What You Should Know about Sale Comps

Home-Value

Many property owners look at their home’s value on websites like Zillow, Trulia or Realtor.com, but can those valuations be relied on? These sites use Automated Valuation Models (AVMs), which have become more common but often don’t reflect the true value of a property. Realtors and appraisers analyze a property based on recently sold homes that are most comparable to the subject property. Adjustments in value are made accordingly, based on differences in square footage, condition, number of bedrooms/bathrooms, age of construction and other amenities. In a homeowners association, using sale comparables from the same development is often the best way to determine value due to the similarities of the homes being sold. However, even within a HOA various factors can dictate substantial differences in value. This was brought to light when a client recently asked why the value of a neighbor’s condo was over $100,000 higher than theirs (on Zillow), yet was almost identical. The likely reality is that the value of both properties were very similar but that Zillow’s valuations were off substantially. If you want a realistic expectation on the value of your property, your best bet is contacting a REALTOR, because they know how to identify the factors that can swing value. Some of those factors include:

  1. Location within the development: If a property borders a busy street, highway, train tracks or an industrial area, it will likely sell for less than that same floorplan which is in a cul-de-sac location or next to green space. Additionally, some parcels within a development offer better views or more usable space as a result of the home’s orientation on the lot.
  2. Renovations: AVMs don’t know whether or not a property has been updated, but buyers certainly do. Properties that are nicely upgraded appeal to a wider audience as many buyers don’t want to take on the task of substantial renovations. Adjustments to value should be made accordingly based on the difference in finishes, upgrades and amenities.
  3. Listing Price vs Sales Price: The listing price reflects what the seller is asking, but not necessarily what a buyer is willing to pay. Sold inventory is a more reliable data point to determine the price a seller will receive vs comparing a home to other active listings. When interviewing a REALTOR, ask about the typical sale price/listing price ratio for the area AND for homes they have listed and sold.

Curious to know what your home is worth in today’s market? Call or text Graham at 805-459-1865 for a no-cost, no-obligation analysis.

SLO County Insights