You’ve got a lot of decisions to make when you plan to buy a home.
From determining your must-have features, to how you’ll make a down payment – the decisions can be dizzying. And one of the most important decisions is how to determine the value of a home. That’s where real estate comps come in.
What is a real estate comp? As a new homebuyer, you may have heard a real estate agent refer to it when you started looking for a home or read the word on a real estate website. Let’s take a look at real estate comps, what they are, who uses them, and how to scout them out on your own.
What Are Comps in Real Estate?
Real estate comparable sales, or “comps” for short, determine a home’s fair market value using recently sold homes that are similar to the property you plan to buy or sell. Comps will show you the recent sale prices or rental rates of homes that have similar location, size, condition and property to the home you’re buying, selling or renting.
Who Uses Real Estate Comps?
Many parties use real estate comps, including homebuyers, sellers, appraisers, and real estate agents.
Homebuyers can use comps to determine how much to offer for a home by comparing what others have paid in the past few months for similar homes. Buyers can also use comps as a negotiating tactic to achieve a lower price or seller concessions.
Sellers can use comps to decide a listing price if they don’t want to hire an agent to help them sell their homes. Comparable sales can offer an objective way to help sellers price their homes by getting to the root of fair market value. They can also use comps to counter offers made by buyers if they make a low offer.
Appraisers are professionals that are typically hired by a mortgage lender to determine the value of a home when considering a mortgage application. Appraisers can use comps to determine how much area homes have recently sold for, which is the best way to assess the fair market value of a home.
Real Estate Agents
Real estate agents can use comps to run a comparative market analysis (CMA), or a report that compares the home to recently sold properties, which uses comps to estimate fair market value.
The CMA helps them come up with a listing price for homes, in line with fair market value.
How to Find Real Estate Comps for Your House
Let’s take a look at the steps to finding real estate comps for your home on your own. It’s often a good idea to consult with a real estate agent, but you can search for them on their own.
Real estate listing sites can be really handy. First, type in the address for the property you’re considering or the property you want to sell. You may want to search by date sold to figure out how recently comparable homes sold. You want to stick to listings that have already sold because current listings could change in price.
You could also use the following sites to help you make comparisons on your own. You can search by location and filter by details such as the number of bedrooms, amenities, square footage and more to find some healthy comparisons.
- Zillow: Zillow, one of the most popular search sites, offers a variety of filters and home values based on both public records and recent sales comps.
- Trulia: If you’ve heard of Zillow, you’ve likely heard of Trulia. Trulia offers local insights, school ratings, discussion options and more so prospective community members get an overall feel for the neighborhood and home they might purchase.
- Realtor.com: Monitoring a property through Realtor.com also allows you to track the value of your current or potential investment.
- Home Smart Reports: This website uses statistical models of sales activity in neighborhoods.
- Redfin: Redfin offers a 3D overview of homes so you can experience the homes just like you would if you’d walk through them. You might have a trickier time finding comps on this site because it’s primarily a buy/sell site.
- RealQuest: RealQuest, a financial and real estate-related database, also covers the logistics and analysis of real estate.
You can also pursue public property records by visiting your county assessor’s office, which maintains records of all recorded local sales transactions, though you can’t access the asking price of any homes nor any seller concessions or what the seller agrees to pay.
Note: You ideally want to keep comparable homes within a local radius – particularly within the same neighborhood or within one mile, if possible.
The Components of Real Estate Comps
Real estate comps look at the following characteristics of a home:
- Home square footage: Look for similar square footage — within 25%. In other words, if a home is 2,000 square feet, look for a home that is around 1,600 to 2,000 square feet.
- Bedrooms and bathrooms: Take a look at the number of bedrooms and bathrooms in the comp. A property with five bedrooms and four bathrooms will be valued differently than a home with two bedrooms and two bathrooms.
- Amenities: Amenities include big backyards, updated parts of the house, swimming pools and tennis courts.
- Neighborhood: Who primarily lives in the neighborhood? A mixture of families and retirees? College students? Determine whether it’s safe, how well people maintain their homes and more.
- Final sale price: What were they priced at and how long did they stay on the market? This can help you figure out your price bracket and maximize your ROI.
Other value-influencing factors can also occur, including market conditions, location differences and other information surrounding the sale.
How to Use Real Estate Comps
First, verify the homes you’ve selected really do look like yours by visiting them in person. Take a look at the yard, the exterior of the home, the neighborhood, entertainment venues and walkability to various services. It’s hard to tell whether the amenities compare to your home unless you actually visit the home you’re comparing yours to.
Choose three comps that are the most similar to your property. Comps can help you decide how much you should initially list the property for.
The Bottom Line on Real Estate Comps
Amid the many considerations when it comes to buying or selling real estate, beyond down payment and neighborhood conditions, real estate comps remain one of the most important components. They can help you pinpoint a listing price and keep you from overpaying for a property.
Do you have your eye on a new home? Get pre-approved for a mortgage to jump-start your homebuying journey.