The Negative Impact Comps Can Have on Your House
Looking at the comps in your area when deciding to sell your house can be an important step to determining the asking price of your house. However, it is not always a clear cut process and there are instances when the comps can have a negative impact on your selling price.
If the comps lead you into pricing too high, your house will sit on the market. If the comps lead you to asking too little, you will leave money on the table at closing.
Understanding how comps can negatively affect you can help you know how to avoid the problem.
What is a Comp?
When you are buying or selling a house, your real estate agent will look up the other houses that have recently sold in the area. They will look for the houses that are the closest to yours: same number of bedrooms, close square footage, lot size, etc. The price that these houses have sold for help create the market value of what your house will be able to sell for.
Comps work correctly in neighborhoods where the houses are very similar and there are little differences. However, if your neighborhood has a bigger range from the nicest house on the block to the lowest, the comps might not be accurate. Here are the ways that comps can hurt the price of your home:
Living Close to a Bad Area
There are many areas in cities where one street is a nice place to live, but a few streets over is a place many people want to avoid. If you live in this area, the houses that sell in the less desirable area are going to bring down your home’s value. A buyer’s agent will be sure to bring these lower priced homes to the buyer’s attention when they are making an offer.
Square Footage Wasn’t Taken Into Consideration
When running comps, real estate agents are looking to compare the number of bedrooms and bathrooms, but they don’t always pay attention to the square footage. The size of the house can make a big difference over the way those bedrooms and bathrooms are used. If your house is 2,500 with 4 bedrooms, a comp of a 4 bedroom house that is only 1,500 square feet is not a true comparison.
There are No Comps
There are some cases where there are no houses that have sold in your area. This could be because you are part of a newer development or just a stable neighborhood that no one has moved out of in years. When this happens it can be difficult to know what asking price to set on your house.
If your real estate agent is presenting you with comps that you know are not truly comparable to your house, speak up. Many agents will have sections to mention the differences that are not accounted for by the details of the houses. Make sure you look at the whole picture when pricing your house to sell, but keep in mind that buyers are going to be seeing those same comps as you and they won’t be as quick to see how your house is different.