REAL ESTATE COMPS: Detailed Guide on Finding Real Estate Comps

Real Estate Comps
FIND THE BEST PROPERTY CONCEPT

Understanding real estate comps help you to sell or purchase a property. When buying, you’ll need to first determine what the market value of the property you want to buy is, and the standard way of establishing that is through real estate comps, which are also known as real estate comparables or just comps. 

Interested in learning about real estate comps and how to use them? Read further!

What Are Real Estate Comps? 

Real estate comps, also known as real estate comparables, are recently sold homes in a particular area that are comparable to a given home in terms of location, size, condition, and features. It is used to determine the value of a property on sale by comparing it to other properties that have been sold within the same area as the property on sale.

Agents, appraisers, homebuyers, and house sellers use real estate comparables to determine a property’s suitable market value. Comps are crucial since they offer proper context and aid in correctly understanding the state of the current real estate market.

People Who Use Real Estate Comps

People in the real estate business use real estate comps to determine how much a property is worth by comparing it to similar properties sold in the same neighborhood or area. Groups that use real estate comps: 

#1. Home Sellers

Sellers use comps to determine the right listing price for their home, ensuring it is competitive and attractive to a potential buyer

#2. Home Buyers

Buyers use comps to determine if a home is reasonably priced and to negotiate the asking price based on the prices of similar properties in the area

#3. Appraisers

Appraisers utilize real estate comps and other factors to value properties. Before a sale closes, the mortgage lender often orders an appraisal to find out how much the property is worth.

#4. Real Estate Agents

A comparative market analysis (CMA) from the local MLS helps agents and sellers set a listing price. They also use comps to track local market developments and market conditions.

How Do You Get Comps for Real Estate?

You should consider some factors when you want to get real estate comps. They typically involve:

  • Time Frame 
  • Location
  • Condition of the home
  • Design and age of the property
  • Home renovations
  • Surrounding amenities
  • Size of the home
  • The desirability of the neighborhood
  • Local housing market

To get comps for real estate, you can follow several approaches. The following are ways of getting comps for real estate: 

#1. Hire a Real Estate Agent

Real estate agents have access to the MLS (Multiple Listing Service), a database of properties that have been sold or are currently for sale in a given area. They can perform a comparative market analysis to identify comps very precisely 

#2. Use Reputable Real Estate Websites

Websites like Zillow, Redfin, and Trulia provide access to recent sales data in your neighborhood. You can search for recently sold homes that are similar to yours and check their prices. This method may not include all the variables that impact your home’s value, but it can give you a good idea of what to expect. Also, some of these websites give real estate comps for free

#3. Collaborate with a Licensed Agent

If you’re not a licensed agent but want access to MLS data, you can establish a symbiotic relationship with a licensed agent. They can pull MLS comps on your behalf in exchange for referrals to clients and listings

#4. Obtain Your Real Estate License

If you want to pull comps independently, consider obtaining your own real estate license. This will allow you to access the MLS and run comps by yourself.

When looking for local comps, finding at least three or more similar properties is essential to ensure none are too expensive. Between four and six comps should suffice.

Steps to Finding Real Estate Comps

  • Know the specifications of your home.
  • Examine similar properties to get the best match
  • Work with real estate agents
  • Check with multiple sources
  • Consider key factors
  • Evaluate your results and estimate a value

Remember, real estate comps are just one piece of the puzzle when determining a property’s value. Additionally, consider the property’s current condition, any improvements made, and market trends.

How Can I Get Free Real Estate Comps?

There are several options for those who want to get free real estate comps. Including:

  • Use online home valuation tools such as Redfin’s instant home-value estimate and free home report or a professional estimate prepared by a Redfin agent to get real estate comps
  • Find free real estate comps online without a realtor by accessing public websites such as Zillow, Trulia, or Realtor.com, which provide historical sales data and allow you to search for comps in your area.
  • You can get free real estate comps by asking your agent to procure MLS comps which provide the most accurate and up-to-date information on recently sold properties.  
  • Check real estate sites like Redfin, Zillow, or Trulia since they allow you to search for recently sold homes and compare them to your property.

How Important Are Real Estate Comps?

Comps in real estate are very important, particularly as they are part of the market analysis that anyone looking to buy or sell a property should carry out. 

Comparables also help you estimate the property’s market value you want to sell or buy. Further reasons why real estate comps are essential are:

#1. Negotiating of Deals

While investing in real estate, it is essential to negotiate deals. Hence, utilizing comparables facilitates negotiations between buyers, sellers, and real estate brokers and sellers. 

This also reduces the time and effort required to persuade sellers using facts and figures. Also, a buyer can use comparables to obtain the desired outcome from a transaction.

#2. Reduces Risks

Comparing comparable properties enables a buyer, seller, or real estate agent to determine the market value of a property.

This safeguards against a buyer or agency overpaying for a property. So, if you use comparables, you’ll be able to get the best deal on an investment property.

#3. Appraisal

Real estate investors can determine the price of a property through the use of a house appraisal. Hence, utilizing comparables is a smart idea, regardless of your technique. This is because it saves you money and time when obtaining a house appraisal.

#4. Profit

Comparables are used in real estate to help buyers, sellers, and agents find homes with higher profit margins. This is crucial because the objective is to maximize profit. Therefore, real estate comps will help to get competitive prices.

What Do Comps Mean in Selling?

“Comps” refers to comparable sales in real estate. Comparables are recently sold homes in the same area as the property with similar features, such as size, condition, and location. They are essential for deciding a property’s fair market value and for both buyers and sellers during the negotiation process.

How Are Comps Decided?

Comparables, or “comps,” in real estate are similar properties that help determine how much a property should be worth. Additionally, they are tools that real estate agents, appraisers, sellers, and buyers use to determine how much a property is worth on the market right now and predict how much it will be worth. 

To identify the best comps, consider the following factors:

  • Location
  • The similarity in size, layout, and features
  • Recent sale date (within the past six months)
  • Active, in-contract, and recently sold properties

If you cannot find comparable properties, you can expand your search criteria by 

  • Increasing the search radius
  • Extending the time frame for recent sales
  • Searching for properties with different bed/bath counts
  • Adjusting the square footage range

However, remember that the less similar a property is, the less accurate it will be as a representation of your subject property’s value.

Comparative market analysis (CMA) is a sophisticated way for real estate agents to find comps. You can also find comparable properties by searching online for recent sales in your neighborhood and comparing properties like yours. 

It’s important to note that comps are not foolproof. Appraisers and real estate agents use them to get a general idea of how much a property is worth, but they also consider many other factors when figuring out the proper list price. Also, working with a licensed real estate agent and an appraiser is the most reliable way to know the exact value of your property.

How Do You Use Comps in an Offer?

Use the following steps to incorporate comps into your offer:

#1. Find Equivalents

You can research recently listed properties in your region using websites such as realtor.com, or you can seek the assistance of a real estate agent who has access to databases such as the multiple listing service (MLS)

#2. Consider Features of the Property

Think about the number of bedrooms and bathrooms, the total square footage, and anything that sets the home apart, such as a swimming pool or updated appliances.

#3. Find Out How Much the House is Worth

You can better grasp the home’s worth by comparing it to the values of comparable homes. It is essential to remember that the procedure described here may not be different from the exact method an appraiser would use to determine the value. Still, it can give you a decent idea of what to anticipate.

#4. Put in an Offer 

Make a reasonable and defensible offer, using the comps and your knowledge of the home’s worth as your guides.

#5. Negotiate

Make sure that your offer is in line with the market value of similar properties by using the comps as a basis for your bargaining approach, and also ensure that your offer is in line with the market value of comparable properties.

When using comps, it’s important to remember that different experts in the same field could come to different conclusions. Comparable sales can be a very helpful tool when buying a home because they can help you determine if the asking price is fair and give you an idea of how to negotiate.

Commercial Real Estate Comps

A commercial real estate broker could use real estate comparables, sometimes known as “comps,” to estimate the worth of your property. It’s crucial to research the local market and recent transactions when selling commercial real estate to determine how much your property will fetch on the current market.

Comps for Commercial Real Estate

Successful commercial real estate (CRE) businesses and deals use accurate data and current market conditions to find the best price for both parties. Furthermore, finding accurate comparables is crucial to acquiring commercial real estate.

Tips on how to find comps for commercial real estate:

  • Locating a trustworthy source for lease or sales comps 
  • Finding a comps tool with extensive and reliable filters 

Commercial real estate professionals need reliable and detailed comps to give their clients the right advice and also, to determine all the factors that could make a potential listing price higher or lower. Additionally, get a big-picture view of the market in their target areas.

Commercial real estate comps should include the following to be truly useful to the CRE professional:

  • Full Address
  • Tenant’s Name
  • Kind of Space (office, retail, industrial, etc.)
  • Size of Transaction (SQFT)
  • Beginning and net effective rents
  • Date of Execution or Start
  • Period of Lease (months or years)
  • The last day of the lease
  • Free rent and landlord concessions (TI/Work Value)
  • NNN/full-service lease type
  • Transaction Type (i.e., Renewal)

References

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