What Are “Comps” In Real Estate?
February 19, 2022
Property values are the most important figure to know about in real estate. The value determines how much money you are dealing with in a real estate transaction.
If you’re a buyer, you don’t want to make an offer that’s too much higher or lower than the actual property value.
If you’re a seller, you don’t want to make the listing price for the house higher than the value of the house after an appraisal. So, how do you figure out the property value of a house?
This is where real estate comparables come in. Comparables or comps are a tool used in real estate to estimate the value of a property. In this blog post, we go through what real estate comps are and how you can use them.
What Are Real Estate Comps?
Real estate comps are recently sold houses in a certain area that have similar qualities to the one you are attempting to sell or buy. Comps are usually used to assess a house’s value or purchase price.
Real estate comps use a sales comparison approach to determine the value of a house by figuring out how much it would cost to purchase a similar one in the same area.
The closer the houses being compared are in similarity, the more accurate the purchase price will be. The condition, square footage, and location should be very similar if not the same. Along with these factors, there are a few others that should be considered.
- Number of rooms in the house
- Amount of land
- Time frame (Sold up to 6 months ago)
Real estate comparable properties are a reliable way to determine a property’s value. By observing the differences between the properties being compared and seeing how they influence the prices, you can get a good read on how much the property of interest should be priced at.
Who Uses Real Estate Comparables?
Real estate comps can be used by anyone in the real estate industry but there are some that real estate comparables benefit more than others.
When buying a house, you don’t want to put in an offer that’s too high because you could pay a lot more than you need to for the house. If you put in an offer that’s too low then you could increase its chances of being declined. Real estate comps allow buyers to find out how much other buyers have paid for recently sold similar properties. Comps give buyers a range to work with so they can make a decent offer on the house while at the same time giving buyers leverage in negotiations.
The pricing of your house when selling is an extremely important step to sell your house fast. Home sellers can use comps to find a range of prices that buyers have been willing to pay for. Sellers can also use comps to determine the different features that buyers were willing to pay more for.
An appraisal is a necessary part of a real estate transaction. Without it home buyers won’t be able to get a mortgage. Appraisers use comps along with other resources to assess the value of a property.
Licensed Real Estate Agents
Real estate agents can find comparable properties from Multiple Listing Services, a resource that gives real estate professionals the largest selection of properties for sale. They use those comps to create a comparative market analysis which uses the sales comparison approach to estimate the fair market value of the property.
How to Find Real Estate Comps Tools To Use For Free
Many websites provide tools to help users compare properties on sale and that have been sold. Finding real estate comps using these online resources is convenient but rarely accurate. Here are some websites that provide free real estate comparables.
- Zillow Pricing Tool
- Trulia Search
- Property Shark (Through a paid plan)
- Research Public Property Records On Your County or City’s Website
Work With a Real Estate Agent To Get Access To MLS Comps
Free real estate comps are a great place to start whether you are buying or selling a house, but the accuracy of these resources is questionable. Real estate agents use Multiple Listing Services that gives them access to a larger amount of houses to compare to. Agents also use their expertise along with other tools to ensure that you are working with accurate estimations on property value.
Negotiators consist of some of the best real estate agents in the country that go above and beyond to satisfy their clients. You can find your local Negotiator here.