Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
So I live in a relatively small neighborhood, essentially about 25 homes on 2 streets all built by the same builder around 2006-2007 (a great time for quality construction I know /sarcasm).
We had our house on the market at the end of last year but struggled with pricing because the "comps" were all over the place, and although we realized we were likely on the high end (yet still got about 10 showings and an offer in about 5 weeks despite listing during probably the slowest time), we ended up taking it off the market and are content with staying put.
Recently, a couple more houses in the neighborhood hit the market and went under contract in about a week (yes, I know under contract does not equal sold and list price does not equal sold price), but the market has seemed pretty strong here recently (suburbs of Charlotte, NC) so I would tend to think sales price will be pretty close to list--as long as they appraise. In which case I think they would help the value of our house, but they are smaller.
And that's where my question comes in. When we were still wanting to sell, the realtor of one of the above homes was walking the neighborhood so we ended up setting up a potential listing appointment with her. That house, while definitely move-in ready and maintained well, hadn't really had any updates to the mostly builder-grade finishes from 2006. Again, it was built by the same builder as ours so many aspects were pretty similar...however we did an extensive kitchen renovation (their kitchen layout is better that ours was), and have 750 more square feet (~2350 vs ~3100).
That one was listed at $265k, and the realtor said they accepted an offer over asking price, but the deal fell through (I'm thinking maybe it didn't appraise), but it went under contract pretty quickly afterwards. I asked that realtor if that would be a comp for ours (since we'd only be hoping to get about $35-$45k more which I thought was reasonable based on the size and kitchen uprgades) and she said no as far as in an official appraisal because it was smaller (and the second house I mentioned is even smaller than that one and will likely sell for even more than that again with similar finishes). I have seen other articles stating similar things, but shouldn't houses in the same neighborhood that are built around the same time by the same builder even though they may not be the same size be as good of a comp as houses in other neighborhoods of a similar size?
It "might" be a good comp to an appraiser. Given it's the same age and same neighborhood many appraisers will adjust for the size difference. If I recall correctly they only like to do these kinds of adjustments for differences up to 500 sq ft (above ground). Since your house is over 500 sq. feet larger, an appraiser might not want to use the smaller house.
BTW--Notice I said "think" the difference is 500 sq feet or less difference. It could be more/less based on your city/state.
Out here many appraisers will start with 250 sq feet difference and then adjust out if they don't get what they need. I know I've never had to compare a house that small to a house that large. I agree with that agent, that the house is not a comparable sale for yours.
The smaller house in your neighborhood might be a comp for an appraisal. It depends what other sales there are in the area. If there is a nearby, similar community with houses of similar size and age, then those would probably be best.
But, if other sales are more dissimilar, then you are likely to get a mix. When there are no good comps, an appraiser will use a variety of comps that cover each significant feature. So, you may get one in your neighborhood, one that's the same size, but older, one that's similar size, but in an inferior/superior neighborhood, one that's updated, but older/bigger/smaller, etc.
The biggest deciding factor, in an appraisal, on whether to use a specific sale depends on what else is available.
The smaller house in your neighborhood might be a comp for an appraisal. It depends what other sales there are in the area. If there is a nearby, similar community with houses of similar size and age, then those would probably be best.
But, if other sales are more dissimilar, then you are likely to get a mix. When there are no good comps, an appraiser will use a variety of comps that cover each significant feature. So, you may get one in your neighborhood, one that's the same size, but older, one that's similar size, but in an inferior/superior neighborhood, one that's updated, but older/bigger/smaller, etc.
The biggest deciding factor, in an appraisal, on whether to use a specific sale depends on what else is available.
Well I guess related to my original question, does the same apply to lot sizes? Ours is 2.5 acres (although some of the land, but not house, is in a flood zone), so even if you set the minimum at 2 or even 1.5 acres, then the comps were pretty slim pickings. There were more that were 0.5-1 acre (which the house mentioned above is as well) though so I feel like if you can use smaller lots as comps, you should be able to use smaller houses too.
Actually the best comp when we were listed was our next door neighbor which sold for $275k in August. But kinda what I was alluding to in my OP, the more recent, but smaller homes in the same neighborhood certainly seem to support higher prices IMO than others that are not as recent. Basically the next door neighbors house had the same square footage and lot size as ours, but will likely only end up selling for $10k or so more than a house 750 square feet smaller on a lot 1.5 acres smaller (and again with similar finishes inside). I guess the next question becomes how much the appraiser will adjust for the rise in prices that certainly seems to be happening....
Most appraisers try to use homes within 300 sf for comps. Smaller homes will usually be higher per sf than large homes. Also, neighborhoods generally have an average price range. If the majority of the homes in a neighborhood are 1600 sf, and say they bring 150. Sf, Avg price of 240k, but you have a 3000 sf home, it won't bring 150 sf, and probably have a hard time selling for over 300 due to the Avg neighborhood price.
Most people that can afford a higher price range than the top of a neighborhood, will move to a nicer neighborhood, where there are similar priced homes.
When choosing comps, the appraiser will choose the ones that are most similar that are available within a certain area, starting with your subdivision (if there is a subdivision) and then moving outward in distance - they prefer to stay within a mile if possible but will go further out if necessary. They will go five years earlier or newer as far as year built is concerned. They will adjust for size within reason (here it's 500 sq. ft smaller or larger). They will make adjustments using a form that lays out all the differences and makes dollar adjustments for them.
One thing I tell my clients, both buyers and sellers, is that smaller houses tend to sell for more per sq. ft. than larger houses. It's sort of like swimsuits that way - bikinis cost more per sq. inch than one pieces. In part this is because larger houses are mostly two stories while smaller houses are mostly one stories, so once you've got the infrastructure (foundation, plumbing, etc.) done the upper story costs a lot less to build, but it applies to one stories as well.
I've always thought that appraisers must have a heck of a time in our direct area; houses range in size from about 700 s.f., to nearly 4000 s.f., (right next to or directly across the street from eachother) on lots from 2500 s.f to 20,000+s.f., open space/canyon adjacent to interior lots surrounded by others, flat or steep hillside, with ages from well over 100 years to just over five years in every imaginable housing style and level or lack thereof of maintenance and upgrades. Throw in some historic manor-style SF directly adjacent multi-family duplexes and small apartment buildings and you've got some work cut out for you. This is all just within one or two streets of us.
Good luck with that.
As crazy as it sounds I really love the eclecticism of the area regardless.
I've always thought that appraisers must have a heck of a time in our direct area; houses range in size from about 700 s.f., to nearly 4000 s.f., (right next to or directly across the street from eachother) on lots from 2500 s.f to 20,000+s.f., open space/canyon adjacent to interior lots surrounded by others, flat or steep hillside, with ages from well over 100 years to just over five years in every imaginable housing style and level or lack thereof of maintenance and upgrades. Throw in some historic manor-style SF directly adjacent multi-family duplexes and small apartment buildings and you've got some work cut out for you. This is all just within one or two streets of us.
Good luck with that.
As crazy as it sounds I really love the eclecticism of the area regardless.
Indeed! Sounds lovely to live in, a pain for an appraiser!
I do rural property as well as urban and have found myself having to explain to a lender in NYC why the closest comp on the appraisal is five miles away from the subject property. In the part of Texas that the subject property was in, that comp could very well be next door, something the lender (but not the appraiser) was having a hard time getting their head around.
Most appraisers try to use homes within 300 sf for comps. Smaller homes will usually be higher per sf than large homes. .
I know that neighborhoods can have a "max" price, but in my area even within neighborhoods there are typically price differences depending on the specific house/lot. In my neighborhood right now it kinda seems that there's an average price but IMO I think it's more a factor of the market improving. It's not even that the smaller houses are selling for more $/sq. foot, they're selling for more or similar overall.
Bumping this thread because the "second" house I mentioned above just closed for $279k. Similar finishes, but 1000 less square feet and 1.5 less acres than a house that sold in August, but the more recent one sold for $4k more. I think the only advantage it had was an above ground pool... Just seems silly that the $275k house would be an official comp for mine (well only for 2 more months I guess), but the more recent one technically wouldn't to most appraisers.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
