What Are Comps?What are comparables in real estate sales?
Understanding The Role of Comps in Market Value
In order to arrive at the market value of any one you need to have the right comparable sales data. If you screw that up there is no way you will possible arrive at the correct market value. The way you go about getting to the accurate value is to use the proper real estate comps. "Comps" as real estate agents and appraisers call them are the homes that are most similar to the property that is being analyzed.
When you are running your comps you will be looking at three sets of data points including properties that have sold, homes that are under contract but have not closed yet, and houses that are currently for sale. The most vital data that an appraiser or real estate agent will use are sold properties. It is the basis for which you will arrive at the current value of a home. Pending sales can be helpful as they will be more recent data points.
Of course, when you are doing your homework with comparables, the properties do in fact need to be comparable! For example, you would not try to compare a colonial to a split level home as they are two very different types of properties. Likewise, you would not try to compare a townhouse to a ranch as they are two different housing classifications.
Properties need to be apples to apples or your value will turn into lemons. When putting together your list of comps the homes should be as close in location as your able to gather data. The homes themselves should also share as many like features as possible.
Without fine tuning these things you will end up having far too much variation in market value. There is a reason when you have 5 real estate agents visit your house and the range in value given can be miles apart. Some agents have no idea what they are doing. They were in fact never taught properly or just lack experience.
In the article at Maximum Real Estate Exposure, you will see one of the most in-depth articles published on the topic of comparable real estate sales. Take a look and see if it generates any questions for you. If you are having trouble arriving at the value of your home or have specific questions about comps, reach out and I will try to help.
When you want an accurate home value, looking and deciphering the comps will be the most vital aspect.