When The Next Best Thing Isn’t Really The Next Best Thing31 Jul
There are dangers for both, sellers and inexperienced agents when there are is a lack of comp support to determine a home’s value.
Kurt came to us in 2013 hoping to sell his 2 story home on a half acre lot in Sweetwater Ranch Estates. His home lacked upgrades but the biggest challenges came from having zero comps within $200K and the owner was basing his homes value on price per square foot. Kurt’s neighborhood offered homes his size and larger but also on large lots. Single stories were going between $700-800K and smaller homes on smaller lots selling in the low $500K.
Lack of comp support leads many sellers and inexperienced agents to use inaccurate comps by comparing the subject property to the next best thing, to the next best thing, to the next best thing and so on.
To generate comps, the best strategy is to compare 4 homes with the 8 perimeters:
- quality of construction,
- number of stories,
- level of upgrades,
- number of bathrooms,
- number of bedrooms
- size of garage
- pool – if available
To justify his desired value, Kurt was using a larger 1 level home on an acre horse property lot including equipment which is very valuable in Scottsdale. He was going down the next best thing to the next best thing path. Kurt was also under the assumption that having one of the bigger homes in the neighborhood would result in a higher price tag. Unfortunately, price per square foot pricing strategy is wrong, especially when single story homes sell for more than 2 story homes.
Focusing on areas of the home that will yield the highest return on investment
To help get closer to the seller’s list price, Jeff knew $100K would need to be invested but the Kurt’s budget allowed between $50-60K for upgrades or renovation. Knowing we need to be smart about the upgrades, we focused on areas of the home that would yield the highest return on investment. When it came time to list the home, Jeff recommend $635K but Kurt wanted to list at $700K. Ultimately, the home was listed at at $700K in July and after 7 price reductions it went under contract by fall. While the listing was on the market, the selling season change and the market turned. The home ended up selling for $625K.