Comparable home sales help sellers and their agents identify an accurate listing price for a home — one that captures more buyers, minimizes time on the market and clears the path for a smooth transaction. Read on for more info on comparables, the most important factors and how to identify the most accurate comps for your home.
What are comps in real estate?
A comp, which is an abbreviation for comparable sale, is a recently sold home in your area that’s similar to your home in location, size, condition and features.
How sellers use real estate comps
Sellers, especially those selling for sale by owner (FSBO), use comps to determine the right listing price for their home. Even if you’re selling your home with the help of a real estate agent, you’ll want to be familiar with comps so you can make sure you’re comfortable with the listing price your agent recommends.
How buyers use real estate comps
Buyers reference comparables to decide how much to offer on a home. More specifically, they want to make sure they don’t overpay for the home they’re buying.
How appraisers use real estate comps
When an appraiser comes to your home, they will source their own comps to help accurately assess how much your home is worth. Appraisals can happen for a couple reasons. Usually, a buyer’s lender will require an appraisal before closing, but sometimes sellers get an appraisal to help them accurately price their home.
How real estate agents use MLS comps
Real estate agents use comps from the local multiple listing service (MLS) to create a comparative market analysis (CMA). It’s a collection of nearby comps, put together to help an agent and seller decide on a good listing price. Savvy real estate agents regularly run comps (even when not tied to one particular deal) to keep an eye on their local market and gauge overall trends.
How to find real estate comps
Sellers have two options for finding comps: hire an agent to guide them through the research and pricing process or find comps on their own. Here is how the process works for both options.
Real estate agents and MLS comps
The local MLS is usually the best source of comparable home sales, because the information tends to be the most accurate. An experienced real estate agent should be well-versed in navigating the MLS and finding appropriate comps for your property. And since they’re familiar with your area, they can interpret comps with an eye for area trends, home value appreciation and price per square foot.
Many agents will provide potential clients with a free CMA in hopes of landing your business. It gives a rough idea of what your home might sell for in today’s market, in your neighborhood.
Can I find house comps in my area without the MLS?
There are several additional resources for finding comps:
- Public property records: If you want to find the sale price of a specific comparable, the county usually keeps those records. In some counties you can search online, but in others, you may have to go to the courthouse. One thing to note is that county records don’t show seller concessions. So if a seller lowered the price as a credit on some needed repairs, you’ll see the final lowered price — not the original asking price.
- Zillow: Search on Zillow using the Recently Sold filter. You can also filter by ZIP code, square footage and other home features. Zillow also typically includes FSBO listings, which you won’t find on the MLS.
- Zillow pricing tool: Try this pricing tool to find comps in your area. Simply enter your home address to view recent sales. You can narrow the results based on the ones that are most similar to your home, and then we’ll calculate a home value for you.
What to consider when finding real estate comps
Aim to find at least three similar homes that meet the following criteria:
- Location: Limit your search to a quarter- to half-mile from your home.
- Time frame: Only include homes that have sold within the past three to six months — or less if your market is changing quickly.
- Size: Try to stay within about 300 square feet of your home’s size.
- Bedrooms/bathrooms: Include homes with the same number of bedrooms and bathrooms as yours.
- Condition of home: Factor in things like recent renovations, updated interiors or outdated features.
- Age of home: Homes built around the same time as yours will be the most accurate comps, because major systems like roofs, HVAC and plumbing should be in similar condition.
- Nearby features: Find homes that align with yours in terms of walkability, shopping/retail, waterfront proximity, views, public transportation access and school ratings.
- Price per square foot: Real estate agents use price per square foot to identify comparables. Divide the sale price of a home by its square footage, then compare that number to your own desired price per square foot.
Tips when looking for the best real estate comps
Unless you live in a subdivision where a home builder used similar finishes, layouts and materials in all of the homes, no two housing comps in your neighborhood are exactly alike — and even when homes are very similar, no comp is perfect.
So how do you identify the best comps? Stay as unbiased as possible. Try to set aside your emotional connection to your home and focus on the facts.
Only use sold homes
Ignore homes that are currently for sale or pending. Why? Sellers can overprice the home and then end up settling for much lower. Or, sellers can price below market value in hopes of drumming up multiple offers. Until a home sale closes, you’ll never get an accurate read on its value in your local market — it’s only worth what someone ends up paying for it!
Pay attention to the type of home
If your home is a single-family home, don’t compare to townhouses or condos. If you’re pricing a condo to sell, don’t compare it to anything but other condos.
Look closely at photos
Carefully scan the listing’s pictures. Does the home have finishes similar to yours? Look closely at things like appliances, fixtures and flooring. Even seemingly small discrepancies (like stainless steel appliances versus older white appliances) can add up.
Read the listing description
In addition to looking at the pictures, you should always read the listing description. Not every improvement or upgrade is visible in pictures. For example, a recently sold home could have a new roof that would make its value higher than yours, and you wouldn’t know just by looking at listing photos.
See it in person
If possible, drive or walk by the house to get a good feel for the exterior’s condition. Note things like cracks in the driveway or missing shingles. The condition of the exterior should give you some insights into the condition of the interior.
Scan the area
Make sure you understand the nuances of a home’s location. Is it on a cul-de-sac instead of a busy road? Is it in a desirable school district? Is it near a bus or train line?
Write everything down
When researching comps, take careful notes. After homes are sold, photos sometimes go missing or listing descriptions are removed, and all you’ll be left with is the size, address and sales price — not enough to formulate a good comp. Capture as much information as you can, as soon as you find a promising comp.
Formulate your price
When you’re ready to decide on a listing price, the most important thing to do is to consider multiple data points from multiple sources. Combine MLS comps from recently sold homes with online data from sites like Zillow and insights from your real estate agent, if you have one.
Compare with the Zestimate
Once you’ve narrowed down your desired sale price based on comps, check your work against your home’s Zillow Zestimate. The Zestimate is calculated from both public data and user-submitted data. You can also update your home facts to make your Zestimate more accurate.
How accurate is your Zestimate? Zillow’s accuracy has a median error rate of 4.3 percent. This means half of the home values in the area are closer than the error percentage. For example, in Seattle, Zestimate values for half of the homes are within 5 percent of the selling price, and half are off by more than 5 percent.
Hire an appraiser
Not sure you’ve found the right listing price? Consider hiring a professional appraiser to give you an unbiased appraisal of your home’s value. The cost is usually between $400-$500, which can be money well-spent for an accurate listing price, especially if you live in a competitive market or you’ve made many renovations and aren’t sure how they should affect your price.
Avoid shortcuts
You can’t just double the price if your home is double the size of the comp. There are many factors that go into home pricing, so don’t be tempted to take shortcuts by using poorly matched comps and guessing.
Adjust for seasonality
We already mentioned that for accuracy, you should only reference comps from the last few months. Another reason this is important is seasonality.
Whether prices vary dramatically by season depends on your local real estate market, but in general, homes sell more quickly in spring and early summer, and they take longer to sell in the winter. Sellers often try to motivate buyers in slower seasons with a lower sale price, so keep seasonality in mind as you price your home.
Source: real-estate-comps
