'Keeping up with the Joneses' has always been part of homeownership. Well whatever happens down the street is actually important information for you, especially when it comes time for you to sell or remodel your home. Comparables (comps) are the gold standard for determining how much a house is worth. You should know the comps in your area, because there is so much they can tell you about what to do (or not to do) if you are planning to sell or upgrade your home.
- Always compare apples to apples: obviously, every home is different, with specific features that make the home more or less desirable. For example, a three-bedroom house is probably worth more than a similar home in the neighbourhood with only two bedrooms. To determine a house's value, you should only look at similar neighbouring properties and then compensate for the differences. Does one home have a spacious living area and your home does not? Does one have beautiful curb appeal, but it's actually 500 square feet less than yours? Then, find the cost per square footage in your area and increase your home's value by that much. Here's the basic rundown on what to always compare: square footage, age of home, number of bedrooms and baths, amenities: walk in closets, gourmet kitchen, lot size, condition: newly renovated, perfect condition, cosmetic fixer, and teardowns.
- The price must be right: the most critical component to selling your home now or in the future is selecting the right price given the current conditions in your local market. You can't just put any price on your home and wait to see what happens; you need to be very strategic. Price too high, and your house sits there and becomes a stale listing. Price too low and you are throwing away cash. The only ways to know what your house is basically worth is by knowing what all the other comps in your neighbourhood for sale are worth.
- What buyers want: this is important for every homeowner to keep in mind as they plan remodel projects--what kinds of amenities are in the homes that are selling for top dollar in the neighbourhood? If you can pick up on a pattern of interior features, you can pick up on the pulse of the local buyer. Why does this matter to you? Well, if you've remodelled your home in a way that makes it markedly different than all the other homes in the area, you might estimate potential buyers who aren't digging your unconventional tastes.
- Check out the competition: keep your eyes and ears open for what's going on around town. Go to a few open houses, ask around, and pick up brochures. Seeing what is currently on the market is an opportunity to find out what other homes have that yours doesn't, and what your house has that they only wish they had.
- Asking price vs. reality: the asking price of a house currently on the market is just that—the asking price. It is not what the house is really worth. Your neighbour may think that their house is worth far more than it is and has been put on the market with a too-steep price tag. Don't be fooled into looking only at the asking prices of houses on the market. You need to look at the prices of what has sold. You'll get a much more valid idea of pricing by examining what has recently sold rather than what is currently for sale.
- The temperature of the market: knowing the percentage difference between the actual list and sale prices for the houses in your neighbourhood is invaluable. It speaks volumes about the current market's activity. Has every home sold for at least 90% of the asking price? Is every home getting multiple offers? This is a strong indicator of which direction the market has been moving, and will give you a clue on how much less (or maybe even more) you should price your home than current comps.
- Don't look back!: the price of your home today can't be compared to the selling price of your next door neighbour's home two years ago. Prices change as the market shifts. If you're looking at comps older than six months old, they're no good to you anymore. Your house could be worth a lot more--or less.
- Learn from your neighbours’ mistakes: find the homes in your neighbourhood that are NOT selling. You know the ones. They've had the for sale sign outside for months. You can learn a lot from that house that can't find a buyer. Is it priced too high? Are there repairs that they should have made, but didn't? How is the curb appeal? Try to get a tour of the house and see firsthand what your neighbours have done wrong—and what you can do better.
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