The following information is provided by the Center for REALTOR® Development (CRD).
Selecting comparables can pose challenges for a variety of reasons and may mean the difference between an effective property pricing strategy and an ineffective one. Below, we list for you some reasons why some comps that you may be choosing may not be ideal. The common thread among these reasons below is that information available about comparable properties is imperfect or missing from the usual sources that agents consult. Be on the lookout for these reasons that might compromise or skew your results.
Wrong or Misleading Information in Databases
For example, some aggregation sites are not always up to date, showing properties as listed for sale that have already closed. They also might lack pertinent details about a transaction, such as whether the seller contributed to the financing.
A recent trend among listing agents is pulling photos from the MLS after properties have sold in response to buyers’ concerns about privacy. Although it is not required, many agents comply with this request. But photos are an important tool in selecting comparables; agents who don’t have access to them are at a disadvantage when preparing CMAs. Contacting the listing agent to see if he or she can provide the photos is one way around this dilemma. If this is a trend in your area, consider downloading and saving photos when the listings are still active so you have them.
When markets are volatile—for example, when a neighborhood is in a state of rapid gentrification or decline—it can be difficult to identify comparables. In such a market, the guideline of choosing comparables that were listed or sold within 90 days of your CMA research might result in candidates that are no longer truly comparable with the subject. To evaluate comparables, agents must be able to gauge when and how markets are shifting.
Too Much Personal Property in Contract
Some residential real estate transactions include tangible property that is not classified as real estate—items such as furnishings, artwork, antiques, machinery and equipment. For example, consider sellers of a lakefront property who own a speedboat they will no longer have use for in their new home. They include it in the property sale, which skews the price up by $10,000. If this property is used as a comparable, the sales price should be adjusted down by $10,000—but an agent who sees only the sale price in the MLS might fail to do so.
Not Every Sale Is a Market-Driven Transaction
Not every sale or listing represents an arm’s-length transaction. And the fact that a transaction is not arm’s-length generally is not obvious from marketing sources such as the MLS. Often it is necessary to dig into public records to make this determination. One clue might be that the seller is the financial institution that holds the mortgage on the property. This might indicate a foreclosure with a sales price that is not representative of the market.
For more education about comps, valuation, and pricing strategy, check out this month’s featured online certification course at the Center for REALTOR® Development, Pricing Strategies: Mastering the CMA, which is the educational requirement for NAR’s Pricing Strategy Advisor (PSA) certification, and is on sale this entire month of January at 25% off its regular price. This certification aims to help real estate professionals enhance skills in pricing properties, creating CMAs, working with appraisers, and guiding their clients through the anxieties and misperceptions related to real estate valuation.
For more information, please visit RISMedia’s online learning portal from NAR’s Center for REALTOR® Development (CRD) and the Learning Library. Here, real estate professionals can sign up for online professional development courses, industry designations, certifications, CE credits, Code of Ethics programs and more. NAR’s CRD also offers monthly specials and important education updates. New users will need to register for an account.
For the latest real estate news and trends, bookmark RISMedia.com.
The post Be on the Lookout for These Pitfalls When Choosing Comps appeared first on RISMedia.
Be on the Lookout for These Pitfalls When Choosing Comps