Real Estate & Mortgage Insights

Comparable Sales and Market Value

Comparable sales are recent sales of similar properties in the nearby neighborhood or in a similar neighborhoods with similar prices. In short, they are "comparable" to the house you are buying or selling.

The comparable sales method is the best way to determine market value for 1 to 4 unit properties. Other methods are available, but they are mostly used for larger apartment buildings, commercial structures, and agricultural real estate. They don't apply in determining market value for traditional

If you're a seller, your listing agent will help you determine your sales price by showing you some recent comparable sales. If you're a buyer and preparing an offer, your selling agent will probably show you some comparable sales so you can come up with your offer price. Whether you are a buyer or seller, you'll have to make adjustments based on the property and any recent changes in the market.

Agents provide advice, but buyers and sellers make the final decisions.

Realtors excel when anticipating market changes. They have their fingers on the "pulse" of the market and know what is going on...now. When determining market value, you need an agent. An appraiser's main role is to justify a market value or purchase price.

Even so, in most cases buyers need to obtain an appraisal to satisfy the lender that the property is equitable collateral for their loan. Appraisals of 1 to 4 unit homes almost always use the comparable sales method to justify a purchase price or market value..

Usually, finding comparable sales is not that difficult. For example, if the home is in a housing tract where most of the homes were built by the same builder, it is usually pretty easy to obtain comparable sale information. As time goes by and individuals modify their homes, it can get a little more difficult. More adjustments need to be made..

Occasionally, comparable sales are impossible to find. Most often, this happens in newly built-up areas where the sales tract is new. Whether you can find comparable sales does not affect the market value of the home, but it does impact a buyer's ability to find a lender. Fixed rate lenders may not lend until there is more history on the area, so the alternative is usually a portfolio lender. A Realtor has access to title company information and can pull up information on which lenders are lending in a specific area.

� June 2003 by RealEstate ABC

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