What Counts as a Comparable for your Home?

From replacing a rusted out bathroom sink to laying laminate flooring, Canadians are hooked on the DIY craze. Some things, however, are better left to professionals. Establishing your home's current market value before putting it on the selling block or pursuing a refinance is one of those things.
To determine its value, appraisers and real estate agents will compare your home (the "subject property") to those that have recently sold in the area (known as "comps"). They will adjust the comps' prices up or down, according to how similar each home is to yours.
Read on to learn how a home qualifies as a comp for yours.

Status

The market value of a home is, simply, what a knowledgeable and willing buyer will pay it. This figure is reflected in the sales price of recently sold homes.
Appraisers and real estate agents use the local Multiple Listing Service (MLS) database in their research, to look for homes that have sold within the past six months. Only real estate licensees that pay an MLS membership fee will have access to this database, so a DIY consumer will find it challenging to locate a full and accurate list of sold properties.

Location

Since location is one of the principal indicators of property value, appraisers and real estate agents seek sold homes that are in close proximity to the subject property.
Real estate agents will typically begin their research close to the subject property and then widen the area until they've found good comparable properties that have sold in the past six months.
Neighborhood characteristics that influence a home's value include:
Nearby parks
Proximity to shopping
Neighborhood condition
Traffic or other noise
The quality of the school district
Declining values or oversupply of homes in the area

Condition

Deferred maintenance will drag down the value of a home. Deferred maintenance includes all of the items you have been meaning to fix, but never got around to. Examples include:
Leaky faucets
Cracked windows
Loose or missing hand rails
Structural damage
Overgrown landscaping
Dirty or damaged carpets or other flooring

The Process

Since it is unlikely that your agent or an appraiser will find a home that's identical to yours, he or she will need to make adjustments to the sold prices of the comps to account for the differences.
If the comparable home is inferior to the subject property, value is added to bring it up to par. Conversely, if the comparable is superior to the subject, value is removed.

Here's an example of how this works:
The subject property has three bedrooms, two bathrooms and a pool. The comparable property, located three blocks from the subject, sold three weeks ago for $387,500.

The comparable property has three bedrooms and two and a half bathrooms, but it doesn't have a pool.

The appraiser or agent will deduct value from the comparable for the lack of a pool and add value for the extra half bathroom. The amount to deduct or add depends on the value the local market places on items such as a pool or a half bathroom.

The adjusted price range of the comp will reflect the current market value of the subject property.

Determining a home's market value isn't rocket science, but it does require current, accurate information and experience with the process. A professional real estate agent will not only determine the current market value, but will also give you tips on how to get top dollar for the home.

Call us today and find out what your home is worth!

Richard Thyssen, Broker of Record
Colleen Thyssen, Sales Representative
Direct 519-495-1541
Office 519-438-8000
Email richardthyssen@kw.com
www.thyssengroup.com