Home comparables are an essential tool for any serious real estate investor. Comparable sales data gives you the ability to assign an accurate value to the property that you are looking to sell, and so are necessary for any investor looking to maximize the value of their investment. Home comparables have become a necessary part of the home selling process, without which investors are just pricing their properties randomly, hoping that they sell, and basically taking a guess at how much it is worth. As an investor, can you really afford to just guess?
Why are Home Comparables Essential?
Property comparables are absolutely necessary for accurately valuing a home. By exploring comparable sales data, one can define the correct price. Trying to accurately value a home without using home comparables can leave an investor in one of two negative situations. If the home is overpriced, it simply will not sell and could end up being stuck on the market for months, giving the owner continued costs which slowly eats away at the profit until the price is brought back into line with the market and lowered to the appropriate price which will sell. If the home is underpriced, it means that it will sell quickly, but potential profit is not maximized, leaving a nice gift for the new owners in their new bargain home.
How do Home Comparables Work?
Home comparables – sometimes known as real estate comparables – give investors data and information on similar homes which sold in the same neighborhood. By knowing how much other similar homes sold for in the area, it means your home can accurately be valued to also sell quickly. While basic data is accessible it isn’t always accurate, as proper property comparables take into account a lot more information than simply the number of bedrooms, number of bathrooms, and square footage. The price of a home is affected by many factors – such as curb-side appeal, noise pollution, and garage size – which is what you get when applying for professional home comparables. Also, professional home comparables will give you recent data, information on homes which sold within the last six months, which are obviously relevant to where your local market is at today. With such large amounts of money on the table in real estate transactions, can you afford to be inaccurate?
Home Comparables in a Non-Disclosure State
Accurate home comparables are more essential in states like Texas as we are a non-disclosure state. Simple put, homes that are sold in Texas do not go on a public record. The only people who have access to property comparables in Texas are real estate agents and Appraisers. Real estate comparables which are not from the MLS should be avoided at all costs, as they simply are not constructed from sold data.
The Value of Home Comparables
As real estate comparables are an essential part of the selling process, they are absolutely necessary for investors to maximize their profits when selling a home. When considering the cost of a home not selling for months, and the potential of leaving huge amounts of money on the table, and the relatively cheap costs of obtaining home comparables, how can any smart real estate investor consider working without essential comparable sales data?
Image courtesy: Flickr and Scott Hughes