In the days before the interwebs made almost all property information available to you, you had no option but to trust your real estate agent when it came to deciding what to offer for a house. The agent would produce a file, whispering something about comps, that you might get to read but more likely would have read to you. These and other tidbits of "insider information" were part of what your agent offered in turn for a commission on the transaction.
These days, all information is hard to keep secret and that applies especially to real estate related information. But today we'll look at just one chunk, the "comp," and help you learn to use that data to be a more educated buyer. And this knowledge will help sellers too, since pricing your home correctly can make or break a sale.
A now outdated rule of thumb in determining home values was for Realtors or appraisers to use three comparable sales, or "comps" to set a price for a given home. In SF, these data come from the SFARMLS, the database of all the properties currently listed "for sale," including pending sales and recent sale figures. You have easy access to this information thanks to a variety of free sources, which we'll get into later. But keep in mind that today, and in San Francisco in particular, you want to check these figures often and exhaustively. Why check just three? If you can tell a seller that ten homes in this 'nabe have sold for less than the seller is asking, as opposed to pointing out three, your case for under-bidding is stronger.
Current information is also key. SF presents a mercurial market with micro-climates of action in each neighborhood. Even one street or another within a 'nabe may become suddenly hot due to new construction or the opening of a posh supermarket. Just as easily, an area can fall out of favor if something less fortunate happens. If you really want to use comps effectively, check them daily. Several times, daily.
Focus on Sold Data
Sold figures represent market value more truly than listing prices. Listing figures can be overly optimistic or strategically under-market value to incite bidding wars. Focus instead on sold home values. Look for homes that are not only close by the one you are interested in, but the same size, with similar features (number of bedrooms, baths, yard, and in SF, the holy grail: a garage all affect value).
Since each home is different, your ability to line up your property with another can vary. You may need to employ some math to be really smart about it. For example, The Bigger Pockets Real Estate Resources blog suggests simple subtraction. "Does one home have a pool and your home does not? Find out what a pool is worth and subtract that from your home. Does one of the comps have 100 square feet less? Then find the cost per square foot average in your area and increase your home's value by that much." And again, the internet can help you: sites like Redfin and Trulia tell you current price-per-square foot information, free.
You can pay for in-depth property value information, and maybe this makes sense for sellers, but we're hard pressed to see why a buyer needs to do so these days. Here are several free sources for gauging home value:
Zillow – Zillow offers property sale histories and access to comps, plus a "Zestimate" (an automated estimate based those records), tax history and a market guide that predicts market performance.
Trulia– Trulia offers sold data, plus insight on each neighborhood's performance.
Redfin – Redfin lets you see all available property history records plus sold homes and market analysis.
Property Shark – Property Shark provides public data on a properties and comps, and does not require you to register to get at that data either.
Finally, use comps wisely but not with too much fervor. In the end, each home is unique and its price will be too. Several factors, emotional and economical, influence a home's true value, both to the buyer and the seller. Comps can only help you so much in determining that value.
· SFARMLS [San Francisco MLS]
· Real Estate Comps [Bigger Pockets Real Estate Resources]
· All Curbed U coverage [Curbed SF]