As you prepare to sell your home, your first big question will likely be, “What will be my listing price?” This is a tightrope decision that requires just the right balance, and it starts with knowing your home’s value. To find the Goldilocks price point, most real estate agents use the sales comparison approach. In this post, we’ve asked two top real estate experts to share insights on how this approach plays a key role in your home sale, how it works, and another pricing option you might need. The sales comparison approach is where the word “comp” comes from in the real estate industry, explains Tom Horn, a leading appraiser in Alabama with more than 34 years of experience. “We look at other properties that have sold recently that are very similar to the property being appraised. We then ‘compare’ it to those properties to come up with a value. We take into consideration any differences, whether the house is bigger in square footage or has more features. We make adjustments for those differences, and that provides a range of value that we then use to reconcile a final value.” John Swartz, a top real estate agent with 22 years of experience pricing homes in New Jersey, Pennsylvania, and Delaware says agents also use the sales comparison approach to determine a property’s list price. “For example, we look at what’s on the market right now that’s similar to the subject property, and what did it sell for in the past?” Swartz says appraisers and agents using this method will typically go back three to six months. “Basically, we’re trying to find as close to the exact same properties as we can to come up with a value based on the market demand in that area.” The sales comparison approach is foundational in real estate transactions, as it provides a clear picture of how your property stacks up against others in the market. This offers lenders a value estimate to back a mortgage loan, and so both sellers and buyers have a basis for negotiation. Appraisers typically look at a range of factors during this comparison, including:What is a sales comparison approach in real estate?
What do appraisers look for in the sales comparison approach?