Real estate comps are the most important tools for setting a listing price for your home. If you want to sell your home, buy a new one, or determine your home’s equity, comps help you make informed decisions.
Many factors come into play when finding a comp, including the size and configuration of your home, as well as market conditions.
Whether you’re a first-time home seller or a seasoned pro, we’ll help you navigate the comp process.
What Are Comps in Real Estate?
Real estate comps, or comparables, are similar properties that have recently sold in your area. They are used to determine the market value of your property.
For instance, if you want to sell a house with 2 bedrooms, 1 bathroom, and 1,000 square feet of living space. You will start looking for other houses with same characteristics. This will help you estimate the worth of your property.
Sellers can use comp to set a realistic asking price and to determine the home equity. Houzeo help you set a competitive price.
Who Uses Real Estate Comps?
Real estate comps are used by a variety of people involved in the real estate market, including:
Home Sellers
Home sellers use comps to set a realistic asking price for their property. They can get their property’s value by comparing its price to the similar properties.
Sellers can also use comps to correctly price their home. If you price your property too high, you may not be able to sell it. If you price your property too low, you may leave money on the table.
Homebuyers
Homebuyers use comps to estimate a fair market value for a property they want to purchase. They can assess whether a property is overpriced or underpriced and make their decision.
Homebuyers can also use comps to negotiate a better price on a property. They may ask the seller to reduce their listing price.
Real Estate Agents
Real estate agents use comps to help their clients buy and sell properties. Agents create Comparative Market Analysis (CMAs) to determine the ideal price of seller’s home.
Agents use comps to help clients set fair asking prices, negotiate effectively, and avoid price extremes.
Appraisers
Home appraisers use comps to determine the fair market value of properties.
Appraisers compare the property to similar properties that have recently sold. They adjust comparable property prices to accommodate any differences in price.
What Are Essential for Real Estate Comparables?
The essential factors for real estate comparables are:
- Property Type: Compare properties of the same type, such as single-family homes, condos, or townhouses.
- Location: Ensure that the comparables match the location of your property or are in a similar neighborhood.
- Size: Verify that the square footage of the comparables closely resembles your property.
- Features: Look for resemblances in features like lot size, garage, pool, and other amenities.
- Condition: Consider the condition of the comparables, including any recent renovations or updates.
- Date of sale: Ensure that the comparables have sold recently, preferably within the last 3 months.
- ✍️ Analyse the Market Condition: In a hot seller’s market with rising prices, go for comparable properties that sold for slightly more than the subject property. In a slow market with falling prices, opt for those that sold for slightly less than the subject property.
How to Find Comparable Home Sales?
Here are the steps to find comparable homes:
Understand Your Home’s Configurations
The first is step to gather information about your property. Make a list of all the details such as property type, location, size, and condition.
Search for Similar Homes
The next step is to look for similar recently sold homes. You can use real estate websites like Houzeo, Zillow, Trulia, and Realtor.com to search for recently sold homes in your neighborhood.
You can also take help of a real estate agent. Agents have access to Multiple Listing Service (MLS) and can help you find comparable that is tailored to your specific needs.
Another alternative would be to use public records. Many counties in the United States have public records websites where you can search for property sales.
This can be a good option if you want to find comparable sales that are not listed on real estate websites.
Streamline Your List
Once you have identified comparables homes, analyse them to identify the ones that are most similar to your home.
Some homes may seem perfect online but have significant differences affecting their value.
Compare the Comps
Once you have shortlisted 4-6 comparables, compare their sales prices. This will help you to determine the approximate value of a home.
You can also calculate price per square foot (PPSF). Divide the sale price of each comp by its square foot. Then take the average of PPSF among all the comps and multiply it by the square foot of your home.
For instance, let’s say you found four comps with PPSFs: $200, $215, $235, and $225. Add these numbers up and then divide by four to get the average, which is $218.75.
Now, take that average, and multiply it by the size of your home, let’s say 2,000 square feet. This calculation suggests that your home’s value will be approximately $437,500.
Conclusion
Real estate comps are an important tool for anyone who is involved in the real estate market. By knowing how to find and use comps, you can make more informed decisions about your property.
Here are some tips for using real estate comps:
- Get as Many Comparable Properties as Possible: The more comparable properties you have, the more accurate your analysis will be.
- Consider All the Essentials: Consider all of the factors that affect property value, such as property type, location, etc.
- Include Repair & Renovation Costs: If you are buying a property that needs work, be sure to add the estimated cost of repairs to your property’s value.
By following these tips, you can use real estate comps to your advantage and make the best decision about your property.
Frequently Asked Questions
1. How are comps calculated?
Real estate comps are calculated by comparing the price of the subject property to the price of similar properties that have recently sold. The appraiser adjusts the prices of the comparable properties to account for any differences between the subject property and the comparable properties.
2. How many comps should you use?
Use at least 3 comparable properties to get a more accurate assessment of your property's value.
3. How long are comps good for?
Comps are generally good for 3-6 months, but it's best to use the most recent comps possible to get an accurate assessment of your property's value.
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