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Sales comparables are crucial information for setting a list price, but did you know they can also do more?
Particularly for new real estate sales professionals, knowing your comps is critical at all stages of the home selling process — both for your own knowledge and for your client’s.
Know Your Comp Context
Often, sales comps are used when comparing apples-to-apples — for instance, a two-bedroom side-split to a two-bedroom side-split.
However, in today’s real estate market, comps must be more versatile than that. It isn’t always an apples-to-apples comparison. Instead, it’s more like comparing apples to the whole fruit basket.
Take for instance the following example:
Your client owns a three-bedroom, detached bungalow.
Traditionally, you might run a search for other three-bedroom, detached bungalows in the area and see what they have sold for. If others sold for $500,000, and your client’s property appears to be valued around the same, it might appear to make sense to list your client’s property at $500,000 as well.
However, in the surrounding neighbourhood, there are several other homes listed for sale: one back split with three bedrooms and one two-level with three bedrooms listed for sale. These other properties are valued at $400,000 and listed as such.
Even if your client’s property is valued at $500,000, and similar homes have sold for that price, if properties nearby are listed for far less, it might make your client’s property appear overpriced.
The same is true if a much larger house comes on the market at a value similar to what your client wants to list for.
If a potential home buyer is looking for the best deal, your client may end up competing on price even though their home is worth more on appraisal. With sales comps, context is everything.
Two Types of Comps: “Comp”-arable Sales and the “Comp”-etition
The “comp” in sales comps can refer to two things — the comparable sales and the competition! Depending on the competition at the time of listing, your client’s property could be a much tougher sell.
Instead of focusing on only directly comparable properties, look at the bigger picture.
For your client, education is essential here. They need to understand the frame of mind of potential home buyers and the current market conditions.
You must always remind the client that their competition will not only be other properties like theirs.
Prepare your client to be agile and adapt to market conditions. The above scenarios may be more likely than a directly comparable property coming on the market to compete.
Sales Comps Beyond the List Price
Many new real estate sales professionals make the mistake of using sales comps when determining the list price… and then don’t consider them again.
However, comps have importance beyond setting the initial value.
Once your listing is in place, watch the market closely. Other nearby property owners may react to your listing and drop their prices to compete. For instance, if your client listed at $390,000 when others on the market had previously listed at $400,000, you may see their prices drop to $385,000!
Even if the changes the competition makes are meaningless and the right path is to hold course, you should still be monitoring this — because your client likely is!
You never want your client to bring this to your attention first. You should be the one bringing it to theirs. Situations like this can cause clients to quickly lose confidence.
Your comps and discussion with your client should include any sales or listings that could impact the sale of your client’s home.
GeoWarehouse makes it easy to access sales comparables and retain a competitive edge. With our Comparable Sales report, you can search by radius, sales timeframe, and price range — all online and available at your fingertips.
Learn more about our reports today:
If you are a real estate sales professional, you already have access to GeoWarehouse through your real estate board. Please contact your real estate board for instructions to access GeoWarehouse.
Become a GeoWarehouse subscriber by calling 1-866-237-5937 or visiting https://www2.geowarehouse.ca/features/buy-now/.