All comps are not equal

When trying to figure out what market value or a fair price is for a property, Silicon Valley consumers will often look at recent sales nearby which they find online, extract an average price per square foot, and then decide that this is likely to be what a house or condo is worth based on those “comps”.

First factor: the unique real estate itself (how similar are the comps, really?)

Unfortunately, it’s not that simple to figure out that home’s likely sale price or the probable buyer’s value. Homes are much more nuanced than just the average price per square foot.   Unless the comparable sold property is truly comparable in every way – similar quality of updating or remodeling, similar location, similarly expensive landscaping –  and the timeframe recent, too, you’ll have to try to adjust based on varying factors. (And that’s not easy – it’s an appraiser’s area of expertise. But you may say “those comps had remodeled kitchens, so that may be worth X amount of money”. You would not ignore that big of a difference.) Look at the list of homes below – how much can you tell about remodeling, landscaping, or upgrades from a simple list? Not enough.

Comps in a Campbell community

 

Second factor: speed of sale, number of offers

The situation surrounding each sale is likewise quite varied.    A property that gets 4 or more offers on day 7 on the market is a different situation than 1 offer on day 43.  If you are writing a real estate contract on a home that is getting multiple offers, it’s not going to help you to compare it to a stale listing that sold with just one offer.  It’s not just comps: it can be the current competition that largely determines the final sale price of that house or condo.
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How likely are you to find the Silicon Valley home you want in your budget?

Just starting to think about buying a home? If you’re like most people, you’ll be looking at online listings of homes for sale here in Silicon Valley to see what they cost and how they look. Viewing homes for sale and the list prices is a good thing to incorporate in your first steps to assess the cost of home buying, but there are more data points to be used to create a sense of what it will cost to get the kind of home you want (and where you want it), or, coming from the financial side, how much home your money can actually buy.  Misreading the market, or not understanding the odds of success, can lead to frustration and a slower “learning curve”, and that can be expensive in an appreciating market!   Today I spent a few minutes explaining how to get a better handle on home prices in the video below.  I hope it will be helpful to folks in the San Jose – Los Gatos – Saratoga area who are just getting into the market now.

 

 

If you are interested in home buying and looking for a seasoned Realtor to assist you, please reach out to me with an email or a phone call.