Source: Yahoo! Life —
Real estate comparables — known as comps for short — are one of the most important tools used to determine how much a home is worth. Whether you’re trying to price your home for sale, buy a new one or just gauge how much home equity you’ve accumulated, here’s a rundown of everything you need to know about real estate comps and how to find them.
What are real estate comparables (comps)?
Real estate comps provide you with a set of properties that share similar characteristics, making them ideal for price comparison. Typically, comps also come from the same area and the same, recent time period. For example, if you’re trying to sell a two-bedroom, one-bathroom house, your comps would include other two-bed, one-bath houses in your neighborhood that have sold in the past several months. They might also include properties that are currently on the market.
Comps are important because they provide valuable context. “Real estate comps are imperative to fully understand the state of today’s real estate market,” explains John Ameralis, a licensed associate real estate broker at Compass in New York City. “They include active, in-contract and recently sold properties in the trailing six months.” Assessing them can help you arrive at the fair market value for a house you’re either trying to sell or considering purchasing.
Some of the key factors that are generally considered when identifying comps include:
- Location
- Size or square footage
- Condition
- Property style and age
- Home improvements, renovations or amenities
How to find comps
All it takes to find appropriate real estate comps is a little bit of research. Here’s how to go about it in five easy steps:
1. Understand your home’s specs
To find appropriate comps for a home — whether it’s one you want to sell or want to buy — your first step is to get clear on the property. Make a list of all the details that define it, such as where it’s located, its size, how much land it sits on, the number of bedrooms and bathrooms, amenities and any special finishes or upgrades.
To drill down even further, identify other factors that could also impact the home’s value, such as the school district it’s in or its proximity to public transit or parks.
2. Search for similar recently sold homes
The next step is to look for recently sold or pending properties with similar characteristics. If you’re working with a real estate agent, he or she might use the local MLS (multiple listing service) to give you a rundown. If you’re starting out on your own, sites like Zillow and Redfin can give you a sense of the local market. It’s important to search for “sold” homes, not “listed” ones, because listings only show the asking or list price, not the price a property actually sold for.
Set your search to the same neighborhood and to similarly sized homes, as well as the type of property you’re comparing. In the case of a condo, for example, search for condominiums, not single-family homes. Pay close attention to other amenities, too, such as whether parking is included.
Ameralis typically recommends looking for properties that have sold within the last six months. If the housing market in your area has been slow, you may have to look beyond the six-month mark — but that’s not likely these days, even as the housing market cools.
