Comps: An Experiment in Pricing

Dawn Griffin Posted by
Buying & Selling Tips Aug 2009

A friend sent me this article from STLtoday.com (titled: Home sellers skip agent, hope to save). The article is informative, but the comments are much more interesting. Here’s one of my favorites:

This is a no brain-er. You strike a deal,contact a real estate atty,and for a couple hundred bucks you get all the legal paper work done. Then you proceed to closing,and nothing happens there unless it’s all up to speed. Have sold many a home myself. Just hang in there,you DON’T need a realtor. As for pricing. Simple. Check what other like kinds in your area are going for

True: Not everyone needs a Realtor and lots of folks are successful selling on their own. By all means if you have the time and the marketing ability, give it shot. BUT, pricing is not simple. To fully understand that statement, it may be helpful to try an exercise.

I will use Clifton Heights an example.

Here’s the task: A new seller would like to list his home. By studying the chart below, what do you think the appropriate price for the home would be? The home has 3 bedrooms, 2.5 baths and a one car garage with a fenced yard of average size. The home is approximately 1700 square feet. The kitchen is updated and has granite, but not a ton of storage or counter space. The bathrooms are nice, new and clean, but not really very large. The systems and windows are new (within 5 years).

The chart below is current. I mapped the Clifton Heights neighborhood (the triangle between I-44, Hampton and Arsenal), looking for homes with at least 3 bedrooms and 1.5 baths between 175-325K. (Here is a link to the same data with more details and pictures.)

picture-16

Location matters. It is important to understand that at the center of this neighborhood, Clifton Heights, is a beautiful lake in a park setting. Homes with lake/park views tend to go for higher values. For our purposes, the subject property does not have a lake view, nor is it on the outskirts of the neighborhood. From the chart above, please note that both Simpson addresses (6241 and 6172) had lake/park views.

Two more things to add: The zestimate (zillow.com) for the property is $205,000 and the last market sale was about 5 years ago for $211,000. These are just interesting side facts. Neither is truly helpful. No one from zillow has ever been inside this home so that number cannot be relied on. And it doesn’t matter if the owner paid a $1 yesterday or $400,000 two years ago.

What is the property worth now?

Your comments would be very much appreciated!

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