Lee Kiser is a multifamily expert, active broker and Principal of Kiser Group, Chicagoland’s leading mid-market multifamily brokerage firm.
Equity is not static. At a simple level, the equity you have in your building is the difference between its market value and what you owe on the loan. The price you originally paid and the amount you initially borrowed have nothing to do with your current equity. Creating wealth in real estate is about timing and leveraging your equity. If you are an investor interested in growing your multifamily portfolio, this second quarter of 2021 brings three factors that create a perfect storm for leveraging your equity to buy additional properties: investor perception, pandemic-induced lender constraints going away and interest rates.
Market value shifts up or down based on rents and expenses, but also on investor perception of the direction of the market. In this second quarter of 2021, the generally held perception is that while the economic impact of the pandemic will be felt for several years, we have statistically turned a corner past the worst. The perception of a market headed in a recovering direction — as well as rents returning to pre-pandemic levels — is creating investor demand for multifamily, resulting in increasing property values.
If you own an apartment building, you should have a broker, lender or appraiser give you an opinion of value. The result will most likely demonstrate a jump in value. Assuming you have a loan on the property, this means a probable substantial increase in your equity. This creates a moment in which your equity will potentially increase at an abnormal rate, which is the time to tap it and leverage it into the purchase of another property.
Lenders Are Lifting Pandemic Constraints
For the past year, lenders have created constraints on deal flow. At the very start of the pandemic, agency lenders required borrowers to escrow 18 months of property taxes and interest payments to qualify for acquisition loans. This additional capital requirement constrained deal flow. Another example of lender constraint is a deal we worked on last summer in Chicago: We had a sale contract for $21.5 million and the building appraised for $22 million. At the final stage of approval and based on fear of the continuing economic impact of the pandemic, the loan committee arbitrarily decided it would loan only on a $16 million value regardless of the appraisal.
Since March 2020, lenders and appraisers have been worried about the risk of commercial real estate and multifamily. Although multifamily has not been as negatively impacted by the pandemic as other commercial property types like office and retail, apartments have been much more conservatively valued over the last year. However, the effect of stimulus packages and the roll-out of vaccines are combining to lessen lenders’ fears about multifamily operations. The most recent data suggests that renters are now returning to the market this spring. These trends are not unexpected. Previous lender constraints are already beginning to be lifted. I expect this trend to continue during the second quarter. By the third quarter of this year, I expect multifamily lending to be back to normal.
The result of this is that refinancing your property should be a much more streamlined process than at any time in the last 14 months. Lenders are much more ready to move capital into the market, which means it is an opportune time to pull equity efficiently from your investment, and you should be able to do this more quickly and efficiently than at any other time in the past 14 months.
Interest Rates Are Still Very Low
Interest rates are a big part of the window for timing pulling your equity. The amount of your loan will be determined by the appraisal but also by debt coverage ratios. Interest rates are a big part of debt coverage. The lower your interest rate, the higher the loan-to-value ratio you will be able to achieve — meaning you can borrow more. This allows you to tap more of the equity that has been created. Interest rates remain at historic lows, but I predict that rates will go up by the end of the year.
These three factors — investor perception, lender constraints lifting and interest rates — are the perfect storm creating a jump in your equity and favorable conditions to tap it. If you own three to five buildings, you can probably tap enough equity right now to buy an additional building without adding any additional capital.
Now is the time to buy the next investment in your multifamily portfolio. The second quarter of 2021 through the end of the year is a window investors will look back on and say, “woulda coulda shoulda.” Don’t wait.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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Should You Buy a House with Popcorn Ceilings?
There are many variables that homebuyers, especially first-time homebuyers, must consider when purchasing a home. Factors such as location, schools, finances, the style of the home, and yes, whether the house has popcorn ceilings. Popcorn ceilings shouldn’t be a deal-breaker, but it is one more variable to consider and what to look for when buying a house.
Deciding whether or not to buy a house with popcorn ceilings will depend largely on the conditions of your local housing market, and your own comfort level either living with popcorn ceilings or using one of the methods mentioned below to get rid of them. For example, if there are several similar houses for sale in the area you’re looking to buy, then making an offer on a home that doesn’t have popcorn ceilings could certainly save you some money and time. However, if the home you’re looking at is located in a hot market and will most likely receive multiple offers, then understanding exactly what you can do about popcorn ceilings so you can buy a home this year is a great way to go.
What are popcorn ceilings, and why were they popular?
Remember bell-bottom jeans and moccasins? How about bouffant hairstyles for ladies and slicked-back hair for men? Just as in fashion and beauty, the housing industry goes through fads and trends too. For example, shag carpet and popcorn ceilings were extremely popular from the 1950s through the 1970s. But what are popcorn ceilings, and why were they such a popular home trend?
Popcorn ceilings are bumpy, textured ceilings that came into vogue beginning in the 1950s. The sprayed-on technique used to apply these ceilings was less expensive than a hand-troweled, smooth finished plaster ceiling. The popularity of this cottage cheese-like texture was spurred on because the style provided camouflage for ceiling imperfections and a measure of noise-canceling benefits, hence, their actual name, acoustic ceilings.
However, popcorn ceilings have fallen out of favor in many parts of the country as they can collect dust, dirt, and even cobwebs. Also, the rough texture of the material makes the ceiling very difficult to clean, paint, or repair.
Another reason popcorn ceilings have fallen out of popularity is that many of them in older homes contain asbestos, which we now know is a health hazard.
There may be asbestos in the popcorn ceiling. Here’s how to know for sure
Asbestos is a naturally occurring fibrous silicate mineral. It was a very popular material used in making popcorn ceilings until it was banned in 1978 because it became a health hazard. While it doesn’t pose a risk unless disturbed, once disturbed, it lets off microscopic fibers that can cause lung disease and cancer if inhaled.
Due to the continued selling of asbestos-containing ceiling materials after the ban, it’s estimated that popcorn ceilings even made as late as the mid-1980s could still be ladened with asbestos.
Before attempting to make any changes to your popcorn ceiling, it’s important to determine whether there’s any asbestos in the material, which can only be confirmed through a lab analysis. The EPA has guidelines that address the steps to take when considering removing potential asbestos-laced popcorn ceilings. They involve hiring a properly trained and accredited asbestos professional (inspector) to obtain a sample of the ceiling material. The sample is then forwarded to an EPA-qualified laboratory for analysis.
Once you receive the results from the lab, you’ll have a better idea of how to proceed with the removal of the popcorn ceiling. If your results come back positive for asbestos, don’t panic. Remember, an undisturbed popcorn ceiling with asbestos will not affect your health.
However, if you do decide to remove the popcorn ceiling, it’s recommended that you hire a professional asbestos remediation company to do the removal. If there’s no asbestos in your popcorn ceiling, you can do it yourself without the added worry of possible contamination.
How much does it cost to remove a popcorn ceiling?
Hiring a professional to remove a popcorn ceiling
The cost to remove a popcorn ceiling will differ depending on whether asbestos needs to be removed. If your lab results come back negative and there’s no asbestos, a professional will charge approximately $1 – $3 per square foot for labor and materials depending upon the size of the job and the area you live in.
That means if you own a 1,500 square foot home in Charleston, SC, for example, you’ll need to budget between $1,500 – $4,500 for a professional to remove the popcorn ceiling. Remember, this doesn’t include any costs to repair the ceiling or apply paint or another covering once the popcorn ceiling has been removed. You’ll also want to be sure to check that the company you hire is licensed and insured.
If there’s asbestos in your ceilings, you can expect to pay between $3 – $7 per square foot, and again, the amount will vary depending on how many rooms you have and the total amount of square feet involved. To remove asbestos-laced popcorn ceilings in a 1,500 square foot house, the cost would be anywhere from $4,500 – $10,500.
Removing a popcorn ceiling yourself
If there’s no asbestos in your ceiling, you may opt to remove it yourself. The primary costs involved will be your time, labor, and any tools and supplies needed to do the job.
How to remove a popcorn ceiling yourself
Before you decide to tackle this project, remember the job is difficult, messy, and labor-intensive. You’ll need a ladder tall enough to reach the ceiling so that you can get close enough to scrape off the popcorn material. You will also need something to scrape with, such as a wide putty knife or a popcorn ceiling scraper that you can find at most hardware stores.
Other possible supplies include an extension pole, depending on how tall your ceilings are, plastic bags fitted to the scraper to catch debris, along with safety items such as goggles for eye protection and a respirator to prevent inhaling fine dust particles. You may also want to invest in drop cloths for the floors and long plastic roles to separate rooms so you can further contain any mess.
Some professionals recommend spraying the ceiling with water to make scraping easier. The key is to apply a light amount of water so that it’s only absorbed by the popcorn material. Do not soak the ceiling as this could cause water to seep into the sheetrock or underlayment and cause damage that would need further repair
Begin by lightly spraying water on a small section of the ceiling where you will be working. Allow the water to soak in for several minutes, and then position yourself close enough to the ceiling so that you can scrape at an angle, being careful not to gouge the sheetrock underneath. Continue working around the room until you have removed all the popcorn material.
If your popcorn ceilings have been painted over, they’ll be harder to remove. If this is the case for the home you’re buying, you may want to hire a professional to do the work or leave the ceilings as is and drywall over the top of the popcorn ceiling instead.
Here’s what to do after removing your popcorn ceiling
Once you have removed your popcorn ceiling, it’s time to decide on the type of finish you want on your new ceiling. Before getting started with the actual finish, you will need to repair any gouges or damage to the substrate material. This can be done by applying a thin covering of joint compound over the ceiling and then sanding the whole area until it’s smooth.
If you plan on painting the ceiling, you will need to apply primer paint since drywall will absorb any initially applied paint and could lead to an uneven look once it’s been fully painted.
You could also opt to finish off your new ceilings with a lightly textured look instead of a smooth, painted finish. These ceilings go by different names, such as skip trowel, Santa Fe look, or stipple, and offer different variations on the style and amount of texture provided.
Keep in mind that asbestos is still legally distributed in the United States today, though its production and overall use have significantly declined. Because it’s still being used in products, it’s advisable to check the Safety Data Sheet (SDS) of any product you use when replacing your old popcorn ceiling.
How to cover a popcorn ceiling without removing it
Covering a popcorn ceiling is another great option if your ceiling has had paint applied to it or if it contains asbestos. Another benefit of covering the ceiling is that you won’t have all the messy work or expense of removing the popcorn ceiling.
There are a couple of options you could choose to cover the popcorn ceiling, such as covering it with drywall or tongue and groove planks or possibly apply a skim coat, but only if the ceiling does not contain asbestos.
Covering popcorn ceilings with drywall
An alternative to deal with popcorn ceilings that have asbestos is to encapsulate the ceiling with drywall. This can be done using a ceiling-grade gypsum board instead of regular wallboard. Standard wallboards weigh significantly more than gypsum boards and are not a good choice for ceilings.
Affix the gypsum board right over the top of the popcorn ceiling and securely screw it into the framing. You’ll then need to mud and tape the joints for a smooth, seamless job. Once that’s completed, you’re ready to finish the ceiling by either priming and painting it or by applying texture to create a new design.
Covering popcorn ceilings with a skim coat (plaster)
Another way to remove dirty, outdated popcorn ceilings is by using joint compounds to cover them, also known as skim coating. Similar to replacing a popcorn ceiling with a lightly textured ceiling, this technique uses a joint compound to give a smooth, finished look by spreading a thin layer directly on top of the acoustic ceiling. Once it is completely dried, a second layer is spread to fill in all the crevices, thereby creating a smooth surface.
Does removing a popcorn ceiling increase property value?
Removing popcorn ceilings can increase the value of your home, considering removing them could range into the thousands. There are, however, several factors to consider before you make plans to remove popcorn ceilings with the expectation that it will increase your property value.
For instance, if popcorn ceilings are a common home trend within your home’s price point and location, removing them may be an expense you can forgo. However, if you would prefer to remove the popcorn ceiling, it may be that the cost to change out the ceilings ends up equalling any increase in sales price when you go to sell your home. In any case, consulting with a real estate agent before you sell will help you better understand which home improvements to consider so you can sell your home fast and for more money.
How to Make the Most Money When Selling Your Home
What’s the number one thing buying and selling a house has in common? Getting the best price possible. Buying a home is one of the most significant financial investments you’ll make, so there’s no surprise why so much time is spent tracking mortgage rates, researching how much house you can afford, the best location, and even the types of homes that can make good investments. But, when it’s time to sell your home, too often, sellers list their home on the market and hope for the best offer.
Before you sell your home, it’s essential to set the right strategy to stay ahead of the competition, especially in today’s housing market. And putting in the work beforehand can make all the difference in setting you ahead of the selling curve and make your listing more desirable. Here are some tips to help you sell your home for more money and get the best possible offer.
Make sure you can afford to sell
It only makes sense to sell your house if you’re going to make money, so it’s important to figure out the cost of selling a house in your area before putting your home on the market. However, figuring out how much you’ll make from selling your home isn’t as easy as subtracting your outstanding mortgage from the price you hope to get. Keep in mind that you’ll have to pay several fees when selling your home, including agent commissions, excise tax, title insurance, and other closing costs, which vary by region. Using an online sale calculator that estimates these variables is a good place to start. However, working with an agent will give you a better understanding of how much you can hope to get in proceeds since they’ll know the current market conditions and the amount your home can sell for.
Work with a local real estate agent
The housing market can be difficult to predict, and unless you’re an investor or real estate expert, you’ll benefit from having professional help and guidance from a real estate agent. A local real estate agent has the know-how to help you get the most money out of your home sale and can be an asset when navigating the ins and outs of the selling process. Your real estate agent can also be an asset when it comes to staging, marketing, negotiating, and staying on top of the local market conditions and laws.
Set a competitive asking price
Nothing deters homebuyers more than an overpriced listing. A good place to start is finding out what your home is worth and researching real estate comps in your area to figure out how to price your home for the market. That way, you’ll have a general idea of what homes are selling for in your area. Once you’ve done your research, this is where having a real estate agent on your team can help sell your home for more money. Ask your real estate agent for a comparative market analysis (CMA), which will help you determine a reasonable price based on sales of similar homes in your area. Your agent can also work with you to determine the best price to motivate buyers to schedule a tour to view your listing and generate the necessary exposure for your listing.
Also, be sure not to overprice your home. Homes get 64% more views the day they first hit the market compared to the day after a price reduction. The goal is to set a good price the first time, so you don’t have to drop the price later. Your home may not get the same attention the longer it sits on the market and can even cause some buyers to be skeptical of the discounted price. Plus, if you play your cards right and price it competitively from the get-go, you may even incite a bidding war to encourage buyers to bid higher.
Time it right
Listing your home for sale at the right time can help maximize the sale price, so it’s important to consider which month may be the best time to list your home. Spring is widely considered to be the best time to sell a house, and for a good reason. According to Redfin data, homes listed in March and April not only sell the fastest, but they also sell for the most money. The average home listed in April will sell 14 days faster and for $2,750 more than if the same home were listed in November. However, if your timing is flexible, March and May are excellent options to help you sell your home for more money.
You’ll also want to consider which day of the week you list your home as well. The best day to list your home is on a Tuesday, Wednesday, or Thursday since homes listed for sale midweek sell for an average of $1,700 more than homes listed on the weekend.
Spruce up your home to help you sell for more
It’s no surprise that kitchens and bathrooms are the main hotspots buyers look at when touring a listing. So, if you’re considering which repairs to make before selling, a kitchen or bathroom remodel is some of the smartest investments you can make to increase the value of your home. However, there are many other budget-friendly projects you can do to make a great first impression, including replacing your front door, installing dual-pane windows, adding a fresh coat of paint to the exterior, and maintaining the yard.
Don’t forget that a deep clean inside and outside your home can go a long way in refreshing its appearance. Washing the windows, steam cleaning the carpets, pressure washing the deck, and scrubbing down your appliances will help your home look well-maintained to eagle-eyed buyers. A clean and orderly house has a higher perceived value than one that needs attention and can help your home sell for more money.
Enhance your listing with staging and professional photography
Staging is commonly used when selling a home and should be a key component of your strategy, especially if you want to sell your house for the most money. A professional stager can help neutralize the space to help buyers visualize themselves in a move-in-ready home. Plus, stagers have the knowledge needed to highlight your home’s best features and make it feel warm and welcoming.
Once your home is looking its best, hire a professional photographer to take the listing photos as homes with professional photos are known to sell faster and for more money. Most people start their home search online, so photos are crucial to getting their attention. Eye-catching listing photos are integral in showing off your home’s features and can include some home trends buyers are looking for, making all the difference in swaying buyers into viewing your listing or passing on it completely.
Carefully consider offers, and be prepared to negotiate
An experienced listing agent will know a good offer when they see it. They’ll also guide you through the offer process and advise you on when to negotiate prices and terms. While the highest bid will grab your attention, especially if it’s close to or above your asking price, it doesn’t mean that it’s the best offer. Your agent will know what’s “normal” when it comes to offers and know when someone is trying to get a bargain. You should consider all the terms of the offer, not just the price, to make sure you get the best deal. If a buyer has included contingencies, you’ll want to be sure to review those carefully as they’re the deciding factor in when you get paid. With the right planning and real estate agent on your side, you can begin your home selling journey with the confidence you’ll get the best offer.
How to Find Real Estate Comps in My Area
Whether you’re selling your first home or you’re a first-time homebuyer, finding comparable sales of homes in your area is much easier than it was even ten years ago. Back then, it wasn’t easy to find publicly available data online – you needed the help of an inside connection like a real estate agent or home appraiser to pull comparable sales off of the MLS (multiple listing service). Today there’s much more information available to the public, and you can now access comps with an online search. Let’s explore how to find real estate comps for your area.
What are real estate comps?
When you start researching for real estate comps in your area, it helps to understand what comps are and what information they can tell you. Real estate comps, also referred to as “closed comparable sales,” are completed home sale transactions that have taken place within a specific area and where the homes share similar characteristics with the home you’re selling or considering for purchase. However, you should be aware that a home in Vancouver, BC will list for a different price than an exact replica of the same home listed in Birmingham, AL. Although they are the same house, just listed for sale in different geographical areas, the value of each home is largely influenced by individual housing market conditions.
5 Ways to Find Real Estate Comps in Your Area
When searching for local comps, the first rule of thumb is to find three or more similar properties to ensure that any comparable property isn’t an outlier in price. For example, one home comp in your area may be lower than what you should list your home for sale because it was in poor condition and needed work, or another property may have a high comp because it was the best house on the block. Having at least three property comparables should give you an average price point to start with. Here are five easy ways to get those real estate comps.
1. Use a reputable real estate website to find local comps
Comps are an essential part of listing your home and the home appraisal process. One way to find comps in your area is to use an established real estate listing website for your research. Redfin offers an easy way to identify recently sold homes in your neighborhood quickly.
If you know the address of a recently sold property in your area, you can simply enter the property address in the search bar see all public information about the home, including what the home last sold for.
Scrolling down slightly on the same page will also show the most recently sold homes in the same neighborhood. If you scroll down even further to the bottom of the page, you’ll see a heading titled “Nearby Recently Sold Homes,” and a “View More Recently Sold Homes” button right below. Clicking on this button will bring you to a map populated with homes sold in your area, and you’ll be able to see details like sold price, the number of bedrooms and baths, square footage, price per square foot, and how many days the home was on the market before it sold.
Alternatively, you can view sold properties by searching for your city in the search bar of Redfin’s website. For example, to see comps for a home in Cleveland, OH, type in your city name into the search bar.
- Click on “More Filters.”
- Scroll slightly down and under “Listing Status,” click the toggle that says “For Sale.” This will effectively replace homes for sale with sold homes in your search area.
For a better picture of recent home sales and what you can consider as real estate comps in your area, you can narrow down your search further by restricting the time frame to a specific month and then setting the filters to see recently sold homes that most closely resembles your home. Such as:
- The number of bedrooms
- The number of bathrooms
- If your home is a house, condo, multi-family, etc.
- Square footage of your home
- Your lot size
- Year built
- And HOA fees, if they apply
You can even go more in-depth and identify specific amenities or home trends that could increase the value of your home, such as being a waterfront property or having a view. Keep in mind that if you get too specific in your searches, you might not find enough recently sold homes in your area that you can use as reliable comps. Here’s an example of how you can filter for real estate comps based on a three-bedroom house with two bathrooms and which were sold within the last month.
Recent data is the most useful, so start with one month to see what pops up, then widen your time frame to transactions completed in the past three or six months. In a busy seller’s market, you can even look to see comps in your area within the past week. Once you’ve nailed down your search criteria, you can zoom in on the map and look at all the recently sold homes in your neighborhood and find the ones that are the most comparable to yours.
This is valuable information whether you’re buying or selling a house. From here, you’ll be able to estimate a reasonable starting price that reflects the current housing market. While this method doesn’t necessarily include other variables that could impact your home’s value, such as its current condition, or if there have been any property improvements like a new kitchen or deck, it can be a good way to get an idea of what you can expect.
2. Use an online home valuation tool
Another valuable tool when searching for real estate comps is a home valuation tool to help you understand what your home is worth and provide a good starting point to determine the fair market value. Because Redfin uses complete MLS data on recently sold homes in your area, we offer a couple of different ways to access an online home valuation.*
- Instant home-value estimate and free home report: This a fast way and easy way to see what your home can sell for. Simply type in your address, and instantly see Redfin’s estimate for your home based on recent home sales in your area. It’ll even show you comps in your area just below the estimate.
- A professional estimate prepared by a Redfin Agent: This is a free, no-obligation property estimate prepared by a Redfin agent that knows the housing market in your area. Though you won’t get the estimate back instantaneously, you’ll receive an estimate within an hour that’s more comprehensive.
*These estimates are not intended as an appraisal and are not a substitute for the services of a professional, licensed appraiser.
3. Ask your real estate agent to procure MLS comps
One sure-fire way to get accurate real estate comps is to work with a local real estate agent. Local real estate agents are experts in their market and can give you sound advice on how to price your property, as well as help you understand data in MLS comps. Only licensed agents have access to the MLS, which is the most up-to-date and accurate tool available.
Real estate agents pull comps from the MLS in their daily work to provide clients with a reliable price range when listing a home for sale. For example, agents know if properties have likely increased in value, if the fair market value is accurate, or if a property’s price is out of line with other homes in the area.
4. Research public property records
Another valuable resource for homebuyers and sellers is your county’s public property records. Unfortunately, public property records can be a hit or miss when it comes to comps, as you’ll only be able to find the last recorded sales price, which may be from ten years ago. So if the area market has few or no recent transactions, you could be stuck with property comps that don’t reflect today’s market conditions. Public property records can be a good place to start, but you’ll need additional research to find accurate numbers.
Most counties allow you to search property records online at no cost – although you may need to pay for printed documentation. Visit your county or city website and search for “property records.” The house’s street address should allow you access to property tax information that will show the last sold price and the current taxes.
5. Request a comparative market analysis (CMA)
Real estate agents and brokers use CMAs* to give sellers all the details they need before listing a house for sale. Finding the listing price sweet spot is essential to a quick sale. The best listing price is the one that’s not too low where you end up leaving money on the table or not too high where the home doesn’t sell at all. And for buyers, a CMA can help verify if a home is a good deal and pinpoint a competitive offer that will be taken seriously—without going overboard.
A CMA also provides the most accurate data and details about the home and surrounding area. However, an agent’s CMA is more than just the numbers. The agent provides expert advice to help you assess the home, the current market, prices, and other factors that could affect your list price.
Many real estate agents and brokers have software they use to generate comprehensive CMA reports. If you’re creating your own report, it would be best to use a spreadsheet to keep track of your research.
A typical CMA will include:
- The address of the property and three to five comps in the area
- Description of each comparable property, including elevation, floor plan, and the number of bedrooms and bathrooms
- The square footage of each property
- The sales price of each comparable property
- Dollar adjustments will be made for any differences
- The adjusted sold price per square foot of each comp
*This is not intended as an appraisal and is not a substitute for the services of a professional, licensed appraiser.
How do I use comps to price my home?
Real estate comps help you price your home accurately by giving you a range for its “fair market value” based on recent market activity. Then you can add or subtract from the fair market price based on the home’s condition, special features, and other characteristics that buyers will likely consider.
What goes into a comps analysis?
To be considered a comparable property, a property should ideally match your house in:
Location: Location matters. In some areas, a property’s value can change from neighborhood to neighborhood, from block to block, or even within 100 yards. Start by looking for comps within a 1-mile radius and move out to 5 miles if necessary. Expert knowledge can help you understand nuances in a neighborhood, so take your time or ask an agent to help you.
Neighborhood: Real estate comps should have the same neighborhood features, such as distance to schools, stores, hospitals, waterfronts, parks, and views. Also, keep in mind access to public transportation and walkability.
Year built: Consider houses built within a 5-year range of your home being built. It’s often assumed that an older home needs work and hasn’t been updated. While this isn’t always the case, a newer home will initially have a higher fair market value.
Size of the home: Square footage plays a significant role in comparing home values. After all, if one home has 1000 square feet and another 2000 square feet, you are buying a larger home, and it should cost more to purchase. Square footage will raise or lower the value of the real estate comps you’re looking at. The best comps for you will be properties that are comparable to yours.
Layout: If the home has a strange layout or is partitioned into smaller, separate rooms, it can bring down the value and the sales price.
Price per square foot: Calculate the price per square foot by dividing the home’s sale price by its square footage. Price per square foot is always a good yardstick for neighborhood comparisons.
The number of beds and baths: A home’s value typically increases when there are more bedrooms and bathrooms. This translates into a higher sales price and considering higher comps.
Condition: If the house was in disrepair and needed a lot of work and investment to make it livable, the price the home last sold for may reflect a fixer-upper. However, on the surface, these deals would show up in comps the same as if the house was move-in ready. It’s important to dig further to see what any unusually high or low sales prices might reflect and help put these comps in perspective.
Upgrades and renovations: When a homeowner updates a bathroom or renovates a kitchen, their home value typically increases. Consider any renovations or upgrades you see in your real estate comps and how those compare to your home’s features. Does your home have a new kitchen or a deck that needs fixing? Either of these will undoubtedly have an impact on your home’s value.
Timeframe of when the comps sold: Focus on homes that have been sold within a 3- to 6-month period. In a hot market that favors the seller, you may want to focus on an even shorter timeframe.
Who uses real estate comps?
Real estate agents and brokers use real estate comps every day to do their jobs. An agent or broker will use comps to suggest a listing price for a home that’s about to go to market and represents a fair market price. Agents also have access to any pending sales, which would affect real estate comps and CMA reports. The sales volume in your area will also drive the fair market price on any home being listed for sale. For example, if your housing market is currently a seller’s market and homes are selling quickly, buyers may be making higher offers than they would be in a market that’s not so competitive.
Understanding real estate comparables and the state of the market in your local area is essential. It can help you make an informed decision about buying or selling a property.
Home sellers use comps to understand what similar homes in the area are selling for, allowing them to set a list price they feel confident in. Comps also help home sellers clarify their home’s selling points which will be highlighted in the home’s description when it’s listed for sale.
Homebuyers use accurate real estate comps for making an offer. By researching similar properties in the area, buyers can verify that the listing price is fair, or if the price is too high or low. Comps are also helpful in creating a strategy for negotiating a home sale.
Home appraisers perform home appraisals as one of the most important steps to completing the sale of a home. First, the buyer’s mortgage lender usually initiates an appraisal. Next, they call a professional appraiser to determine the value of the house in question. The appraiser relies on real estate comps and several other factors in determining an accurate property value that can make or break a sale. The cost of the home appraisal will be covered by the homebuyer.
Finding and analyzing comps can be tricky. However, you can always work with a local real estate agent or broker with expertise in your market. They can help you nail down a good price to list your home.
Are you curious how much you can make from selling your home? Check out Redfin’s home sale calculator to see what your estimated home sale proceeds could be.
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