Friday Five: Factors to consider when selecting comps

By: Brad Horner

One-third of U.S. consumers polled this week by Gallop indicated that they believe home prices would rise in the next 12 months.  And the recent Standard & Poor’s/Case Shiller home price index backs up this sentiment, as it reported the eighth consecutive monthly increase in home prices.  Yet analysts predict that home prices might fall again during the second half of 2010.

So how do you determine a home’s value during such an inconsistent market?  That’s a big question that NRT Development Advisors regularly receives when counseling clients about home pricing strategies.  Our answer: Comps.

Comps allow sellers and buyers to compare “apples to apples” and determine the price of what such a home   could realistically sell for in the current market.

Below are the top five factors you should consider when selecting comps:

• Size – This includes the number of bedrooms and baths, additional rooms such as a study or playroom, number of garages and lot size.
• Square footage – Cost per square foot is an important measure in determining a home’s value. For example, if your home’s value per square foot is $250 and the average per square foot of nearby similar recently sold homes is $275, it shows that your home is valued less per square foot than nearby similar homes.
• Features –Look for the presence or absence of similar characteristics, such as chimneys, decks, walk-in closets and oversized bathtubs. And don’t forget about energy-efficient upgrades, including appliances and insulation.
• Exterior features – This includes brick, siding, gables and more.  Brick homes are typically worth more than homes constructed with other materials.
• Foundation – Is the home built on a basement or slab?  Homes on a basement are typically valued higher because there is more room for expansion.

By analyzing the current listing prices of competition and final prices of recent comparative closings, sellers can appropriately price their homes to make them an attractive option, and buyers can know that they’re getting a fair deal on a purchase.