This time of year is always tough for comps…..which is the term we use for recent comparable sales used to determine the value of a house. Realtors use comps to determine a list price. Appraisers use them to justify a contract price. The thought is that the recent past will tell you what the market is doing now, but it really doesn’t work that way in a really good or really bad market when prices are either going up or down.
This reminds me of my old dog Julie. She was a beagle. She loved to go out in the yard and sniff around for critters. I remember one time she was on the trail of a rabbit. She had her nose to the ground and was on the trail of where that rabbit had been. What she didn’t know was that the rabbit was right behind her. That is how appraisals work. They always know where the market used to be and never where it currently is.
Part of what makes this time of year tough is that the market for the new year is kicking off and we are looking back at late fall and all of the winter to determine value. Sales are usually down in the winter and most of what sells are the leftovers from last summer.
So, we are looking at the worst times to sell to determine a value during the best time of the market.
I personally have a house that I sold for $200k. It only appraised for $185k. The best comps for my house were from 6-12 months ago. So we have a big gap between what a real buyer with money will pay for a specific house and what an appraiser, whose job is to determine market value, says it is worth.
My current dog Sherpa is a dachshund-Jack Russell mix. She has no problem keeping up with critters in the backyard.
I wish we had a system of determining value more like Sherpa than Julie.