icon Search

Whats the Sales Comparison Approach for Home Appraisals?
HomeLight
Real Estate
8 months ago
Img

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.

How Much Is Your Home Worth Now?

Home values have rapidly increased in recent years. How much is your current home worth now? Get a ballpark estimate from HomeLight’s free Home Value Estimator.

Get Estimate

What is a sales comparison approach in real estate?

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.”

What do appraisers look for in the sales comparison approach?

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:

  • Property location: The geographical area where your property is located, considering its proximity to amenities, schools, and other attractive features.
  • Neighborhood characteristics: The overall appeal and quality of the neighborhood, including its safety, community features, and aesthetics.
  • Features and style: Unique aspects of the property, such as architectural style, home improvements, and special features.
  • Quality of construction: The craftsmanship, materials used, and overall build quality of the property.
  • Age and condition: How old the property is and its current state, including any updates or renovations.
  • Square footage and lot size: The overall space of the property, both the interior living space and the land it occupies.
  • Similar recently sold area listings: Comparable sales, often referred to as “comps,” that have recently closed in the area.
  • Current market conditions: The state of the real estate market at the time of appraisal, which can significantly affect property values.

add

More From Life Style