Comps is the abbreviation for “comparable” properties, which can help you determine the value of a home based on recent sales prices of similar properties in the area.
So people who have properties for sale (and their realtors) use this artifice to help them calculate the price asked.
This way, buyers can use the compensation to find out the price ordered. Therefore, this is an important concept for buyers and sellers.
What is the role of Comps for the real estate market
In fact, the function of such a comparison goes far beyond simply establishing a fair price for real estate.
After all, we at Br Capital USA like to see the purpose that each stakeholder has for the sustainable development of the entire market.
Therefore, there are some sectors that are impacted by comps:
Sellers use comps to determine the correct listing price for their home.
So, even if you are marketing your home with the assistance of a real estate broker, you will want to be familiar with the comps to ensure that you are feeling good about.
Buyers refer to comparables to decide how much to offer in a home. More specifically, they want to make sure they don’t overpay for the house they are buying.
Moreover, some investors who buy properties to resell them (so-called wholesalers) are true experts in making comparisons.
So when an appraiser arrives at your home, he provides your own comps to help you accurately assess how much your home is worth.
As we saw in the blog post here, evaluations can happen for some reasons.
Normally, the buyer’s lender will require a valuation before closing, but sometimes sellers get a valuation to help them set the price of their house accurately.
Real estate agents use comps to create a comparative market analysis. It’s a collection of close comps, gathered to help an agent and seller decide on a good listing price.
Therefore, skilled real estate agents routinely perform comps (even when not linked to a particular deal) to stay on track of the spot and evaluate broad tendencies.
How do Comps work?
Well, it is necessary to understand that a good comp occurs when there is a correct match between properties.
In other words, it is important that the comparison be as similar as possible to your property.
Although what constitutes this form of housing price valuation depends on each specific market, the following are some rough parameters of how they work:
- Location: properties are generally considered to be less than half a mile from the house in question.
- Size: if the house in question is 5,000 square feet, it is ideal to look at other houses with about 5,000 square feet.
- Number of rooms/bathrooms: no doubt this factor is more important than even the size of the house (quality is better than quantity).
- Recent sale price: With the monthly variations of the houses prices, the ideal is that its comparison is at most the houses that were sold in the last six months to one year.
- Style, view and other details: the units in the same skyscraper may have different views – one on the lake and one in the parking lot. Therefore, although they are similar in terms of rooms and square footage, these factors should also be considered. At the same time, if you are looking for an adjacent residence, such as a semi-detached house, the price of the finish is usually higher than the price of other properties.
How to find comps to benefit my work in the real estate market?
Actually it’s very simple: just access the realtor.com site and go to the comparisons area.
But, for a complete and deep dive in the numbers, you should count on the help of your realtor or other professional.
Because listings usually show the asking price, but not the final selling price (which is, so to speak, the real value of a property).
Fortunately, your real estate agent will have access to more detailed databases, such as the multiple listing service.
In addition, realtors will also know how to synthesize all this information into a quote that you can use when entering a trade.
For example, say you are selling your house for $300,000 and some buyer gives you $270,000.
In this context, comps allows your agent to go back to the buyer and say: “Another three-quarter with approximately the same square footage a block away just sold last month for $290,000! Therefore, we are quite confident that we can find a buyer who will pay at least that amount. Do you mind increasing your offer to at least $285,000? “
Remember, however, that comps are more of an art than a science.
For this reason different professionals can reach different conclusions.
So, the comps are so strong for your position within a negotiation and saving tens of thousands of dollars. In other words, it is really essential to master this topic of the real estate market.
Practical tips for making successful comps
So, how do you identify the best comps?
First of all you need to be as impartial as possible. Try to put aside your emotional connection with your home and concentrate on the facts.
Pay attention to the type of house
If your home is a family home, do not compare it to a semi-detached house or condominium.
Use only sold houses
Ignore houses that are for sale or pending.
Because sellers can put a very high price on the house and then content themselves with a much cheaper price.
Or, on the other hand, sellers can price below market value in the hope of obtaining multiple offers.
Watch the photos carefully
Carefully examine the photos in the list and notice all possible details that may add or take value from the property.
Read the list description
Besides looking at the photos, you should always read the description of the ad. Not all improvements or updates are visible in the images.
For example, a recently sold house might have a new roof that would make its value higher than yours, and you wouldn’t know just by looking at the pictures in the list.
Examine the area
Is it a dead-end street instead of a busy road?
Or is it a school district?
Is it near a bus or train line?
See for yourself
If possible, drive or walk around the house to get a good idea of the conditions abroad.
Formulate your price
Combine MLS comps from recently sold homes with online data from sites like Br Capital USA and insights from your realtor, if you have one.
Make a note of everything
After the houses are sold, sometimes the photos disappear or the list descriptions are removed, and all that’s left is the size, address, and selling price – not enough to make a good comparison.
So, write down whenever you find an interesting ad.
Hire an evaluator
After all, most of the time it is not certain that the stipulated value is correct.
Therefore, consider hiring a professional appraiser to make an impartial assessment of the value of your home.
The cost is around 450 dollars, which is usually a good investment.
Do everything in your power step by step. Skipping steps can compromise your comp.
Adjustment for seasonality
We have already mentioned that, for accuracy purposes, you should only refer to comps of the last months. Another reason why this is important is seasonality.
Conclusion about comps
In short, comps are vital for property negotiations to take place in a fair, interesting and responsible manner.
After all, in the real estate market, examining comparisons means comparing properties that have similar qualities such as size, age and location.
In addition, factors also include market conditions, such as changes in price over time and sales conditions.
Be sure to check if the property was last sold as an emergency sale or a real estate deal, or any other factor that might affect its value.
All stakeholders who are impacted by property comparisons should be aware that some comps may not accurately represent the value of a home.
Therefore, some comps may be very outdated in a rapidly changing market or may cite properties that are too far away or still in the market.
To avoid any kind of error or unnecessary wear, Br Capital is at your disposal.
Our purpose is to offer business opportunities that are increasingly humane and socially responsible. Come with us to build this new path within the real estate market!