If you've been considering selling your home, one of your first questions will be: "How much is my house worth?" Maybe you've been inspired by those "Sold" signs in your neighborhood; maybe you're just ready for a change of scenery. Whatever the case, a great way to get an idea of how much your home is worth is to look at the recent sale prices of other homes in your neighborhood.
Comps can help determine how much your house is worth
By identifying the sale prices of similar properties in your area, known as "comparables" (or comps), you can come up with a realistic asking price. When using comps, you'll want to compare apples to apples—that is, homes that have a similar square footage and amenities as yours. You also want to look at homes that were sold within the same six-month period and that are similar in style.
“I try to find properties within 150 square feet either side of the subject property with similar features,” says Rick Snow, a Realtor® with Exit West Realty in El Paso, TX.
“The number of bedrooms doesn't really matter because they are all figured into the square footage, but baths—half, three-quarter, or full—give more value," he says. "For example, a three-bedroom, two-bath home that is 1,800 square feet would come out the same as a four-bedroom, two-bath home that's 1,800 square feet; but a three-bedroom, two-and-a-half-bath would be worth more.”
How to search for comps
A good place to start your research is realtor.com®'s Just Sold feature. Just enter your ZIP code, and click "Search." A list of recently sold homes in your area will pop up, along with their sale price. This will give you a general idea of the home prices in your area, but to really home in on a sensible price for your home, you should call on a real estate agent.
"Agents can discuss pricing of other sales or pending sales in your area with other agents to help you estimate home values,” says Michele Lerner, author of "Homebuying: Tough Times, First Time, Any Time." “A [real estate agent] can also provide you with a free comparable market analysis to help you decide if you want to sell your home."
And while it’s a great idea to find out about recent home sales in your community, you also should recognize your home might not sell for a similar price.
In general, the real estate market changes rapidly, and timing is a large factor in a sale price. Many of the factors of the larger market are out of your hands: Mortgage rates, the local economy, the national economy, consumer confidence, and the availability of homes for sale all influence a final price.
Will home improvements affect your sale price?
If you look through similar listings and feel like your house isn’t up to snuff, you might think about remodeling before putting your home on the market. But before you hire a contractor, determine if the cost of a remodel will be worth the value it will add to your property.
For example, if you remodel a bathroom, it will cost you anywhere from $10,000 to $30,000, and you’ll gain back an average of 66% of the money you spent. Beyond that, however, will the shiny new bathroom be the tipping point for a buyer to select your home over another? You can’t know for sure, and sometimes you have to roll the dice and see.
Snow says homeowners often believe they can recapture money that is spent on improvements dollar for dollar, but that just isn't the case.
"Many improvements add marketability but not additional value," he says. "Even projects that add value typically don't bring back a dollar-for-dollar return on investment."
Homeowners might also make improvements that are too specific to their personal taste and won't appeal to a wide variety of buyers.
"When I am looking at the house, in my mind I'm thinking how much it will cost me to get rid of this or that. Many buyers then base their offer on value minus 'what it's going to cost me to make it the way I want it,'" says Snow.
If you are going to make some improvements with the hopes of increasing your home’s value, just be careful not to do too much remodeling.
“Be sure to consider the potential negative consequences of 'overimproving' your home for the neighborhood,” Lerner says. “It could be harder to sell your home in the future if it’s much larger or more expensive than the surrounding homes.”
Remember, buyers weigh many factors when they decide to buy a house, and digging deep into your home's value can help you get the best price.