What Are Comps? A Way to Pin the Right Price on a Home
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To drill down even further, identify other factors that could also impact your home’s value, such as the school district it’s in or its proximity to public transit or parks. NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.
The number of rooms, bedrooms, bathrooms and additional living and outdoor spaces can affect real estate comps the most. “These can shift comps numbers considerably,” Coley said. There are various ways to find comps for houses, whether you’re doing the research yourself or getting the help or advice of professionals.
Hire an appraiser
One important distinction to make as you investigate comps is between value and price. Value is how much the home is worth to potential buyers in the current market; price is how much the home is actually listed for. The goal for a buyer is to find a home with a price that’s similar to its value, and reviewing comps can help. Eal estate comps are a critical component of making the best decision when you’re thinking of buying or selling real estate.
But if your hood is unusual or a little rough around the edges—or your home is a one-of-a-kind, and maybe not in a great way—comps might send you traveling down the wrong road. “Don’t believe the hype that all CMAs are created equal,” says Aaron Seekford, a real estate broker in Arlington, VA. The latest real estate investing content delivered straight to your inbox. A title company confirms that a person has the legal right to sell a property.
When comps work—and when they don’t
The above information is a great starting point when analyzing comparable properties, and the side-by-side format will allow you to compare relevant information directly. You can add additional rows for property descriptions, tax values, and more as you see fit. I recommend walking through an example yourself and then saving the file as a template for future use. If you want a more visual example, try checking out the examples provided by SampleTemplates or The Balance. Picking the correct price point is critical to a successful deal.
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Using Comps To Determine Home Value
Even if you’re selling your home with the help of a real estate agent, you’ll want to be familiar with comps so you can make sure you’re comfortable with the listing price your agent recommends. As you observe the market, take note of how quickly homes are marked as “pending” (or “sale pending”). This can indicate the kind of market (buyer’s or seller's) you’re in, which can impact real estate prices and availability. Once you’ve found the right home for you, you can use info from comps to make realistic offers that make sense in the current market. 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.
There’s a lot of information to gather as you start looking for your perfect home. Home and lot size – Many homes are priced per square foot, so finding one of similar size makes for an easier comparison. It’s preferable to find a house within 10% to 20% of your home’s size.
Location
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. IDX information is provided exclusively for personal, non-commercial use, and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. The listing broker’s offer of compensation is made only to participants of the MLS where the listing is filed. Understanding real estate comparables and the state of the market in your local area is essential. It can help you make an informed decision about buying or selling a property.
It’s not uncommon for information within an online listing to be a little embellished. Listings are, after all, written by sellers or real estate agents interested in getting the home sold. They may take a little creative license, which you don’t want to influence the calculations you make for your home’s value. Known as pocket listings, these are private listings that agents sell for their clients within their own private network of buyers. Even if they aren’t in the MLS, the sold prices on these pocket listings can impact your home’s current market value.
Keep in mind, though, that comps are more of an art than a science, which is why different professionals may come to different conclusions. Nonetheless, comps add oomph to back up whatever you’re asking for , strengthening your negotiation position and saving you tens of thousands of dollars. In other words, it pays, literally, to have comps in your corner. It’s updated regularly based on market conditions and can show you the longer price trends in your area. Meet with the agent to collect the printouts and to ask questions. You will want to know why some houses sold for more than others, and the agent will probably have a good idea why, especially if she personally saw the houses.
Sometimes you need to find a comparable, or “comp,” for a house, meaning the value of other, similar homes in the area. This might be because you’re house shopping and want to determine what kind of offer is reasonable for a house. Or you might be thinking of having your home appraised because you’re considering refinancing, and you’re wondering what the appraised value might be. But appraisals go much deeper than simply looking at neighboring properties.
After selecting your comps, you’ll need to make a few pricing adjustments to each comp to level the playing field. This helps match the comps to your existing home and mostly involves modifying the comp price based on the types of upgrades each house has. There can also be more specific things in common as well like flooring type and upgrades. If you can’t find enough comps in your immediate area, it’s okay to expand your search to include a wider geographical range. Just don’t stray too far away as that will impact the accuracy.
Too high a price for the market value of the home could keep potential buyers from viewing the property. Keep in mind that you might not be able to sell your home for what you bought it for, depending on the market. 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.
You can use comps in your home’s area to determine your own home’s value. Use the MLS to pull the values of homes with the same number of bedrooms and bathrooms. Then, use their values to help guide your understanding of the value of your home. Be sure to take any differences in the properties into account. If your home has any distinguishing features such as a pool or upgraded appliances, they will most likely increase your home’s value compared to other similar properties in the neighborhood. Likewise, if your home is missing features that other homes in the area possess, you should expect your value to be less.
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