I had a long discussion yesterday with a veteran Compass agent where we got into the granular details of today’s home pricing. In particular, how crucial it is to examine the past sales carefully to avoid having a one-off sale be a guide as to how much buyers are willing to pay in 2023.
The sale above is a great example.
An agent sold his own house in Torrey Highlands at the peak last year. He listed it for – $2,088,000 and if it sold for that much it would have been the new record price. But the buyer, from Brooklyn, threw in an extra $322,000 to clinch the deal.
But when you study the history, there isn’t any logical explanation – other than it was peak frenzy:
A year later, all of those recent sales are an ancient memory. While most of the homeowners in the tract would love to use the $2,410,000 as an approximate value for their home, they are the only ones.
This is an easy example because it’s so extreme. But as agents, we need to be smart about investigating the comps thoroughly, and use the ones that appear to be a legitimate reflection of what a ready, willing, and able buyer would pay for a home today – and price our new listings appropriately.
Red flags for unusual sales that may not reflect today’s values:
- Cash buys.
- Off-market buys.
- Market time of one day or less.
- Sales from the first half of 2022.
- Buyer-agents who are newly licensed or out-of-area.
The easiest rule-of-thumb is to only use sales that closed in 2023.