4 things Home Buyers need to know about Market Value

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"Comps" is a word often used in real estate to compare a subject property to other similar properties (the comps) to determine its market value.   Market value is based on recent sale price of comparable properties in a certain neighborhood.  Let us define each of these terms separately.

Neighborhood - A certain radius around the subject property... within a planned unit development, having a common builder or Home Owners Association (HOA) rules...within the township...or a borough where certain property rules apply to every homeowner ....in a certain school district ..... lake or river front properties .. away from or close to highway noises.   Real estate as they say is all about Location, Location, Location.  This is the most important consideration in determining value.   Engage the services of  a local Realtor, someone who knows the area and understands the neighborhoods.

Sale Price - Buyers are often overheard discussing the List price.  List price is the asking price for the property and not as important as the Sale price.   If it is an educated and motivated seller - the list price is pretty close to the Sale price.   The relevant number is - What did other buyers pay for the recently sold properties?  These numbers are available through the public records from your local township.  A Realtor has the fastest access to these numbers through the MLS.  Online, Zillow has made it real easy to find Sale price - just plug in the address and scroll down to see the last sale price of that property.  However there is a time lag before this data appears on Zillow.

Recent - In the current market recent means last 3 months.  If there have been no sales in the immediate neighborhood for the last 3 months - one can go back further to 6 months or even a year.  However, in that case, the geographic area under consideration is widened, to township or school district, to find 3 recent sales for comparison, in addition to those comps.  So if your friend bought in that neighborhood last year, chances are, with the current downward market trends, you can buy a similar property cheaper.  Similarly, expect to pay more in a rising market.   It is the price at this point in time that is relevant.

Comparable - the key is finding properties that are similar to the subject property.   Unique or custom homes built decades apart are  difficult to compare.  The appraiser compares properties with similar acreage, building square footage, number of bedrooms and bathrooms.   The general condition of the property is important and will be compared to the comps.   If the house has been over-improved by the seller, it may not necessarily bring a higher Sale price in a down market though it may appeal to buyers and get offers quicker than other comparable properties.

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