The comps or comparable sales of recent properties, do not matter as much in a frenzy low inventory market. Now what the market has slowed down comps are back in play.
Some comps are not quite what they seem. Both sellers and buyers should proceed with caution when using these comps:
1. Sales prices above list prices. Bidding wars have been the norm, but the eventual sales price was thrown out there by somebody who was trying to win the contest, not pay market value. They probably waived the appraisal contingency too, so there aren’t any checks and balances in place. Just because one crazy nut was willing to pay that price doesn’t mean there will be others willing to do the same.
2. ‘Sold before processing’. How can it be considered market value if the market never had a say? Rarely do they have a full description or ample photos so you don’t even know what was sold, or why. Sometimes these are high-priced, where you wonder if the seller and listing agent thought they’d never get the same price on the open market. But usually they are lower-priced.
3. Dual agency. When the seller’s agent represents the buyers too, how do you know what happened at the moment of impact? Be wary of those that closed for a deep discount under list.
4. Long-timers. Have you seen those properties that have been on the market for months without lowering their price, then all of a sudden they sell for full price, or close? Sure, the market can come up to meet them, but it just smells fishy to me that buyers wouldn’t demand to pay less for a property nobody else wanted for months.
5. Comps that went pending when hottest (Jan-April 2015). Today’s market is still good, but for the rest of 2015 it won’t be sizzling like it was when rates were 3.67 – 3.77% earlier this year. Buyers are going to want to pay a little less than before to compensate.
6. Weak buyer’s agent on the sale. Inexperienced or desperate agents don’t stop their buyer from over-paying. The inexperienced agents are usually unaware themselves. The tricky ones are the big teams who just use the leader’s name on every sale – but you suspect it was an assistant who handled the sale.
Tip of the Day: Examine the photos from the buyer’s perspective.
Buyers have never relied less on their agent – they have all the comps at their disposal, and they will interpret as they see fit. Your accuracy about the comps is only half the battle – understanding the buyers’ position and how to add value to their interpretation is essential too.
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