Thursday, September 16, 2010

How to "comp" a house for sale

This recently came up on a transaction: the misuse of sales data for comparable sales purposes.  Here are the three numbers you start your comparison with, and these are the numbers the bank's appraisers use as well:
-- sales closest in time, preferably no older than three months;
-- sales closest in distance, preferably no farther away than 1/2 a mile;
-- sales closest in size.  You cannot compare a 1,000 square foot home to a 2,000 square foot home.  Ideally, the size difference should be no greater/lesser than 25%.
Yes, there are variables, including exact location, neighborhood, view, condition, lot size, etc. but these are the three fundamentals to start with.  I'll elaborate in another post soon.  And remember, exact price per square footage is only accurate if you're comparing condos in the same building with the same square footage, amenities, etc. 

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