What's that home
You've fallen in love with a neighborhood and decided
to buy a home. Now how do you find out what individual houses there
are really worth?
Welcome to the world of comparables. Here's how it
works: If two identical homes are on the market and one sells for
$250,000, that will be a big factor in the cost of the second home.
In real life, however, two houses are seldom identical.
And the differences -- such as an updated kitchen or poor maintenance
-- can make a big difference.
So, if you're interested in a neighborhood,
you need to know what's selling, for how much and how long it's
on the market.
Getting the goods on your neighborhood
Now, where do you dig for the dirt?
"The problem with people trying to do this research
themselves is it tends to be proprietary," says John Bredemeyer,
national chair of government relations for The Appraisal Institute,
a professional association of real estate appraisers. "That
can be a difficulty."
Start with your real estate professional. Realtors
have access to the Multiple Listing Service (MLS), an automated
record of sales, the length of time on the market and a detailed
description of the home. If you're looking to buy or sell, the information
In some parts of the country, local Realtors
or Realtors' associations put information from the MLS on their
Web sites, says Rodney Gansho, manager of policy information for
the National Association of Realtors. In some places, this will
also include sales information, he says.
"It depends, locally, if the MLS allows its brokers
to display that information," Gansho says. "In some areas,
it's a matter of public record; in other areas, it's not."
You may also be able to get some listing information
from the National Association of Realtors site: www.realtor.com.
In many cases, you need to contact a Realtor to get recent sales
Some will require a formalized agreement before they
share MLS information. Others will make the data part of their pitch
for your business.
If you're a homeowner, ask a potential agent, "If
I ask you to shop my property, how would you deduce the price?"
says Alan Hummel, CEO of Des Moines-based Iowa Residential Appraisal
Co. and past president of the Appraisal Institute. "What is
your suggestion for the listing price? And what documentation can
you show me to support that that's reasonable?"
"Unfortunately, Realtors still largely
control the market information," says Kenneth Austin, co-author
of "The Home Buyer's Inspection Guide," "although
more is becoming available on the Internet."
Pixels and print
If you want to do a little digging on your own
before you sign with a real estate pro, you can start on your home
computer. Several online sites like Owners.com,
provide sales data and/or appraisal estimates. The wrinkle: you
sometimes have to pay and the information could be months or years
At ElectronicAppraiser.com, you can buy a detailed
valuation of a particular home along with comparables for $29.95.
"It takes about eight seconds," says Rudy De La Garza
Jr., the site's director of business development.
For $9.90, the consumer can purchase just the
comparables -- typically, four to seven properties that have sold
within the past year. The data "is as updated as the county
assessor's office is," says De La Garza.
Want to get a picture of your favorite community over
the past several years? Try ForSaleByOwner.com, which will let you
look at a rough estimate of what homes in a neighborhood have sold
for over the past 10 years, says Colby Sambrotto, the site's chief
operating officer. For the East Coast, pricing will be as recent
as the past year, while on the West Coast, data could be a few years
old, he says.
But not every site promising comparables is helpful.
Some "are trying to get your information and give it to a local
broker because you're in the market," says John Aust, president
of the National Association of Real Estate Appraisers.
In some parts of the country, comparing home prices
is as easy and cheap as picking up a newspaper.
"I go to the [Chicago] Tribune and see
what's on the market," says Kurt Mittenbuler, a home inspector
with Kurt Mittenbuler & Associates in Chicago. "Every month
the Tribune publishes all the transactions that occurred."
But too many times, he says, people look just at the
"The big mistake people make in comps is that
they don't look at all the details," says Mittenbuler, who
also moderates the Internet tech forum for the American Society
of Home Inspectors. It's not just about the number of bedrooms and
bathrooms, he says. "It's about the kitchen and the baths and
the floor plans and very specific location requirements."
For example, in Chicago, the location of a house
"on the east or west side of Sheridan Road can mean $250,000,"
The age of the home can also make a difference.
If there are two identical homes in the same neighborhood and one
is new while the other is 5 years old, guess which will bring the
"A resale home is not a new home," says
Austin. "It's best not to compare it with a new home. It will
be worn a little bit."
And there are a lot of little details that can
explain why a house that's "exactly" like yours brings
$20,000 more -- or $10,000 less. Some factors: number of bedrooms,
number of bathrooms, square footage, floor plan, size of garage
(attached or detached?), fireplace, size of family room, renovations,
lot size, location (does it back on roads, utility lines, shopping
centers, etc.), school system, pool, above ground or underground
utilities, condition and how long it's been on the market.
You can also use your city or county tax assessor's
data. "In many places it's available online and you can search
by neighborhood or area," says Hummel. The problem: "It's
different in every jurisdiction," he says.
His tip: Call the office and find out if the information
is online. If it's not, many offices are automated. Ask if they
can walk you through what you need to do to get the information
Depending on the county, the information might not
be as up-to-date as you need. In some localities, "taxes are
assessed only when you buy or do improvements," says Robert
Irwin, author of "Home Buyer's Checklist." In other areas,
taxes are assessed more frequently.
Local town halls have comparable information, says
Ron Phipps, principal broker with Phipps Realty & Relocation
Services in Warwick, R.I. "The reality is you need to know
how to get at it." And the reality is, "It's not real
easy to get at."
But official records, newspaper accounts or even the
neighborhood gossip might not know which party paid closing costs
or other concessions that ultimately count against the final price,
says Myra Zollinger, owner/broker with Coldwell Banker Realty Center
in Chapel Hill..
Irwin's advice: see an agent -- or two or three --
who specializes in the neighborhood that you've targeted. "If
you can find somebody whose been working in the business for 20
years and is in the area, they've got an incentive to give you the
right pieces [of information]," he says.
Some appraisers have access to MLS data. And
in many cases, buyers and sellers can hire an appraiser for an hourly
rate to give them an idea of what specific homes in specific neighborhoods
are bringing, says Hummel. Figure $50 to $125 an hour and "two
to three hours would not be unreasonable," he says.
Don't be afraid to do a little reconnaissance.
When homes go up for sale in a neighborhood you've targeted, go
through them. What is the asking price? What are the special features
that warrant that price? How long does it stay on the market and
what -- if you can find out -- is the final selling price?
In a hot market, sellers get what they ask and sometime
a little more, says Hummel. On average, the sales price is 3 percent
to 7 percent lower than the list price, says Hummel. Other real estate agents
say it could vary by 5 percent to 10 percent.
And put things in historical perspective. When gathering
comparables, most real estate agents look at sales records going
back six months to a year. If the market is slow, they may be forced
to use older data. If the market is hot, buyers and sellers need
the most recent numbers.
Phipps has worked in markets where homes are appreciating
so fast that a model identical to one that brought $250,000 six
months ago "could legitimately be worth $275,000 [today],"
he says. "That's information you want to be aware of."
Even if the data is only a month old, that could mean
a difference of $2,000 to $3,000 in value in some markets, says
Don Fialk, broker/owner with Choice Realty Co. in Iselin, N.J.
"I wouldn't just look at six months," says
Phipps. "I would look historically to see what
the neighborhood has done over a period of time, four to five years."
Comparables can also tell you a little about your
Realtor. Is your agent padding the listing price to leave room for
negotiation or pricing the homes to sell? Compare a string of an
agent's list prices with the final sales prices, says Kevin O'Connor,
host of "This Old House" and "Ask This Old House."
And once you've settled on a particular house, hire
a neutral appraiser who is not affiliated with the agent or the
The cost: somewhere in the $300 to $500 range, says
But when it comes to predicting the sales price of
a home, formulas and comparables only go so far, says Don Strong,
a general contractor with Strong Brothers Inc. in Houston. "The
ultimate value," he says, "is what [the seller] can get
Dana Dratch is a freelance
writer based in Atlanta.