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What's that home really worth?

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.


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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 is invaluable.

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 information.

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, Forsalebyowner.com and ElectronicAppraiser.com provide sales data and/or appraisal estimates. The wrinkle: you sometimes have to pay and the information could be months or years old.

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 numbers.

"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," says Mittenbuler.

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 higher price?

"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.

Government records
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 you want.

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.

I spy
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 mortgage company.

The cost: somewhere in the $300 to $500 range, says Bredemeyer.

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 for it."

Dana Dratch is a freelance writer based in Atlanta.

 

-- Posted: March 15, 2004
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