure. We may see prices continue to jump significantly between now and next spring.”

Excerpted from The Wall Street Journal ‐ December 14, 2012

Home Prices Could Jump 9.7% in 2013…Homeprice forecasts for 2013 are on the rise. J.P. Morgan Chase & Co. expects U.S. home prices to rise 3.4% in its basecase estimate and up to 9.7% in its most bullish scenario of economic growth. Standard & Poor’s said it expects a 5% rise in 2013. The J.P. Morgan analysts boosted their basecase estimate from 1.5% after a convincing rise in the “net demand” for housing this year has surpassed 2 million homes for the first time since 2006, said John Sim, a strategist at the investment bank. Net demand is the pace of existing home sales minus the inventory of homes available for sale.

Excerpted from Puget Sound Business Journal ‐ December 19, 2012

Seattle‐Area Home Values Keep on Rising…Home values in the Seattle metro area in November posted their largest monthly gain since 2007, according to a report from Seattlebased online real estate listing service, Zillow. November marked the ninth consecutive month that home values have appreciated in the Puget Sound area. Nationwide, home values have risen every month for more than a year. Within the Puget Sound area, several cities posted doubledigit gains in November.

Excerpted from The Washington Post ‐ December 19, 2012

Wall Street Is Betting on a Housing Recovery…The highest return among stocks in the Standard & Poor’s 500 index for the year so far is Pulte Homes, the major homebuilder; as of Wednesday morning it had returned investors 195%. “The quality of the traffic is superb and visitors are very serious about buying,” said Douglas Yearly, the chief executive of major homebuilder Toll Brothers, in a conference call with analysts earlier this month. The question now is not whether housing is coming back; new data shows that November housing starts were up 21.6% from a year earlier. The question is what will the housing recovery look like. Will it be strong enough to pull the rest of the economy with it, even amid potentially tighter fiscal policy and international economic turmoil.

Prudential Northwest Realty: An independently owned and operated broker member of BRER Affiliates Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation of Prudential. Equal Housing Opportunity.

Perception is everything in home values

This is one of those spectacular, sunny mornings that answers the question (usually posed by out-of-towners), “Why would you choose to live in Seattle where it rains so much?”

They don’t understand that one day like this makes up for a whole bunch of the others. And it’s okay with me if we keep it our little secret 😉

Right now (11:45AM) I’m holding an Open House at 7426 44th Ave SW in West Seattle and here is the view I’m forced to endure!

I was just showing the house to Keith, who has been admiring it online. He expressed his surprise that the house hasn’t sold yet (it’s been on the market for 138 days, which is longer than the current average of 63, but still not bad) because he believes it is a good value. It’s not my listing, but I think it’s well-priced, too. Four bedrooms, 2.5 baths, 2,625 sq. ft., beautifully restored 1921 home with a great view. $625,000. MLS# 275850.

Keith commented about how perception of a home’s value can be skewed once it has been on the market for awhile. So true. Often, a long market time means that the home is over-priced, but that’s not always the case. Sometimes it’s just a matter of waiting for the right buyer.

I will be holding this home open again tomorrow (yes, Superbowl Sunday) from 10A-1P. I hope you will come by and tell me what you think of the home and whether or not it is priced right. How do you judge home values?