Rough Comparables: Determining a Price Range

You will often have clients who need a high-level or rough estimate of the value of a property. After your first interaction with a seller, you will want to send an email that includes rough comparables. Likewise, when a buyer expresses interest in a property but isn't yet ready to make an offer, that buyer will often want a rough opinion of value. In order to create any Comparative Market Analysis (CMA), you will need to identify how you will search for sold comparables. Comparable sold properties are simply homes that have sold in the past 6-12 months (with some exceptions), that are in the same or similar neighborhood, with similar qualities. A good set of rough comparables will have 3-15 sold properties. Fewer than 3 solds doesn't establish a pattern and greater than 15 can be overwhelming.

Here are instructions for using the Quick CMA in the Portal.

Defining Your Comparable Properties

Geography / Area

MLS Area + Subdivision: This is the easiest and most frequently used way to define your area. Most properties built in the 1980s or later will have a helpful legal subdivision. You want to include the MLS Area so that you don't get bad data - there are two very different "Highland Park" subdivisions in the Austin market, for example.
Elementary School: While elementary schools won't usually affect the value of a property dramatically on their own, elementary school boundaries often do an excellent job of setting a geographic boundary that is helpful for finding sold comparables. Properties built <1980 often have unhelpful legal subdivisions, so elementary school boundaries will take the place of subdivisions to bind the area. Large subdivisions like Steiner Ranch, Circle C, & Avery Ranch have different sections with varying build qualities and price points, so further binding the area by an elementary school can be helpful.
Manually Drawn Polygon: Many "hard to comp" properties will be in central Austin, where values can vary greatly in a short distance. In these cases, you will need to use market knowledge and manually draw a polygon to bind the search by area. If you are not familiar with the property's area/neighborhood, then ask everyone in the office! It is much better to ask a question than to provide bad comps to a seller (who surely knows their neighborhood.)

Property Attributes

Size: Beyond location & condition, the SqFt size of a property will be the biggest factor in a property's valuation. We generally look at sold comparables that are +/-10% SqFt of the subject property.
Bedrooms & Bathrooms: It's important to note that the number of bedrooms & bathrooms rarely affects the value of a property unless the subject property is deficient. For example, a property with only 2 bedrooms or 1 bathroom will be affected negatively. If the subject property has only 2BRs and/or 1BA, it is important to either only look at comps w/ similar BR/BA mixes or to note the fact in your comments on the property and indicate that a value adjustment needs to be made. Likewise, if a subject property has 3BR/2BA+ and many comps have 2BR and/or 1BA, the same strategy and/or comments need to be made.
Number of Stories: In general, we want to compare 1-story homes with 1-story homes and 2-story homes with 2-story homes.
Year of Construction: In newer subdivisions, you will often find different levels of build quality in different years of construction. Homes built in 2009 (during the recession) were typically built with lower quality finish out than homes built in 2017 (after values had appreciated considerably.) Likewise, in central Austin neighborhoods, newer construction homes should generally not be compared with older homes that have or have not been renovated.

Relative Date of Sale

12 Months: We generally default to 12 months of sold comparables in order to see property values over the different market seasons.
6 Months: If a market has appreciated considerably in recent months, we may bind the comparable sold properties to within 6 months or give greater weight to homes sold in the past 6 months. Likewise, if we have a large # of comparables that we need to trim down, we may adjust from 12 months to 6 months of sales.
24 Months: We will sometimes look at 24 months of sales when comparable sold properties are scarce and when a market has not greatly appreciated during that time.

Criteria Adjustments

Since we want to find 3-15 sold comparables, we will often have to make adjustments to our search criteria to get this number of sales.

Relative Date of Sale: This is the best way to increase or reduce the number of sold comparables. We do want to increase to 24 months as a last resort, though.
Geography: Avoid making the geographic area larger whenever possible. If you need fewer sold comparables, it is worth checking to see if a logical tighter geographic area will bring the # of sold comps down.
Size: Price/Sq Ft is a terrible metric to value properties, so we want to adjust the SqFt search criteria as little as possible. We will sometimes adjust to +/-15% of the subject property if sold comps are hard to come by. We rarely tighten beyond +/-10% SqFt.
Number of Stories: Adjusting to include both 1 & 2-story homes is a good way to see more sold comparables.
Year of Construction: Loosening this criteria is also a good way to find more sold comparables.