‘Real Estate Comps’ is a term you will come across very commonly in the world of real estate. Whether you are a buyer, seller, or an investor, it is comps that are needed to take an informed decision about buying or selling a property.
‘Real Estate Comps’ is actually an acronym that stands for real estate comparable sales and it refers to the prices of comparable properties recently sold in the area.
For example, if you are trying to sell your house, it is important for you to set the asking price right to catch the attention of many potential buyers. It is then that you need to get these comps to arrive at the right asking price.
Similarly, as a buyer or an investor, you need help of comps to take a correct decision about buying a property in each neighborhood. the comp data is usually available with all qualified realtors operating in a housing market.
What are real estate comps?
Real estate comps are statistics pertaining to prices of similar properties sold in a specific community or neighborhood in the recent past.
For example, if you want to sell your single-family home or an apartment in a specific neighborhood, you need comps related to prices of similar properties (in size and condition) sold in the last 3-4 months in the neighborhood.
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Age of the homes and their features also need to be very similar to your home when consulting real estate comps to arrive at the asking price of your home.
Real estate comps are very helpful for not just buyers and sellers but also brokers and realtors as they are able to guide their clients in the right direction based upon these statistics.
How to determine the value of your home using real estate comps?
One of the most useful ways in which comps are used are when a seller wants to know the fair market value of his property.
As values of properties keep on changing with passage of time, it is these comps that help the owner know the sale prices of comparable properties in his neighborhood in the last few months or even a year.
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Here is a list of some items that are considered in the real estate comps of a house:
- Number of bedrooms
- Number of bathrooms
- Square footage of the property
- Square footage of the home
- Age of the home
- If the home has a pool
- Has the property been updated?
- How many car garages does the property have?
- How old is the roof?
- Any other characteristics of the property
Basically, the real estate comp is trying to find any comparable property that has been sold in the area recently.
If an owner is going to list his/her property for sale soon, It is important to keep track of comps pertaining to similar homes sold in recent months only as prices fluctuate quickly.
There is no use of real estate comp data that is more than 6 months old as values of properties may have changed quite a lot in this time period.
Of course, every property is unique in terms of its features even if the age and numbers of bedrooms and bathrooms is same.
Also, the owner needs to keep in mind whatever improvements he has undertaken in recent times when calculating the sale price based upon real estate comps.
How to find other properties to use as comparable sales?
Lenders appoint professional experts called appraisers to find out the actual value of a property for which they are providing finance to the borrower.
These appraisers depend upon real estate comps to arrive at the fair market value of the property in question. They make sure that the data they are consulting involves comparable properties only.
For example, if an appraiser has been given the task of finding out the value of a single-family home, he will not look at the real estate comps of apartments or homes larger in size than the property that needs appraisal.
Other properties taken into consideration as comparable sales must be similar in terms of location, area, age, condition, and the numbers of bedrooms and bathrooms.
If such comps are not available or if there are slight differences in properties, the appraiser considers these differences when arriving at the fair market value of the property for which he has been appointed.
Online resources for determining your real estate comp
When you are trying to find out the value of your house and not contacted any realtor, it is possible to get down to real estate comps on your own by consulting various online sources.
There are many people who find it awkward to call a realtor just to find out the value of their home.
Here is a list of online companies that compile real estate comps:
- Zillow.com
- Trulia.com
- Redfin.com
- Loopnet.com
- Roofstock.com
You can visit Zillow, a very popular realty website and enter the address of your home to be provided with Zestimate, a term that they use for a correct estimate of the value of the property.
Zestimate is based upon sales records available in the public domain and it serves as a beginning for you to calculate the fair market value of your house.
There are several other online resources that you can take help from to arrive at a fair value of your property. These include Trulia, RedFin.com, Realtor.com, and Property Shark.
These are some free house value sites that can be used by anyone to find out the price of his property. In addition, there are some paid online resources also that can be used for finding the value of a property.
They are RealQuest.com and Home Smart Reports. Both charge a small fee for providing a neighborhood summary that contains comp data, a neighborhood ma, risk analysis, and other important data about the housing market.
Paid services for real estate comps
Most people do not like the idea of paying someone to know the value of their own property.
However, it can be a good idea to pay a small fee to an online source that is ready to provide you with detailed information about the real estate comps.
Why leave money on the table for the buyer of your house when you can get a higher value based upon the information you get from these paid online sources?
Real Quest is one of the top-rated services online providing useful information about a property anywhere around the country.
By paying a small amount of fee, you can get real estate comps, street map, and info about the neighborhood, accurate estimate about the value, flood maps, and transaction history of the property in question.
As a buyer, you can get very useful information about the property you are interested in buying form Home Smart Report.
It is a paid online resource that gives you data about comparable sales in the neighborhood in recent times, a summary about the neighborhood, statistical charts, and even a risk analysis to help you in taking an informed decision about buying.
How buyers and sellers use real estate comps?
Sale and purchase of homes involves lots of money.
As a buyer, you do not want to pay more for a property than its real worth. At the same time, no seller wants to leave money on the table by setting the asking price of his property any lower than its fair market value.
This is the reason why real estate comps are mostly used by home buyers and sellers.
While there are many individuals who visit realty websites to make use of real estate comps, the best resource of the most accurate and authentic comps are real estate agents.
It might be a tricky exercise for any common individual to navigate through the comps given by a realty website as it requires using relevant filters.
But if you know a realtor, the same exercise becomes very easy as this professional can run through the comps to give you the most accurate price of a property.
Whenever using real estate comps, you need to make sure that you are comparing prices of recently sold properties. Also, you must compare properties only when they have the same condition and contain same numbers of bedrooms and bathrooms.
How appraisers use real estate comps to value a property?
Appraisers are professionals hired by lenders to find out the real value of a property that they are financing.
Though these professionals are trained in finding the value of a property based upon its condition, age, features, and improvements undertaken by the owner, they nevertheless make use of real estate comps to compare the property with sale prices of comparable properties recently sold in the neighborhood.
They factor in the minor differences in properties as all properties are unique in many respects. But they do get invaluable help from real estate comps in arriving at a fair value of the property.
Their work becomes tough when there are no comps available as they must do their calculations from a scratch. When real estate comparables are available, they can easily find out the value of the property by factoring in differences and compensating for them.
Key items to consider when using real estate comps
No two properties are alike. However, the goal of real estate comps is to compare properties and to help buyers and sellers in finding out the prices of properties. There are many things that need to be taken into consideration when using real estate comps.
- Location
- Neighborhood
- Age of the property
- Condition of the property
- Square footage of the property
- Features and accessories used
- Improvements undertaken in recent times
Only properties that are like each other should be grouped together when comparing their prices.
This can be done based on location, age, condition, numbers of bedrooms and bathrooms etc.
There are obviously differences in any two properties and these differences must be factored in by the appraiser to add and subtract amount form the price of a property.
For example, the property in question may have a basement which adds to its value. The owner may have purchased a new HVAC system that also adds to the value of the property.
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