Everything You Should Know About Real Estate Comps

Everything is relative in real estate. From sales prices to property market values, determining the ideal sales price can depend on different factors. Real estate comps help you address some of those factors.

1- What are Real Estate Comps
2- How Do it Work
3- How to Find Comparable Properties
4- Reviewing Real Estate Comps
5- FAQs

What are Real Estate Comps?

Real estate comps, or comparables, are nearby properties that are similar in value. You can estimate your home’s value by comparing the market value of similar properties.

Real estate comp is also helpful if you’re preparing to buy a house. Comps will be especially helpful if you’re concerned about the property being overpriced. Looking at other houses for sale in the neighborhood can give you a better idea of what houses in that area are worth.  This will, in turn, help you decide how much to offer.

Comparing real estate prices is also essential when evaluating potential properties to invest in and generating housing market forecasts.

Who Uses Comps?

Real estate agents, appraisers, homebuyers, and sellers use real estate comps to determine the appropriate market value for a property.

How Do Real Estate Comps Work for Different Stakeholders?

Real estate comparables can be essential when making a decision about your house or when helping a buyer find their new home. Let’s take a closer look at how real estate comps can be helpful for different stakeholders.

1) How Do Real Estate Comps Work For Appraisers?

A property appraisal is critical when selling a house. When done at the buyer’s request, an appraiser examines the property to assess its value. An appraisal will generate the property’s selling data and the comps for estimating the property’s actual value.

2) How Do Real Estate Comps Work For Realtors?

To do a comparative market study, real estate agents use multiple listing service comps (MLS comps) to collect relevant information about a home’s value. This proves beneficial during the listing or buying process.

3) How Do Real Estate Comps Work For Buyers?

If you want to purchase a house, real estate comparables are an excellent way to get a sense of a home’s market value. Even if you’re sure you’ve found the perfect home, a review of recent real estate sales in the area can reveal what similar houses in the area have sold for. This is helpful when determining whether the listing price is fair before making an offer.

4) How Do Real Estate Comps Work For Sellers?

If you are trying to sell, you’ll need to competitively price your home so that it generates the maximum amount of interest among potential buyers. Additionally, this may also shed light on the selling points to feature when you advertise your house.

How to Find Comparable Properties?

Whether you’re trying to buy or sell property, you should research your options thoroughly to ensure that you end up making the best possible financial decision. Let’s examine several approaches to accomplish this:

1) Do Your Research

A bit of web research will provide you all the information you need to make comparisons, even if you decide not to talk to an agent. Real estate sites like NYRentOwnSell can help you locate comps quickly and for free.

2) Pull MLS Comps with a Real Estate Agent

You may find that the MLS comps are fantastic resources, but they’re only accessible to real estate brokers and appraisers, not the general public. To obtain the MLS comps database, you’ll need to work with a real estate agent. In doing so, you will also gain access to an expert who knows how to conduct and read comps data.

Things to Look For When Reviewing Real Estate Comps

Whether you’re an experienced real estate agent or a novice homebuyer, take note of the following when considering comps:

1. Construction Date

A house built 50 years ago will not require the same level of maintenance and upkeep as a house built five years ago. Therefore, try to find a house with a similar age and construction date to make the best comps for the home being sold.

2. Location

Smaller distances provide more accurate representations of homes in your area when looking for real estate comps. Examine similar properties on the same street or within a few blocks.

3. Target Dates

To accurately estimate the house’s worth, it’s essential to focus on recent sales activity in the neighborhood. Comparing a home to one that’s recently sold will give you a better idea of how accurate your valuation is. To save money, look for houses that have been sold within the last six months.

4. Number of Bedrooms/Bathrooms

The subject property should have the same number of bedrooms and bathrooms as the sales comps. If your home has four bedrooms with one bathroom, it’s not comparable to a house with two-bedroom and two bathrooms.

5. Square Footage

In determining a property’s worth, square footage is vital because it determines the house’s total size. Look for homes that are within 10% of the size of the property for which you are looking for comparable listings.

FAQs

How do you Determine Comps?

You can determine real estate comps by comparing properties within a 1 – 2 mile radius that was recently sold. You can also compare the properties by specifications like number of bedrooms, kitchen size, number of bathrooms, and yard size.

Why are Comps Important in Real Estate?

Comps are important for sellers when calculating the actual listing price of their property or house. It is also essential for potential buyers.

How do I Find the Best Real Estate Comps?

You can get the best comps by reviewing the local MLS.

How many comps should you have?

Appraisers typically ask for 3 – 4 comps within a mile of the property and 20% of the gross living space.

What are the Resources for Finding Comps?

Public property records are available if you want to find the details of a specific sale; these are accessible at the county clerk’s office. You can also conduct an internet search to find comps in the area.

How Many Months of Comps are Required for an Appraisal?

Appraisers look at the home sales within the last 90 days when evaluating real estate comps. When there are not enough sales, the time window expands to sales within the past 6 – 12 months.

Final Thoughts

Evaluating real estate comps is vital if you’re considering buying or selling a property. You’ll find that your home search will be easier once you know how to look for and interpret real estate comp.