When it comes to purchasing and selling property, all solutions are based on different relative factors that change based on the location, the time of year, market trends, and, most importantly, real estate comps.
How much should you spend on purchases?
What price should you set when you’re selling?
What is a house worth?
What are real estate comps?
A recent sale of a property in your neighborhood that is comparable to yours in terms of location, size, condition, and features is known as a “real estate comps,” short for “comparable sale.”
Real estate comps help sellers and their agents find an accurate price to list their homes for sale.
Finding comparable sales prices of properties is much easier now than it was even ten years ago, whether you’re a first-time buyer or seller.
Back then, you had to know someone on the inside, like a home appraiser or real estate agent, to get similar sales data from the Multiple Listing Service (MLS).
Nowadays, the general population can access much more information and find comps by conducting an online search.
Continue reading to learn more about comparables and how to find the most accurate comps for selling/buying a house.
Who uses real estate comps?
Real estate comps are used by real estate agents/realtors, appraisers, home sellers, homebuyers, and lenders.
1. Real estate agents/realtors: To determine a reasonable market value that seems acceptable to the present homeowners and buyers on the housing market, real estate agents conduct comparative market analysis while assisting their clients in selling property.
2. Appraisers determine the value of single-family homes, townhouses, condos, and other real estate types by looking at similar sales prices and other factors.
3. Home buyers and sellers can use comparable sales to determine the right list price for new home sales.
For example, homebuyers might use real estate comps to determine whether a particular property is priced fairly for the neighborhood market.
Even if a seller is using a real estate agent to help them sell their home, they still need to know about comps to be happy with the price that their agent suggests.
4. Lenders: When figuring out the terms of a home loan, lenders look at local market assessments and how the economy is doing.
They can determine if a sale price is fair, given how the market is doing, and if a mortgage loan is an excellent way to show how much a house is worth.
How can you find comparable properties?
You can use public property records to find real estate comps or hire an agent to help you with research and pricing.
Public Property Records
If you want to know how much a similar property sold for, the county usually keeps track of that information.
In some counties, you can search online, but in others, you might have to go to the courthouse.
Seller concessions are not listed in county records. But if a seller lowered the price to make up for repairs that needed to be done, the records show the final price that was lowered, not the original price that was asked for.
Real Estate Brokers and Agents.
In 2020, 86% of Americans bought a home through a real estate agent, while 86% of Americans sold a home through a real estate agent.
The same research found that 89% of buyers would hire their agent again or recommend them to others.
Real estate agents in your area can help you figure out what the information in MLS comps means and give you a comparative market analysis (CMA).
They can also give you accurate advice on how to price your property because they are experts in the market.
The MLS is the most up-to-date and accurate tool, but only licensed agents can use it.
So, agents can determine if a property’s value has probably gone up, if the fair market value is reasonable, or if the price is too high compared to other houses in the area.
Things to Take Into Account When Finding Real Estate Comps
Beginners may find it hard to find real estate comps, but if you know what to look for ahead of time, you’ll be able to find the right homes. Here are a few crucial factors to take into account when searching for real estate comps:
Use only Houses that Have Already been Sold
Ignore homes that are pending sale or are up for sale. Why? Sellers can overprice their homes and subsequently accept a considerably lesser price. Or, sellers may choose to underprice to attract multiple offers.
You will be able to determine a home’s value in your neighborhood once the sale is finalized because it only has value based on what someone ultimately pays for it.
Carefully Evaluate the Images.
Study the images in the listing very carefully. Are the finishes in the house comparable to yours? Examine the flooring, fittings, and appliances in detail. It doesn’t matter how minor the differences may seem; for example, stainless steel devices against outdated white devices can add up in price.
Read Out the Listing Description.
You should always read the listing description in addition to seeing the photographs. Pictures don’t always make every update or improvement obvious. For instance, you might not realize from glancing at listing images that a recently sold property has a new roof, increasing its value over yours.
The Location is Essential
Real estate comps only work in the exact location.
In some locations, the value of a property might vary significantly from one neighborhood to another, from one block to the next, or even within a hundred yards.
So you start with comparable homes within a mile, and if you need to, you look at homes within five miles.
Square Footage
When comparing home values, square footage is crucial. The price should be higher if one has 1000 square feet and the other has 2000. Properties similar to yours will serve as the best comparables.
Bedrooms and Bathrooms
You need to compare residences with the same number of rooms as your own home.
Also, two similar homes may have the same square footage, but their layouts may differ. For example, if a family room takes up most of its square footage, it cannot be compared to a home with several tiny rooms.
Lot Size
If their property has a yard, you must consider the lot size. Even though two houses have the same square footage, they aren’t comparable properties if they are situated on highly different-sized lots.
Year of Building
You should look at homes built five years or less before yours. An older house is frequently thought to require repair and to be out of date. So, a newer house will have a higher fair market value at first, but this doesn’t always happen.
Condition
The price the house sold for before can vary if it was in bad shape and needed a lot of work and money to make it liveable.
Renovations
When a homeowner renovates a kitchen or updates a bathroom, the value of their home usually rises. Think about any improvements or changes you notice in comparable real estate and how they stack up against the qualities of your home. For example, do you need to fix the deck on your house or install a new kitchen? Either of these will undoubtedly impact the value of your house.
Time of the Comparable Sales
Focus on properties that have recently sold—within the last three to six months. You could want to concentrate on an even shorter term in a competitive market where the seller is favored.
Similar Features:
Find properties similar to yours in terms of how close they are to the water, how lovely the views are, and how easy it is to get to them by public transportation.
Taxes
The amount of the property tax varies between towns. Therefore, when determining if two residences are comparable, consider taxes.
School district
Families with school-aged children may be concerned about the school district in which they live. Therefore, these housing comps mean less to you if you don’t have school-age children or if you’ve enrolled your children in a private school. Your final resale value, however, might be impacted.
It can be challenging to locate and evaluate comps. However, your neighborhood real estate agent is equipped with the knowledge and tools to guide you through the procedure. They can assist you in determining a competitive listing price for your house.
Real estate brokers and agents use CMA before listing a home for sale to provide sellers and buyers with all the information they require.
A CMA gives the most accurate information about the house and surrounding area. The CMA of an agent, meanwhile, is made up of more than simply numbers. Instead, the agent gives you professional advice to help you determine your list price based on the property, the market, prices, and other factors.
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