Understanding Comps

The term comps refers to comparable properties.  Whether you are buying or selling, you will want to know the sales price for similar properties. It's important to note I said sales price, NOT list price.  You may think that the pricing of nearby properties is the only factor when you're looking at comps and trying to set a price for your listing. But, it's actually a bit more complicated. Here are five things that affect comps that you might not be aware of.

1. Lot Characteristics:  The size of a lot can significantly affect the price a buyer is willing to pay for a piece of property.  You can understand how identical homes, one on a 1/2 acre lot and one on a 1/2 acre lot would sell for vastly different figures.  Also, it is important to think of the topography of the land.  A flat, cleared lot is much easier to build on than a steep parcel with a river running through it.  Other considerations include the zoning of the parcel and if the lot is located within the flood zone. 
2. Renovations & Improvements: Recently renovated homes typically sell for more than homes that haven't been updated in a while. If you've recently upgraded your home-especially sought-after upgrades like the kitchen or master bath-your home should be priced appropriately. Other improvements such as an outdoor kitchen or a pool may also add value to a property. Layout is also important.  Most buyers these day prefer an open floor plan. Houses with lots of ups and downs, sunken room, or sets of small stairs tend to sit on the market longer than those that don't.
3. Location: Nearby amenities, safety, schools, and noise levels can vary greatly within a neighborhood. Homes in more desirable parts of the neighborhood will sell for a higher price, all else being equal. A property backing to a busy street is unlikely to sell for as much as the secluded home in the rear of the community backing to a natural preserve. Also consider school districts.  Some neighborhoods like Barton Creek in Austin are divided with one half of the neighborhood feeding to one school district (Austin ISD), and another feeding to a different school district (Eanes ISD).
4. ADOM:  You want to look at the Average Days on Market (ADOM) when you are looking at comps.  This figure shows you how long the property has been for sale. It is particularly important to look at this number when you are pricing your property to sell.  Are you willing to have your house sit on the market for months or do you need to sell quickly? You also want to look at the list date.  Sometimes a property has sat on the market for a while because it was simply listed at the wrong time of the year.  
5. Listing price vs. sale price: This is the most important item to consider when determining the price you will pay or the price you will list your property for. You must look at sales prices, not just list prices. The list price for a house that is currently being offered for sale is simply not reliable data. The property has not sold. A good comp is a property similar to yours that has sold in the past 90 days.  Sometimes, you can use a property that meets that criteria that is pending.  A pending property is one that is under contract, and has not closed. If you can roughly determine the price that was offered, you can include this figure in your calculations.  However, you should not base the price of your subject property solely off data that may or may not be accurate.