House pricing strategy #2: Look to comparable sales for guidance
Property values are hyperlocal and always shifting, so agents and appraisers rely on comparable sales, aka “comps,” to price individual houses and capture recent changes in the market.
What’s a comparative market analysis?
A detailed CMA may run 30-plus pages long and cover:
- A deep dive into the subject property, including any recent photos and new features worth mentioning
- Somewhere between 10-12 comps within a certain radius of the property and details for each
- A summary page of what each comp sold for
- A map of all included listings
- Charts and tables that show market trends data such as inventory numbers for the area and average price per square foot
Can you do your own comps?
You can do your own comps analysis, but a top real estate agent will have experience putting together hundreds of CMAs. They will be more accurate and efficient in pulling the right data and making dollar adjustments based on competitive differences.
For example, Dominguez deals with a lot of bungalow-style homes of about 2,000 to 2,500 square feet, where additions or upgrades can increase the asking price by $100,000 to $150,000.
“When you add an addition or a coach house, it obviously brings value because it allows a lot more living space and maybe potentially an Airbnb opportunity or rental,” he says, adding that it’s important to “present the comps, see what’s actually selling in the area, and price comparably.”
How do you price based on comps?
Say you had a CMA with about a dozen listings. The summary page might look something like:
- Lowest price: $575,000
- Average price: $621,318
- Highest price: $690,000
If your house appears to be a bit better than average and the market is heating up, perhaps you price around $650,000. Or maybe the photos clearly show that the comps are more updated than your inherited home that hasn’t been refreshed in decades.
That might put you on the lower end of $575,000 to account for work needed on the home. But such a range would help you see that pricing anywhere above $690,000 is going to be way out of line, while going higher than the $620,000 average should be supported by your house having some competitive advantages.
“My emotional sellers have been in their homes for generations when their parents owned that property,” says Loretta Thomason, a top-selling real estate agent in Austin, Texas. “But, when new developments take over certain areas of town, and they see everybody else selling their homes and the houses have been remodeled, sold for $400,000, they’re not taking into account that there’s $150,000 of work that’s been done.”