What Are Real Estate Comps?

Buying a home is an all-encompassing process. It’s like a part-time job that requires hours of research, work and money. The last thing you want to do is pay more than you need to for a home. And that’s where real estate comps come up. You can use comps to help you find the right home in your budget for the best price.

What Are Comps in Real Estate?

Real estate comps are comparable homes in your area that recently sold. For instance, if you’re looking at a three-bedroom, two-bathroom home, you can explore similar homes in the same neighborhood that recently sold. This will give you an idea of how much you can expect to pay for that type of home in the neighborhood you want to live in.

Comps are based on many different factors, including the number of bedrooms and bathrooms, amenities such as a garage or pool, square footage and others.

Who Uses Real Estate Comps?

Comps are an asset to a lot of people in real estate. They’re important to homebuyers and other groups as well.

Sellers

When listing a home, sellers need to know what other, similar homes in the area sold for recently. This gives them a reasonable expectation of market conditions and what price they should set on their house.

Buyers

Homebuyers use comps to see how other homes in the area sold based on similarities. It helps buyers determine if the home they’re looking at is reasonably priced. If it’s got a high asking price, buyers can use comps to negotiate.

Agents

Real estate agents can use comps when it comes to both selling and buying. Comps come in handy during the selling process because it helps agents determine if the price they’re listing is fair. When it comes to buying, agents can help their buyers find homes in their price range based on comps.

Appraisers

Like agents, appraisers use comps to compare properties and assess a home’s value. Based on comps, an appraiser would find whether a listing price is accurate, or whether it’s worth more or less. Appraisers and mortgage lenders work hand-in-hand; if an appraiser determines the home’s worth based on comps, the mortgage lender will approve a home loan based on that assessment.

How to Find Real Estate Comps

Before you look at other comparable homes, you need to know what you’re comparing them to.

1. Examine the home

Looking at the home you want to buy, find the number of bedrooms and bathrooms, the livable square footage and the lot square footage. Also, check the condition of the roof, major appliances and systems, like the fridge, washer and dryer, water heater, A/C unit and electrical panel. The location also matters, so include this in your research as well.

2. Check out home sale sites

Once you have a good idea of what the home includes, you can search recently sold homes in that area. Use sites like Redfin, Zillow and Realtor to narrow your search—and make sure to look at recently sold homes (not homes for sale).

3. Use the MLS

The multiple listing service, or MLS, is a market comparison database local to each area. Many real estate agents use the MLS to find comps of their own to share with their sellers or buyers.

How to Get Real Estate Comps Without an Agent

If you want to buy or sell your home without a real estate agent or you’re just doing preliminary research, it’s possible to find comps without an agent. But keep in mind they might not be in your favor.

Agents have access to MLS sites with the most accurate and up-to-date information. Sites like Redfin, Zillow and Realtor are helpful, but they might have outdated information. For instance, a home might have recently sold in the area you’re exploring, but the listing hasn’t been updated by the listing agent. That means you don’t have access to the most recent information, and it could skew your research.

If you still want to go through with finding comps without an agent, you can explore public property records. Most municipalities list them online, or you can head to your local county appraiser’s office.

Even though it’s possible to find comps without an agent, having an experienced person with a lot of knowledge of homes in the area will only help you find the right home at the right price in the long run.

How to Determine Real Estate Comps

There are a few different ways to determine comps. While it’s a good idea to find general comparisons in size and offerings, you can find comps that are very specific. For instance, you might find similar floor plans if you’re searching for a home that’s in an association or subdivision. Use similar floor plans of homes in the area to compare to the home you’re looking to sell or buy.

You can also compare similar homes that have recently sold, though “recent” can be subjective and depends on the market in real estate. If the housing market is hot, you may want to limit your search to within the last couple of weeks. If it’s been a slow time, expand your search to the last couple of months.

Once you’ve gathered enough comps, you can calculate the potential cost of the home. The easiest way is to divide the home’s sale price by its square footage. This equates to the price per square foot, or PPSF. If you have the PPSF of a few different homes, you can find the average.

While it might not be the final amount you buy or sell the home for, it can give you a realistic idea of the home’s worth before you go through with the process.