Have you ever heard about the term comps? If you are familiar with the field of real estate you probably have. Regardless of whether you are a seller or a buyer, you will find comparables, or comps, handy when it comes to property transitions. In this article we will disclose important facts about comps with the intention of informing and guiding through the world of real estate.
What are comps in real estate?
Comps, which is short to comparable sale, are homes that have been recently sold, oftentimes within six months, that are also similar in condition, size, location and features to the home you wish to buy. The comp will give you an idea of how much the home you wish to buy should cost.
How does a comps work?
Comps are used to help us determine the value of a home. So, if you are a buyer, you must ask yourself, “How much should I pay for this property?” and if you are a seller wonder, “How much should I sell this property for?”. Comps will give both parties some guidance by comparing the property with recently sold properties in the same neighborhood or as near as possible with similar features.
How do you identify comps?
Start by looking for properties recently sold nearby where you are considering making the purchase, and ascertain the price paid for them. The sold properties must have similarities with the one you are aiming for, like size, features and age. Consider additional amenities such as pools, garages, basements, etc.
How can comps help me if I'm a buyer
They will help you make an informed decision, potentially preventing you from overpaying for a property by informing you of the value of similar properties. Once you choose the property you like, by searching and comparing your property with others sold, you will have a better idea of how much to offer for it.
Who Uses Real Estate Comparables
Comps are frequently used by sellers, homebuyers, appraisers, and real estate agents. Comps are crucial for anyone involved in selling, buying or dealing with property valuation in any capacity.
How To Find Real Estate Comps For Your House
Start by checking out our online real estate website. There you will find a range of properties and their prices. Working with one of our real estate agents can also help you, since they have access to the Multiple Listing Service (MLS), a comprehensive database of property listings, sales, and details.
You can also research the county’s public property records, attend open houses and check with local newspapers or online classifieds.
How to Calculate Property Value Using Comps?
Start by gathering relevant comps for you, write down the sale’s prices then calculate the average price. Also, consider the median price. Finally, review the data and check with the current market. Don’t forget that you can always count on our real estate agents to walk you through the process.
Difference between comps and assessments
Both are used to determine the value of a property, but they serve different purposes, are conducted in different ways, and can sometimes lead to different valuation outcomes.
- Comps: Used to determine the current market value of a property, usually for the purpose of setting a listing price or making an offer.
- Assessments: Conducted by local governments (usually at the county or municipal level) to determine the value of a property for taxation purposes.
Is it possible to negotiate a property's price based on comps?
Yes, it’s possible. It is actually common to negotiate the property’s price using comps. They give a great base for both seller and buyer, and starting from this base, they can start the process of offering.
How do appraisers use real estate comps?
The appraiser will come to your home and then source their own comps to more accurately assess how much your home is worth. Usually, a buyer will require an appraisal before closing the deal, and sellers get an appraisal to help them accurately price their home.
What goes into a comps analysis?
There are a range of factors that are taken into analysis in real estate comps:
- Location and amenities nearby: Property values usually change from neighborhood to neighborhood, and depending on amenities. Consider looking for comps within a 1-mile radius and move out to 5 miles if necessary.
- Age of the house: Houses built within a 5-year range of your home’s construction should be considered. A newer home usually has a higher value in the market.
- Size of the home: Square footage it’s indispensable when comparing home prices. After all, you will pay per square foot, so the best comps for you will be properties that have the same size as yours.
- The number of bedrooms and bathrooms: The price of a home increases according to the number of beds and baths.
- Condition: To get more accurate and compatible comps the houses which you are comparing need to be in the same condition (maintenance and liveability) as the one you are targeting.
- Property History: When the house has its bathroom updated or kitchen renovated, its value typically increases. Any renovations or upgrades must be considered on comps.
- Timeframe: Focus on homes that have been sold within a 3 to 6 month period. In a market that favors the seller, also called a hot market, shorter time frames might be more common.