mortgage. A real estate agent works for a home seller. It is the agent's job to determine the highest possible price they can get in the current market when they sell the home.
Selecting Comps
- The comps should be selected from the most recently sold homes. Older sold prices will not accurately represent the current market.
- The homes should be in the same neighborhood or as close as possible. Prices can vary widely by neighborhood.
- Comps should be as similar to the home being valued as possible—bedrooms, bath size/type, etc.
Adjusting the Comps' Sold Price
Another part of the process that can introduce variable results is the adjustment of the comps' sold prices. This is the process of adjusting the actual sold prices of the comparable homes to account for differences in major features like bedrooms, baths, etc. A home with an extra bedroom is considered to have sold for more, so the adjustment would be to subtract the value of a bedroom from that comp's sold price to bring it closer to what it should have been if it had the same number of bedrooms as the subject home. For a comp that has fewer baths, bedrooms, etc., the value of the difference would be added to the sold price.
Average Sold Price per Square Foot
Once the agent adjusts the comps' sold prices, they can be averaged as price per square foot and multiplied by the square footage of the subject property. This is the approximate market value of the subject home.
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