Real estate comps, or real estate comparables, are comparable properties recently sold in the location you want to buy or sell in. They are used to help you determine property value and initial asking prices.
There are a number of factors that go into pricing a home, including the location, time of year the house goes on the market, current real estate trends, and comparable houses or properties (aka real estate comps). Agents or sellers rely on real estate comps to understand what buyers are currently willing to pay for a property similar to the one about to hit the market.
Why Do Real Estate Comps Matter?
Real estate comps matter because they help determine current home or property value. Buyers do not want to overpay for a home, and sellers do not want to undersell their home. By looking at the selling price of comparable homes and properties in the exact location, sellers can have a clearer understanding of a fair and reasonable asking price. At the same time, buyers can have a better idea of what to offer.
What Factors Impact Real Estate Comps?
There are a few factors that buyers, sellers, agents, and appraisers should use to determine real estate comps, including:
Location
The location should influence which properties should be compared to the home or property in question. After all, a home in the heart of the city is not reasonably comparable to a rural home located on a country road.
Ideally, real estate comps are found within a mile radius of the home in question. However, the size of the search area can fluctuate depending on the number of homes available for comparison in the area. For instance, while a seller in a congested urban area will likely have several comps close by, a seller in a rural area may need to extend the comp search by a few miles so they can cast a broader net to find comparable homes.
Lot Size
When finding a comparable property, it’s crucial to consider lot size because the more land someone owns, the more valuable their property is. It can be unfair to compare a home on a quarter-acre lot to one on a three-acre lot.
House Size
Square footage, the bedroom count, and the bathroom count all factor into which properties should be used for comparison and which ones should not. A 2,500-square-foot home with four bedrooms and three bathrooms is significantly more expensive than a 1,400-square-foot home with two bedrooms and one bathroom. When finding comps, look for homes that are close in number to room counts and square footage.
Age
The age of the house can also affect which properties should be used for comparison. A newer home typically has a higher value than an older home, even if the location, lot size, and house size are comparable.
Conditions
House conditions matter when comparing the value of one home to the value of another. Even if all other factors are similar, a well-kept home will have more value than a home with roofing problems or water damage.
Date of Sale
It’s essential to find real estate comps that were sold within six months or so of the current property hitting the market. A home sold recently will more accurately reflect market trends than a home sold more than a year ago.
How to Find Real Estate Comps for a House
Whether you are house-hunting or preparing to sell your home, your real estate agent will be able to use their resources to find fair comparables in your area. Your agent will rely on the Multiple Listing Service (MLS) system to access the most up-to-date information and pull the most applicable comps.
To do your own comp research, you can check out real estate websites or scour through public property records to find comparable houses or properties. These methods are more time-consuming but accessible to anyone with a computer and internet access.