How much will this house sell for

“How much is this house going to sell for?”

Answering this question accurately and thoughtfully might be the most important realtor skill.

If you’re new to the real estate game and someone says run “comps” it means comparable sales. One of the key ways to estimate the value of a home is by looking at other similar homes to see their selling price.

This may sound straightforward, but there is nuance. Comping a house is truly a blend of art and science. There is no one-size-fits-all or perfect way to comp a house because you don’t know what someone will pay for a house until they pay for it. Don’t fret. So let’s call it what it is, a guess. However, we can take some steps that make it a very good and high quality guess.

Pro-tip: In any business world, no one says “guess.” Instead, we say “forecast”, “estimate”, and “projection” which all mean the same thing, a guess.

I buy a house almost every day using this exact method, so I can confidently say it works.

Here are the guidelines. Not rules. Because sometimes you won’t have enough data and you’ll need to adjust and flex these guidelines to forecast an accurate price.

The golden rule of these guidelines:
The closer the better. You can add this to the end of each recommendation.

Temp’s House Comping Guidelines:

1 - Smaller radius = better comp. Do not leave the sub-division. Appraisers go up to 1-2 miles, which is too big. Think about walking a neighborhood and how different things can be just 1 mile down the road.

2 - Don’t cross major roads.

3 - Look at sales in the last 6 months, ideally 3 months. The more recent the better.

4 - Find houses + / - 500 square feet of your target home. Bonus points for exact model and floorplan matches.

5 - Like for like. Use good common sense and try to match up as many things between your home and the comparison home. For example, single level vs. single level and two vs. two.

6 - The smaller the house, the higher the per square foot. Think of it like Costco, if you buy more, you save more. If a 1,000 square foot house is getting $500 per square foot, it is not likely that a 2,000 square foot house gets the same $500 per square foot.

The Biggest House in the Neighborhood Rule:
Trips up rookie investors when searching $ per square foot in the MLS. A property may look like a great deal because its $/sqft is lower than all other homes in the neighborhood. But it’s not necessarily a value. It just looks like it because it’s a HUGE house! Maybe it’s 3,000 sqft and every other home for sale in the neighborhood is 1,500 sqft.

7 - Phone a friend. That’s right, ask another realtor what they think. Even better, ask an investor. Investors usually price homes more accurately than realtors because they are taking the financial risk. They need to get it right.

8 - If you have enough data, throw away the outlier (high or low) that doesn’t fall within the range and will skew the comp. This price is possible, but not likely, so don’t let it impact your acquisition buy price.

If you follow these guidelines, you will make realistic comps in no time. Effectively comping makes your life better by:

• Setting appropriate prices for your selling clients

• Understanding value for your buying clients

• Accurately predicting After Repair Value (ARV) for your investors

Stay compin’

— Temp