Comparable
Sales and Your Offer Price
Determining Your
Offer Price
When you prepare an offer to purchase
a home, you already know the seller’s asking price.
But what price are you going to offer and how do you come
up with that figure?
Determining your offer price is a three-step process.
First, you look at recent sales of similar properties to
come up with a price range. Then, you analyze additional data,
such as the condition of the home, improvements made to the
property, current market conditions, and the circumstances
of the seller. This will help you settle on a price you think
would be fair to pay for the home. Finally, depending on your
negotiating style, you adjust your "fair" price
and come up with what you want to put in your offer.
Comparable Sales
The first step in determining the price you are willing to
offer is to look at the recent sales of similar homes.
These are called "comparable sales." Comparable
sales are recent sales of homes that compare closely to
the one you are looking to purchase. Specifically, you
want to compare prices of homes that are similar in square
footage, number of bedrooms and bathrooms, garage space,
lot size, and type of construction.
If the home you are interested in is part of a tract of homes,
then you will most likely find some exact model matches to
compare against one another.
There are three main sources of information on comparable
sales, all of which are easily accessed by a real estate agent.
It is somewhat more difficult for the general public to access
this data, and in some cases impossible. Two of the most obvious
information sources are the public record and the Multiple
Listing Service.
Comparable Sales in the Public
Record
The most accessible source of information on comparable sales
is the public record. When someone buys a home the property
is deeded from the seller to the buyer. In most circumstances,
this deed is recorded at the local county recorder’s
office. They combine sales data with information already
known about the property so they can assess property taxes
correctly.
Provided there have been no additions to the property, the
information available from the public record is usually correct
regarding sales price, square footage, and numbers of rooms.
This makes it easy to use the public record as a source of
data for comparable sale information.
Accessing the data is another matter, at least for the general
public. Realtors can generally look up this information through
title insurance companies. The title companies either compile
the data directly from the county recorder’s office
or purchase if from other companies.
One problem with the public record is that it tends to run
at least six to eight weeks behind. Add another four to six
weeks for the typical escrow period and you can see the data
is not current. The most current information is the most valuable.
Comparable Sales in the Multiple
Listing Service
Most of the public is aware that the Multiple Listing Service
is a private resource where Realtors list properties available
for sale. Recently, the public has been able to access some
of that information on such sites as Realtor.com, MSN HomeAdvisor,
and others.
Once a property is sold and the transaction has closed,
the selling price is posted to the listing in the Multiple
Listing Service. Over time, it has become a huge database
on past sales, containing much more information on individual
homes than can be gleaned from the public record. This information
is only available to real estate agents who are members of
the local Multiple Listing Service. Your agent will provide
you with this data to help determine your offer price.
Comparable Sales – Pending
Transactions
The most valuable information would be the most current, of
course. A sale last week has more validity in helping you
determine a purchase price than a sale from six months ago.
The problem is that there is no actual record of the sales
price until the transaction is completed. The information
is not available in the public record because no deed has
yet been recorded.
Neither is the information available in the Multiple Listing
Service. Once a property is sold, it becomes a "pending
sale" and all pricing information is removed from the
listing. Prices are not posted until it becomes a "closed
sale." This protects the seller in case the transaction
falls apart and the property is placed back on the market.
It would give an unfair advantage to future potential buyers
if they already knew what price the seller had been willing
to accept in the past.
However, if a Realtor has a reason to know the sales price,
they can usually find out through professional courtesy. Also,
some real estate brokerages post sales information on a transaction
board in their office.
Conclusions
Gathering and analyzing information from comparable sales
helps to establish the range of prices you should consider
when making an offer to buy a home. More weight should
be given to the most recent sales, but even so, you need
to do a bit more analysis before setting upon the price
you will offer. That is because you also need to consider
the condition of the property, improvements, the current
market, and the circumstances behind the seller’s
decision to sell.
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About Blaine Morris, Marin Properties
As a top-producing licensed REALTOR with
Frank Howard Allen in Greenbrae, California, Blaine Morris
specializes in Central and Southern Marin County. Always just
a phone call or email away, Blaine works seven days a week
for his clients, providing them with the utmost in fast and
efficient service and follow through. Whether you are searching
for the home of your dreams, or thinking of selling it, Blaine
can turn your dreams into reality! Behind Blaine is the strength
and stability of the Central Marin office of Frank Howard
Allen, the #1 office of the #1 Brokerage in Marin County.
Contact him today at 415.925.3279 or
click here.
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