Whether you are planning to buy or sell a house, being able to compare similar homes will give you a lot of useful information.
Comparable sales, or comps, are important terms that real estate buyers and sellers alike should be familiar with.
This pertains to houses with the same size, features, and condition located in a similar area just like the house you want to sell or buy.
What are Real Estate Comps?
Real estate comps are houses that are the same with the one that you want to sell or buy. A real estate comp could be used when it comes to determining the value or price of a property.
You can pull up real estate comparables from the data on the multiple site listings, which is the database of the properties that are currently offered for sale or have already been sold in a specific area.
A licensed real estate can gain access to the system to pinpoint similar properties in a neighborhood for drawing comparisons.
Every time they pull MLS comps, real estate agents usually look for listings that have the same age, features, size, and condition. These listings are often sold for the past 6 months and within the 1-mile radius.
A 5-mile radius is considered acceptable in rural places where properties are often at more distances away from each other.
The multiple listing sites also give data points including number of days of being in the market, sales prices, and listing prices.
How to Determine the Value of Your Home Using Real Estate Comps
With the help of real estate comps, it becomes more possible to identify your property’s future value after it gets updated. There are several factors that should be addressed to project the future value of your property.
After Repair Value or ARV is value of the property after it gets fixed up and updated.
This after repair value could also be used before fixing up or updating the property to determine its approximate future value.
For example, you are planning to renovate your house and you would like make some upgrades in the bedroom, bathroom, or kitchen so you can sell it at a much higher value.
With the use of real estate comps, it will be easier for you to estimate the property’s future value by looking for other newly renovated comparable homes in your community to identify what your property’s future value is going to be.
How to Find Other Properties to Use as Comparable Sales
There are several methods you can try to find other properties that you can use as comparable sales:
Get a home appraisal
The most straightforward and standard way to find a comparable property is to work with an appraiser.
A professional real estate appraiser who specializes in the area where you plan to buy or sell a property is among the best sources to help you with this task.
The appraiser will perform a careful analysis of the property to identify your property’s exact features.
After that, the appraiser is going to compare this with similar properties around the area that were sold for the past two months to provide you with a fair and acceptable market value.
Work with a hire real estate agent
Except if you have decided to buy or sell a property all by yourself, you might want to consider working with a real estate agent.
A trusted realtor focusing on the area where you want to buy or sell has access to all local real estate listings.
It means that the agent can give you a list of properties for sale that are the same with yours.
The agent will also know the sale prices of the real estate comps that were sold within the past several months and their difference with the listing prices.
Conduct comparative market analysis
In case hiring a home appraiser or real estate agent is out of the question, you can proceed with your own search in finding comparable properties.
You can do this by performing a comparative market analysis or the process of carefully analyzing the property that you plan to buy or sell.
After this, you will look for at least three almost similar properties within the vicinity sold for the past three months.
Use real estate tools
Thanks to the development of real estate technology, there are now real estate tools that you can use to help you find properties that you can use as comparable sales.
Online Resources for Determining Your Real Estate Comp
There are several online resources you can use to determine your real estate comps. For public and fre real estate websites, the best ones include:
- Zillow.com
- Redfin
- Trulia.com
- Property Shark
- Realtor.com
As for paid services, two options you can consider are:
- RealQuest.com
- Home Smart Reports
How Buyers and Sellers Use Real Estate Comps
Sellers, specifically those that are sold as FSBO or for sale by owner, use comps to identify the suitable listing price for their property.
Even though you are selling your house with the assistance of a professional real estate agent, it is important that you are still familiar with real estate comps for you to ensure that you will be comfortable with the recommended listing price of your agent.
On the other hand, buyers use real estate comps to decide on the price that they will offer on a particular property.
To be more specific, buyers want to ensure that they won’t end up overpaying for the house that they are planning to buy.
How Appraisers Use Real Estate Comps to Value a Property
Once the appraiser arrives at your home, they are going to source their own real estate comps to have an accurate assessment of the worth of your property.
There are a couple of reasons why appraisals can take place.
Most of the time, the lender of a buyer will request for an appraisal prior to closing.
However, there are also times when sellers can ask for an appraisal in order to help them get an accurate price for their home.
Real Estate Comps Summary
There are several factors used to determine the prices of real estate properties and these include demand, supply, condition, location and the amenities and features of the property.
Since these values tend to be ever-changing and relative, real estate comps on the multiple listing sites are a respected and trusted method to set competitive and fair list prices.
Buyers can use comparable properties since these determine the right offer price for a property.
All in all, real estate comps are considered as valuable resource for both real estate sellers and buyers.