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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:
- Size or square footage
- 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.
3. Narrow down your list
Once you’ve identified comparable candidates, inspect them more carefully to find the ones most similar to yours. Ameralis suggests compiling a list of four to six comps in order to appropriately evaluate your property.
If you live in a very active housing market, you may want to get ultra-specific about your criteria. For example, two homes with similar square footage and finishes, within a quarter mile of each other in the same school district, both with in-ground pools, are likely to have very similar values.
Conversely, if the home you’re evaluating is unlike what has sold nearby, or is in a rural or sparsely populated area, you may need to relax your search criteria.
4. Get the whole picture
There’s only so much information you can gather online. Some properties might look like a near-perfect match on a screen, but in reality, they could have key differences that impact their value. One home might be on a cul-de-sac with stellar curb appeal, for example, while another has ever-present noise from being near a highway. If possible, see the properties in-person — or reach out to the agents who sold them to get additional details that may not be obvious in an online search.
5. Do the math
Once you’ve settled on your four to six comps, simply compare the sale prices of each to get a rough idea of the home’s fair market value.
Or, try crunching some numbers to get another perspective. For instance, you can look at the square footage of each comp and divide its sale price by its number of square feet. This will indicate the home’s price per square foot, or PPSF, a frequently used metric in real estate. You can then take the average PPSF of all the comps on your list, and using that dollar value, multiply it by the number of square feet in your home.
For example, say you pulled four comps with PPSFs of $200, $217, $222 and $233. The average of those figures is $218. If you multiply $218 by the square footage of the home — for instance, 2,100 square feet — the home’s value based on comparable PPSF might be around $457,800. With this calculation, you now have a ballpark estimate of what the home may be worth.
Who uses comps?
Comps aren’t just a tool for home sellers and buyers. Many real estate experts utilize them, too. If you’re working with a Realtor, for example, he or she will use a set of comps to analyze properties in your price range.
“Banks will use comps to determine the fair market value by hiring a third-party appraisal company for when homeowners refinance a property,” Ameralis adds. Appraisers will use comps to inform their assessment of what a property is worth (though they take many other factors into account as well).
House comps are not foolproof
An important caveat on real estate comps: Unless you’re looking at a row of exactly uniform properties (think brand-new, adjacent townhouses), there are going to be slight differences. “Every property is unique in its way. So, although you can find closely comparable properties, none will be identical,” says Ameralis.
While pulling comps on your own will give you an estimate of a home’s value, working with a licensed real estate agent and an appraiser is the most reliable way to know exactly what your home is worth. Many agents offer a complimentary analysis, called a comparative market analysis or CMA, so you won’t have to pay out of pocket to get expert insight.
You do have to pay for a home appraisal, however. But appraisals go much deeper than simply looking at neighboring properties. An appraisal will take comps into account, but it also considers the city or county’s valuation for tax purposes, the site, hazards, improvements and overall condition. It will also examine factors such as rental income or fees, HOA dues and the cost to build a similar home from scratch.
Comps can help you price a home you’re selling or ensure you’re not overpaying for one you’re buying. They’re a useful tool to get a feel for a home’s value, but they’re not completely foolproof — so don’t skip on finding an agent you can trust. A knowledgeable local agent can not only help you get an accurate estimate of a home’s value, but can also help you navigate what can be a confusing, paperwork-heavy real estate process.
Real estate agents can perform a sophisticated comparative market analysis to identify comps very precisely. But you can also find general comps yourself by looking online for recent sales in your neighborhood, finding the homes most similar to yours, and checking prices to see how much they sold for.
They can be, but they’re only one piece of the puzzle. Real estate comps can provide a ballpark idea of a home’s value based on similar recently sold homes in the area. But home appraisers also take many other factors into account when assessing appraised values, as do real estate agents when determining appropriate list prices.
You want enough to give you a good sampling, because some cases might be outliers — for example, if a home is very close to yours and has the same number of bedrooms and bathrooms, but is in particularly poor condition. Generally, between four and six will do the trick, according to Compass broker John Ameralis.