Why Are The Comparable Homes So Important ?

Often times sellers are confused/concerned about why a real estate agent is so focused on the comparable homes in the area.  This blog will hopefully explain why we must pay attention to them but also why they set the price range for your home !

The Bank & Your Buyer Will Use Them Not Only The Realtors - In realty your realtor will not just have to sell your house to the buyer but it is our job to make sure that come time for appraisal you will not encounter any additional hurtles.

• Once you have gotten a buyer they will often be utilizing a Buyers Broker.  Any well educated Buyers Broker will be advising their buyers on the price to offer for the home, and they will do this by pulling comparable sales in your homes area.  Typically these agents will bring in higher offers than a buyer who is basing it on "gut feeling".  
• The bank will also be using these homes, and the guidelines for which comparable homes are also very important.  The general rule is homes of the same style, within a mile of the home, closed or under contract within the past 90 days.  

When Will The Bank Use Comparables Homes That DO NOT meet the general guideline.  

• Realtor, Buyers, Or Seller - None of us will be able to ask/tell the appraiser to use particular comps.  Although we will often suggest which ones they should use - but keep in mind they do not have to use them and some appraisers prefer finding the comparable homes on their own.  
• If there is homes of similar style and correct area whether you like it or not those are going to be used.  They will give credits/debits for items that may not be the same between the 2 but they will never just not use them at all.  Unfortunately many homeowners will think just because the home is not in the same exact that they will be entitled to go outside those guidelines which is not the case.   
• There are some cases where they will go outside of the area BUT when they do this they will do so in increments.  From 1 mile they will look in small increments so making sure you do also is important - jumping from looking at the 1 mile mark to even jumping to 2.5 miles is not a good idea because they bank will start looking outside the area only in 1/2 mile increments.  

What If I'm In A "Niche" Area, and Not Many Sales Are Available ? 

• This is something we run into quite often here on Long Island.  There are specific areas that might not be large but pricing runs significantly different.  Some examples are South Of Montauk, Villages, & Waterfront Communities.  
• When you are in these areas you will want to keep a close on eye on the homes that are currently on the market.   The appraiser might look at these to find the value of your home, but also the homes that come off and go under contract will be a sign not only for the appraiser but for the homeowner to see where the buyers are seeing the value of the home.  

What If It Doesn't Appraise Can An Appraisal Be Re-Done ? The answer to these questions is unfortunately different for both buyer & a seller. 

•  For a buyer a home not appraising is an issue that can give them the right to not purchase the home for the agreed upon price.  This means they have the right to re-negotiate or walk away with the down payment that you otherwise would have gotten to keep if they had breached the contract.  
• There are of course times where the appraiser is just downright incorrect but not all banks will allow for a 2nd appraisal to be done just because you disagree with the appraiser.  They specifically began using 3rd party appraisers to make sure they had a non-biased party doing the research.  
• Most buyers will not want a 2nd appraisal done if after looking through it the appraiser was accurate with all the information.   If the appraiser was inaccurate which does happens a 2nd might be able to be order but it will be additional funds and time - sellers are unfortunately not entitled to a copy of the appraisal.  

These issue may seem "daunting" but the good news is they are all avoidable.  By listening to your agent and basing your price not on emotion but the facts you will be able to avoid all these possible issues !