Comparables Are Like The 3 Amigos!
Whenever you refinance, or buy a new home, or even sell a home, there is always an appraisal involved. The lender will always want a justification that the home is worth the sales price, and quite frankly, you will want that too.
So, one of the ways that an appraiser uses to determine value (there are others, but I am not going to bore you here with all the technical stuff…I will let Steve do that in a future post)…is to use comparable homes like the one you are buying, that have sold in recent months. The comparable homes need to have the same square footage, beds, baths, etc…kind of like sister houses (or brothers not to be sexist here), or as we like to call them the 3 Amigos. That’s because there are always 3 comparable homes required and they are alike, friendly, you know…Amigos.
Now, lenders , being picky like they are and wanting to know the value of the home they are lending on, want these Amigos to be in the same neighborhood or as close as they can get to it (within 3-6 blocks in Utah), and they want them to have sold no longer than 3 months ago. That is because a comparable house that sold a year ago does not reflect the true market value of today (prices may have gone up or….Down since then).
The lenders want the Amigo homes to be in close proximity because…well, a house that is worth $500,000 is usually not going to be located in a neighborhood of townhomes worth $180,000, so they figure if you can’t find comparable homes close by, there is something wrong with the value…don’t you agree?
So, now you know all about comparables or the 3 Amigos and why they are used. Go forth and spread this knowledge, send your friends here to view this blog, and if you have any questions, please call us (the number is right there…at the top of the page).
Til later, ciao