Real estate comps: What they are and how to find them

As a homebuyer, you may have heard a real estate agent refer to "comps" 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 and how to scout them out on your own.

Real estate comparable sales, or comps for short, determine a home's fair market value using recently sold homes in the area 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.

Many parties use real estate comps. Buyers can use them to determine how much to offer for a home and as a negotiating tactic to achieve a lower price or seller concessions. For sellers, comps can help determine a listing price if they don't want to hire an agent to help them sell their homes. Appraisers use comps to determine how much area homes have recently sold for — their method to assess the fair market value of a home. Finally, comps help real estate agents run a comparative market analysis (CMA), a report that compares the home to recently sold properties.

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Once you're ready to start searching for comps on a property you're interested in, there are resources available that can help you get started.

While it may sound like one definitive resource, the Multiple Listing Service (MLS) is really a collection of local databases that holds information about properties on the real estate market. Local real estate professionals agree to share information on their local MLS, making it easier to connect home buyers and sellers. You need to have a real estate license to access the MLS, so you'll have to work with a real estate agent or broker to access the listings on your local MLS database.

And while you can get started searching on your own, it's often a good idea to consult with a real estate agent who can help you navigate the market and see the big picture.

Once you start researching, you'll probably have a few similar homes to consider. Choose three comps that are the most similar to your property.

If you're able, visit them in person to confirm their similarities. Take a look at the yard, exterior, neighborhood and surrounding area. If in-person isn't an option, do as much research as you can online. Really dive into the details to confirm what you can.

If everything checks out, you can use these comps as a reasonable benchmark of the fair market value of the home you're considering.

Beyond down payment and neighborhood conditions, real estate comps remain one of the most important considerations when it comes to buying or selling real estate. An accurate, well-researched comp can help homebuyers and sellers make informed decisions for their financial future.