How to use comps to set a listing price?

lindy79May 11, 2011

I'm having some confusion about which comps to use in order to determine a price for my home. The issue is that there's such a wide range of sale prices in my town for homes having similar characteristics. I've spoken to several realtors and have been given a range of +/- $400K as a reasonable list price for my home. Anywhere from $1.7 million to $2.1 million. The higher end of the range is from a realtor who provided specific comps, but hadn't actually been inside those comps (I have). The lower end comes from a couple of realtors who have toured my house and given off-the-cuff feedback. When there's such variation, how does one know what's reasonable? I'll be getting CMAs from 4 realtors when I put my house on the market in 4 months. But if the range of sold prices then is the same as now, how to know what price to set?

Oh, and I'm in California so right off the bat the prices are going to seem crazy.

Here are the specifics:

My house is 3090 square feet, 5 bedrooms, 2 and 1/2 baths, 10,000 square foot lot, swimming pool and hot tub. Updated kitchen and baths. Not that this is relevant, but the house is assessed around $1.7 million.

Recent comps are all 4 bedrooms. I'm only looking at comps in my town because my town has one of the highest-rated elementary school districts in the state, which makes the town very attractive to families. Comps in neighboring towns are highly influenced by the struggling elementary schools there and sell for much lower.

Here's what I found:

Comp 1: sale date 12/22/2010

sale price 1,759,000

square feet 3063

lot size 10018

beds/bath 4/2.5

negative: flag lot

Comp 2: sale date 11/30/2010

sale price 1,850,000

square feet 3389

lot size 12,632

beds/bath 4/2.5

negative: pool is trashed, needs to be repaired or demolished

layout of house is nearly identical to mine

Comp 3: sale date 3/3/2011

sale price 2,305,000

square feet 3305

lot size 11400

beds/bath 4/3

positive: shows well, cul-de-sac lot

Comp 4: sale date 4/15/2011

sale price 2,198,000

square feet 2911

lot size 9936

beds/bath 4/3

positive: like new

Comp 5: sale date 10/21/2010

Sale price 2,340,000

square feet 3091

lot size 10029

beds/bath 4/3.5

negative: next to busy park

positive: brand new

There are also a number of homes on the market that will be comps once they're sold, but a couple which I think are the closest in size/bedrooms/lot size to mine are priced around $1,800,000 and have been sitting on the market for months. One's on a flag lot (a negative here).

Any ideas?

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ottawavalleygardener

Sorry, no help here... what is a flag lot?

    Bookmark   May 11, 2011 at 9:28PM
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lindy79

It's a lot where the house is behind another house, with a long driveway along the side of the property to get to it (think of a flag on a flagpole). So the house on a flag lot doesn't have any frontage on the street; it faces the back side of the house in front of it.

    Bookmark   May 11, 2011 at 9:35PM
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mike_home

How old is your house compared to the comps you listed? Houses can have the same sizes and features, but a big difference in age (15-20 years) will significantly affect the price.

    Bookmark   May 11, 2011 at 9:45PM
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lindy79

My house is 42 years old and was extensively remodeled by the previous owner about 20 years ago. I upgraded the kitchen, baths & put in new windows within the past 2 years.

Comp 1 - 30 years old
Comp 2 - 35 years old, updated kitchen
Comp 3 - 64 years old, extensively remodeled
Comp 4 - 6 years old
Comp 5 - new

Most of the houses in the area were built between 1965 and 1975. The town is completely built out; any new home would have been built on land where the original house was torn down.

One thing I wonder is if there's a value that can be placed on the negatives. For example, would the house on the flag lot (Comp 1) have sold for $100K more if it had been a regular lot? Would the house on the cul-de-sac been $100K less if it were on a main street? I know appraisals take some of these things into account, and add/subtract for various features. But the appraisers aren't going into the houses that are comps, so they wouldn't know that a kitchen has been updated or a pool is crumbling. Agents don't seem to be going into these houses either. So if everything is based on square footage and reported bedrooms/bathrooms, why is there such variation?

    Bookmark   May 12, 2011 at 1:54AM
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brickeyee

"It's a lot where the house is behind another house, with a long driveway along the side of the property to get to it (think of a flag on a flagpole)."

AKA a 'pipe stem' lot.

    Bookmark   May 12, 2011 at 9:40AM
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chispa

Waiting 4 months to list the house will mean that you missed this spring/summer market. I'm in a top 5 rated school district in CA and a large number of sales happen right now, as people want to move in July/Aug before school starts.

    Bookmark   May 12, 2011 at 12:06PM
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chisue

I'd give no weight to whether it's four or five BR's; compare the square footages. Bathrooms DO count. Lot size may not be a biggie unless it's especially large, but I'd discount for the flag lot. 'Brand New' always brings more money -- even next to that busy park! lol Only a seasoned homeowner will value new windows.

The 'charm' factor and condition are unknown. Were any of these distressed sales? Does your house have the same 'bells and whistles' as neighboring homes?

I'd be looking at Comp 2 -- nearly identical to your home, and I'd add a little for your pool, which doesn't have to be either removed or refinished. Pools are only a plus for *some* buyers; they're a negative for others.

I'm guessing $2M. I don't know how much the sale dates mean there. Here, sellers traditionally get more in the spring and early summer. Is September a good time to sell in your area?

    Bookmark   May 12, 2011 at 12:38PM
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lindy79

I need to wait to list until after the school move-in time due to a family situation that can't be changed. I do have the option of waiting to put the house on the market next spring, but my target is this fall. I don't think Sept is a particularly great time to sell, but definitely better than December/January.

None of the comps were distressed sales. There are very few short sales and/or foreclosures in my town as the prices have held up pretty well.

Comp 2's list price was $1,895,000, sale price was $1,850,000 so it seems to have been priced well. I forgot to mention that it backs to a grade school, which could either be a positive or a negative.

Comp 3's list was $2,298,000, sale price was $2,305,000 so there were probably multiple offers. Houses have sold in my neighborhood with multiple offers, but I didn't include them in the comps because they're around 2200 square feet and mine is over 3000.

As far as bells & whistles, what would you include? I think my house is pretty comparable given the age of the houses in my town. The main upgrade has been the kitchen with granite counters & stainless appliances. All hardwood floors on the ground floor. Three fireplaces, two of which are wood-burning. Steam shower & double sinks in the master. One negative is that the kitchen isn't open to the family room, as a lot of buyers seem to want that these days.

The pool is either a positive or a negative, depending on the buyer. Almost all the houses in my neighborhood have pools. Comp 1 was listed with a pool for months at an original price of $2,195,000, then reduced to $1,995,000. When it didn't sell, they took it off the market and filled in the pool, then put it back on the market - it finally sold for $1,759,000 over a year after the original listing.

    Bookmark   May 12, 2011 at 2:45PM
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chispa

If you can't get the house listed before September, you should have several new comps as houses close in June, July & August. These will be your real comps, specially if buyers need appraisals for mortgages.

Don't rule out Nov/Dec for sales. Some people have to move at that time and I've even heard of families who like to relocate at that time as the kids aren't stuck in a new town with no friends over the long summer break.

I would attend any/all open houses in your area, so you will know your comps. Good luck!

    Bookmark   May 12, 2011 at 4:02PM
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lindy79

Yes, there will be new comps, and a couple of Realtors made it clear that they won't recommend a final price until a week or so before the house goes on the MLS.

We'll be going to a couple of open houses this weekend. Inventory is quite low here so there aren't many houses to see.

Thanks for everyone who responded!

    Bookmark   May 12, 2011 at 10:37PM
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