Is it Really a Comp?

I sat down with a new client in Park Slope yesterday to talk about listing his townhouse for sale. When we meet our clients in person, we do a thorough walk through of the home, and then sit down and discuss pricing with an iPad, looking in real time at comparable properties (comps) – sold, in contract and what is currently on the market.

We don’t leave our clients a stack of fancy brochures – I never thought it made sense when everything we discuss is on online and on our web site. However, most brokers do leave packages, and in this case, our competition had left a package of what they considered to be comps. And the conclusion they reached based on the comps, was that the home should be priced about 20 percent higher than we said it should.

We warn sellers not to go with the broker that simply suggest the highest price. Instead, we recommend they spend the time to really understand the comps they are looking at, and price their home accordingly. However, brokers know that sellers often consider a high listing price to be an important factor for choosing who to list with, so the temptation is often too great for brokers to resist comp inflation.

In this case, the brokers that came before us put a comp set in front of the seller that did not include sale price. They merely had a single photo of the front of each house, the addresses and the price per foot. They failed to explain that larger homes carry higher cost per foot than smaller, narrower homes like this seller.

They also ignored condition, and how that impacts price. And they didn’t take into account the block – a park block in Park Slope typically sells for more than a townhouse near Fifth Avenue.

Finally, they failed to take into consideration whether the house was a one or two family home. Buyers will often pay a premium for a renovated one family home when compared to a multi-family dwelling that has had or currently has tenants in place.

After we walked through each of the homes that were listed as “comps”, it became very clear that nearly all of the comps that were in the shiny packet were not, in fact, comparable to the seller’s home, and that the price was completely unrealistic (although very attractive).

We were able to produce several good comps – even one on the same block in a nearly identical house, that was left out of the other report. When we took some time to go through them in detail, I believe the owner had a much better view of the market and where his home should be priced.

It will be interesting to see where he prices it, and who gets the listing…