Real Estate Comps: What They Are And How To Find Them In Your Area
Carey Chesney6-minute read
February 24, 2021
When it comes to buying and selling homes, everything is relative. How much should you pay when buying? How much should you ask for when selling? What’s the actual value of a home? The answers all depend on a number of relative factors that vary based on location, time of year, real estate market trends and much more. Real estate comps are the key to unlocking the answers for your specific situation.
What Are Comps In Real Estate?
Simply put, real estate comps – or "comparables" – are comparable homes in a specific area that you are looking to buy or sell in. For example, if you have a three-bedroom, two-bathroom house with 1,500 square feet of living space you’re thinking of selling, finding homes with similar stats in the same neighborhood is a good way to start estimating your property value.
If you’re looking to buy and don't want to pay too much, finding good comps in the area can help you understand what the home is worth before you make an offer. Real estate comps are all about determining value, which can be useful for a number of different purposes across the various facets of real estate, from buying and selling to investing and making housing market predictions.
Who Uses Real Estate Comps?
Real estate comps can be useful for a variety of real estate professionals as well as members of the general public who are on the hunt for houses. Depending on your job or home buying goal, real estate comparables can provide invaluable insights toward making the best decision regarding where to live or how you provide the best possible service to your clients. Let’s take a look at how house comps can be useful for lots of people from virtually all walks of life.
Comps are a great resource for buying a house. As we covered previously, real estate comps can provide valuable knowledge for house hunters who think they've found the home of their dreams. Once you've zeroed in on a property you're thinking of making an offer on, researching similar properties in the area helps to verify that the listing price is fair. This information is invaluable when fine-tuning your initial offer amount – and it provides a way to guide your strategy when negotiating a final price.
Real estate comps provide a few critical insights when it comes to selling your home. As you may already know, understanding the prices of similar homes in the area will help you decide how to handle pricing yours. Another, perhaps less obvious, key benefit is that it can help provide clues on what selling points to highlight when you list your house for sale.
One of the most important steps to completing the sale of a home is the appraisal. This process, usually initiated by the buyer’s lender, calls on a professional appraiser to determine the value of the house in question. During a home appraisal, an appraiser relies on comps, as well as a number of other factors, to determine an accurate value of a property. This can make or break a transaction, making it one of the most important processes real estate comps are used for.
Real Estate Agents
Real estate agents use the MLS (multiple listing service) to pull real estate comps, which are then used to run a comparative market analysis. This allows them to give the best advice possible when it comes to both their buying and selling clients.
How To Find Real Estate Comps For Your House
Whether you’re buying or selling, pulling comps is a critical step toward making sure you make the right financial decision. Let’s look at the various ways you can go about doing this.
Do Your Own Research
If you don't want to consult an agent, a quick bit of internet research can give you the information you need to make your comparisons. Many sites like Redfin, Realtor and Zillow have "Find A Home" features that can make this process quick and easy. Keep in mind that comparables from such websites might not be as accurate as ones pulled through agents, and the comparables you might see may not be as close to your chosen property as you might think.
Want to take a deeper dive? County record sites can provide an even more in-depth look at the characteristics of specific properties and area trends.
Work With A Real Estate Agent To Pull MLS Comps
The MLS provides the most up-to-date and easy-to-access information when it comes to pulling comps, but it’s restricted to licensed real estate agents and appraisers. To get your hands on this juicy real estate comp information database, you’ll have to engage the services of a real estate agent. Working with an agent also gives you the benefit of a professional who is adept at running and interpreting comps. This is especially useful if you’re interested in buying a unique property that may be hard to find comparables for.
How To Use Real Estate Comps
Whether you’re a professional in the real estate business or just an eager home buyer or seller pulling comps, there are some key features to consider. Let’s dive into a few of them.
You've probably heard the old real estate adage, “Location, location, location.” Well, it’s an old adage because it’s pretty darn true. A 500-square-foot apartment in parts of New York City can be 10 times as expensive as a 5,000-square-foot house in the middle of the country. The differences aren't always quite that stark, but you get the idea. Typically, optimal comps are no further than one mile from the property, but that will depend on your area (rural, etc.)
How well-built and well-maintained a home is can be a critical component of its comparable value. Leaking roof compared to a brand new one? Yeah, bit of a price difference there. When running comps, make sure you take into account the condition of all parts of the homes you’re comparing.
New homes tend to have higher value, so be careful thinking there is an apples-to-apples comparison with a home built in 1950 and one built in 2010 just because they have the same number of bathrooms and bedrooms. There isn't.
Number Of Rooms
A four-bed, two-bath house may seem like a pretty close comp for a three-bed, two-bath house, but it’s really not. That extra bedroom can often mean a price difference of $100,000 or more. Don't forget to factor in size, too, as square footage can have a major impact on home value.
Acreage value varies by location but, all other factors being equal, more land means more value. Even if the houses are pretty comparable, if one sits on 2 acres and the other sits on 10, you need to take that into account when determining the value of both properties.
When looking at recent sales in the area to determine the value of the home, recency is a big factor. Comparing your subject home with a house that sold a month ago is going to be much more accurate than if you’re looking at one that sold 2 years ago. Your best bet is to find homes that have sold in no more than the last six months.
Tips For Using House Comps
Getting the information is one thing. Understanding how to interpret it to make smart real estate decisions is something else. This is one of the most popular and beneficial reasons people choose to work with real estate agents. It’s important to understand how to best use the comparable property’s information to make an accurate assessment of your home or future home’s value. Here are a few key tips to keep in mind.
Take the season into account: A house that sold in the spring market likely had a higher selling price than a comparable one that sold in the dead of winter.
View the comparable house in person: Looking at pictures can only do so much. If you can, visit the house you are comparing and get a good look at it with your own two eyes.
Only compare sold homes: Just because a home is up for sale at a certain price doesn’t mean that’s its actual value. This is why real estate agents only use sold homes and not homes for sale when running comps. If you’re researching on your own, you should do the same.
The Bottom Line On Real Estate Comps
So, as you can see, real estate comps are a critical component of making the best decision when you’re thinking of buying or selling real estate. When you know the things to look for and how to interpret them, you’ll be well on your way to making the soundest decisions as you navigate your home search. Looking to buy a home? Start the process with Rocket Mortgage®.
See What You Qualify For
Comparative Market Analysis: A Guide
Mortgage Basics - 7-minute read
Rachel Burris - March 11, 2021
Wondering how real estate agents decide on a fair and marketable price for a property? Learn what goes into a comparative market analysis.
Home Appraisal: What Is It, And What Does It Cost?
Home Buying - 7-minute read
June 21, 2021
What exactly is a home appraisal? We’ll cover the ins and outs of home appraisals and also tell you what it means for buyers, sellers and lenders.