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Don’t Over Pay or Under Sell – Analyze the Comparables
One of the most important things buyers and sellers can do is analyze comparables. For buyers you want to make sure you are getting a good deal and not paying too much. Sellers want to make sure you are asking the right price. If you ask too much your property will not sell and you certainly do not want to sell too cheap thereby not maximizing your equity.
With the high prices of homes, a lot of money can be made or lost by careful analysis of the comparables.
When doing a detailed analysis of comparables you have to take into account many factors. Because there are so many factors that play a part in comparing properties, and some of these factors are based on personal opinion, the process of analyzing comparables can be fairly complicated. It is not an exact science.
Use the Search Form
The best way to get your comparable search results is to use the search forms.
When starting your comparable search it is best to do a broad search and then reduce it as needed.
A typical Single Family Search would start with choosing the minimum Bedrooms, a Neighborhood, and a minimum List Date within the last year. This might be all that is needed.
A typical Condo Search might be the same as above but instead of Neighborhood you would use Building Name.
However, many times you will notice properties in your comparables list that are not really good matches. For example, perhaps they are not close to the same square footage of interior space. For Condos perhaps they are on lower floors.
There are two ways to now narrow your search.
One quick solution is to check off the properties that are good matches, and then click the button that says "Remove Unchecked Properties", thereby leaving just the good comparables on the list.
The way I prefer to do it though, is to update my search criteria to remove those other properties. For example, if the square footage is the issue I would add a minimum and maximum square footage to remove the properties that are too big or too small.
The advantage of doing it this way is you now have developed a search that you can save and view at anytime for updated comparables. To save the search to your browser's Favorites click Add to Favorites in your browser or click on the link that says "Add this page to your favorites".
Another advantage of doing it this way is you can also start to expand your criteria such as adding additional neighborhoods near the original neighborhood.
Stay updated on your comparable search.
You will also want to click the button that says "Email Me When This Search Is Updated" so you automatically will be alerted to changes within your best comparable range.
The way this works is every change made to a property on the MLS is tracked in a history database. If any properties in your comparable search have a new entry into this history database, you will be alerted via Email to exactly what that new entry is. This includes notifying you about new listings.
Factors to Consider
There are many factors to consider when analyzing comparables and we will look at some of them below. You have to analyze all these factors otherwise you might read the comparables wrong and draw the wrong conclusion about your offer price or what price to sell at.
Year Built
One factor to look at is Year Built along with the Remodeled Year. A home built recently might have a much higher price than a home built 30 years ago, even if the bedrooms and bathrooms and square feet match. A recently remodeled home might also go for a higher price.
Days on Market
Always look at the Days on Market. For example, if a good comparison property is charging $700,000, you might think that would be a good comparable, but then you look at the Days on Market and see it has been on the market for 250 days which tells you this price is too high.
Even when looking at sold properties the Days on Market is important. For example, if you found a good sold comparable, and you see it sold in less than 30 days, then you know it was priced right. If the sold comparable sold in 4 Days or less, then it possibly was priced too low. If it sold at over list price, then that would be another sign that it was priced too low.
Cost Per Square Foot
When analyzing a very similar property is also helps to analyze the cost per square foot of living space. Many times you will find a property looks expensive at first glance but if it is larger you might find on a per square foot basis it is actually asking less money.
Also don't forget to analyze the land cost per square foot too. If a property has a much larger lot that would be a valid reason for a higher price.
Photos Help Tell the Whole Story
You can also use the photos to help compare properties. Sometimes one look at the first photo will tell you why one property is asking for more than another one even though their sizes and locations are similar. Looking at all the photos is a good way to get a feel for each home without having to visit them all. Use the comparison view to see all the photos on one screen to make comparing photos easy.
Sort Columns for a Different View
You can sort the CMA page by various columns. For example sorting by Year Built will show you where your home of interest compares to others in terms of Year Built. Sorting by Assessed Ratio shows you how your home compares to others in terms of their List Price vs. their Assessed Value. Sorting by Average Living can be very helpful to see where the property is in terms of cost per interior square foot.
Doing these types of sorts might help you see things that you did not see when using only the default sort order.
Check the History
Don’t forget to always check the history on the good comparable homes. A home that is showing 20 Days on Market might have actually been on the market 6 months before that under a different MLS number. Knowing this information through the history option tells a completely different story about the pricing of this home.
Study the Price Drops
Look at the Price Drops too. Price Drops signal what homes were over priced and where they are heading. The history will also show a history of Price Drops so you can tell the exact dates and amounts of each Price Drop. Multiple price drops might mean the buyer is very motivated to sell and they are lowering their price to try to find the right price point.
Available Inventory
Another factor to look at is how much inventory is available in that neighborhood or building. If there is just one Active listing in a particular neighborhood then it might be a hot area. In hot areas you can sell fast and sell for more. The opposite is also true. If you have a building or neighborhood with a huge inventory of Active properties the competition to be the next one sold is going to be fierce.
Listings in Escrow
Look at the properties that have a status of In Escrow or Pending. This tells you what List Prices are working. However, you don’t know what they actually went into escrow for, but at least you know a List Price that could get you into escrow.
Expired Listings
Looking at the List Date and the Days on Market for the Expired Listings will tell you what prices are not working because those properties did not sell. Keep in mind if the List Date is very old the market has changed since it was listed.
Floor # for Condos
When doing a comparison of Condos, you can plug a minimum Floor # into the search form. In Condos the higher the floor the more expensive because the view is better and there is less noise from the street.
Step into the Buyer’s Shoes
If you are selling your property remember to also put yourself in the buyer’s shoes. If you were going to buy a property right now, which one would you buy. Would you buy your property, or does another one look like a better deal. You can bet the ones that look like the best deals will be the ones that sell first.
Location, Location, Location
Location is very important to a properties price. After all, you can change a lot of things about a property, but you can’t change the location. Click on the address to see the location on Google Maps, and drive around to understand the location of various properties that are for sale and have sold. You could have a property that looks good on paper in terms of the bedrooms, baths, square feet, age, condition, etc…, but if it is right next to a major road you can bet it will be priced lower.
To save time when viewing multiple properties use the button "View Google Map Directions" or "View Google Map Directions of Checked Properties" This will setup Google Map to give you directions from one property to another, and you can easily change the order of which properties you see to minimize your driving time.
Also, study the View field and the Frontage field. This tells you more about the location. An Ocean view is a very desirable location and properties with nice views will sell for more and sell faster.
Conclusion on Analyzing the Comparables
Careful comparable analysis can save or make you thousands, so take your time when studying the comparables and use all the features of OahuRE.com. If there is any feature you feel would be helpful that is not available, please let us know about it.
Making the Offer
The first step when making an offer is to determine what happened up to this point. We would call the listing agent and check for the following:
1. Are there any offers on the property at this time?
2. Have there been any offer in the past that were not accepted? If so, how much were those offers for. Note that sometimes the listing agent will give you this information and sometimes they won't.
3. What is the seller's motivation for selling? If they are going to be foreclosed on they would be very motivated to sell. If they are moving to the mainland they might be interested in selling some or all of their furniture.
The answers to these questions along with close study of the comparables will help you to determine what price to offer.
There are some other things to consider when making an offer that make your offer more attractive.
1. You should have a pre-qual, or better yet a pre-approval that is submitted with your offer.
2. How many days do you need to close? Many times the faster the close the more attractive it is to the seller. 30 days is usually needed for most lenders but if it is a cash deal it can close in as little as 7 days.
3. Do you need all the inspections? Some people waive the inspections if they are thinking of doing a major remodeling anyway. Note that this is a some what extreme measure and is usually only done in the case of multiple competitive offers being submitted.
4. How large of down payment can you make? The larger the down payment the more attractive to the seller.
Once you have determined the offer details, we can write up the offer and Email it to you for electronic signature. By using Electronic signatures there is no need to fax, Fed. Ex., scan, drive, or mail the offer. Plus the offer stays in its original easy to read format unlike faxed offers which lose quality each time they are faxed.