September 27, 2020
Do you remember Gladys Kravitz? If not, you’re missing out. A pop culture staple, Mrs. Kravitz embraced the role of cliche nosy neighbor in the beloved fantasy sitcom, Bewitched.
Besides indulging my nostalgia for 1960’s TV programming, I reference her as a quick reminder that we all have a tendency to be a bit of a Kravitz in our own neighborhood. We love sneaking through the open house of that gorgeous stone two-story we’ve always had our eye on, we love browsing through Zillow photos of the Tudor on the corner as soon as we see the “For Sale” sign in the yard, and perhaps most of all, we love knowing what other homes have sold for on our street. And why shouldn’t we? It’s practical knowledge that can inform us of our own home’s position in the neighborhood. Or is it?
As a real estate professional, I love working with knowledgeable buyers and sellers; it immediately creates an enjoyable, collaborative relationship with clients. In the same breath, it becomes critical to distinguish between knowledge and rationale when comparing the sales of neighboring homes to one’s own.
I regularly encounter clients who reference XYZ sale on their street, and share their expectations for their own home based on that final sold price. While it would certainly make our job much easier if each home was as apples-to-apples as that, each comparable sale typically requires an in-depth analysis to determine how the homes truly stack against one another.
The simplest explanation of our analysis process boils down to comparing properties on a price per square foot ($/sq. ft) basis, calculated by dividing the final sales price of a home by the home’s above grade finished square footage. It is important to note a crucial term in that equation: the use of “above grade” rather than “total” square footage. Clients can often dramatically overshoot or undershoot their home by making the error of a price comparison based on total finished square footage. While finished below grade square footage is always factored into the overall price per square footage, it is never directly included in the comparison.
After comparing the homes on a price per square foot basis, our analysis continues by making adjustments for differences in acreage, finishes, and amenities between the subject property and comparable sales in a manner similar to that performed by an appraiser. By adopting this approach, we ensure we are presenting the most accurate, objective and comprehensive data possible in order to best inform our clients’ decisions moving forward.
What does this means for you? Keep attending those open houses, keep monitoring the market activity in your neighborhood, and keep channeling your inner Kravitz. Just make sure you’re considering all the information when you’re ready to list your own home! Stay tuned for Part 2 where we'll discuss home improvement dos and don'ts, and how to maximize the dollar return on your property investments.
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