Our office regularly speaks to real estate agents and homeowners about how the appraisal process works, but one question that almost always comes up is how to select comparable sales.
This seems simple enough to explain however there is a lot that is considered when selecting the best comparable sales. Explaining the aspects of a home to consider when determining which comparables to choose it is helpful for appraisers and agents to have the same understanding of what makes a good comparable so they agent can price the property at a value that is likely to be appraised at.
What makes a good comparable sale
1) Arms Length Transactions: This is a sale in which both parties are not under pressure or duress to sell because these tend to sell lower than market value. Examples of this are foreclosure or divorce sales. The exception to this rule is if the duress is common for the area such as in a recession foreclosure sales may be more common and therefore would represent the true value of the home.
2) Bracketing: This is when you use sales that are equal, superior and inferior to the subject property. For example when selecting comparables you should select a properties that have square footage above, below, and equal to the subject property.
3) Location: Location means the same locational, economic and physical characteristics as the subject property. There are situations where there are no comparables in the subject’s immediate neighborhood, in which case selecting comparables from a competing neighborhood is acceptable.
4) Construction: Quality of construction is part of the criteria for determining the value of a home. Higher quality homes built with better materials, fixtures, and finishes will be priced higher. Be sure to select homes that have a similar quality of construction the subject property because the construction is given value and will change the value of the home.
5) Condition: The condition of the property is similar to the construction however this also includes if there are items that need to be fixed or replaced. The condition of the property can be affected by termite damage, chipping and peeling paint, old flooring, no recent updates to the property, etc.
6) Recent Sales: The comparables should be from within the last six months or earlier. The market is constantly changing so using an old sale will not reflect what the market is today. Consider any recent changes to the neighborhood that may have affected the value i.e. new businesses, new construction, or the economy, all of which may change the value of homes in an area.
7) Current Listings: Properties currently listed for sale should be included to determine the price of a property along with closed sales. An active or pending listing can show what other homes are listed for for to show what is currently happening in the neighborhood.
8) Similar in Size: Gross living area of the home, as well as the site size are important when valuing a property. Consider both of these when selecting additional comparables and be sure to select comparables that are slightly around 10% smaller and larger than your subject as well as ones that are equal in size.
10) Amenities: Consider the amenities of the subject property such as does it have a pool, spa, tennis court, guest house, etc. all of these items would increase the value of a property. Select comparables that have similar amenities to your subject
There are many aspects of a property to consider when determining the value so consider them all next time to be sure that there are no surprises in your home selling experience.
Please contact our office with any questions you may have or to schedule your appraisal appointment at 760-741-7699, brandlinappraisal@yahoo.com or use our contact page on our website.
Brandlin Appraisals Inc. specialize in helping people who need appraisals for estate purposes, divorce, date of death, bankruptcy, FSBO’s and more throughout San Diego county. For more information please contact us at (760)741-7699, or visit our website at Brandlinappraisals.com, or email us at admin@brandlinappraisals.com
Mike Brandlin
San Diego, CA // Real Estate Appraiser
www.brandlinappraisals.com
(760) 741-7699
San Diego Real Estate Appraisal Services For:
* Divorce Appraisals / Marriage Dissolution
* Bankruptcy Appraisals
* Bail Bonds Appraisals
* Estate / Date of Death / Retrospective Appraisals
* Financial Planning & Trusts
* PMI Removal Appraisals
* Pre-Foreclosure & Short Sales
* Tax Assessment Appeals
* Pre-Listing, Pre-Purchase, FSBO’s
* Probate Appraisals
