Real estate comps: What they are and how to find them

Quick insights

• Real estate comps are similar local properties, sold recently, that allow you to assess a home’s potential value on the market.
• Comps can be gathered by using real estate websites or by reviewing public sale records.
• You can also use comps to draw conclusions about market competitiveness and investment risk.
  

If you’re planning to buy or sell a home soon, it will be important to assess real estate comps (or “comparables”) in the area. Real estate comps provide realistic examples of similar properties on the market. In this article, we’ll explain what comps are in real estate, how to find them and how to interpret them.

What are “comps” in real estate?

Comparable properties are commonly referred to as “comps” in real estate; they are recently sold properties that are similar to a specific property in terms of size, location and features. As an example, for a 3-bedroom, 2-bathroom house in a specific neighborhood, comps would be other 3-bedroom, 2-bathroom houses in the same neighborhood that have recently sold.

Why are comps important and how are they used?

Real estate comps provide a benchmark for estimating the value of a specific home. They are essential for individual buyers, appraisers and real estate agents.

• For buyers: Does anyone want to overpay for their dream home? Homebuyers may reference real estate comps continuously during their search and use them to determine a fair offer. Comps may also impact negotiations; for example, a buyer could use comps to argue a home is overpriced and offer a lower sale price.
• For appraisers: Appraisers will normally refer to real estate comparables for a sense of a home’s value when compared to other nearby properties. While not all real estate sales require a formal appraisal, this can be a helpful step for buyers and sellers alike in seeking a fair, accurate price.
• For real estate agents: Whether they’re the buyer’s agent or listing agent, real estate agents need to be extremely familiar with comps to offer accurate guidance. Agents typically use comps from a multiple listing service (MLS) when assessing specific homes, creating comparative market analyses (CMAs) and keeping an eye on market trends.

How to find comps for a property

Though agents have access to specialized tools, anyone with an internet connection can find their own comparables for real estate. To begin your comp research, visit online real estate platforms with information about recent sales in the same neighborhood. You can also review public sale records, typically available through the county assessor’s website. If your county assessor does not offer these electronically, you may need to pay a visit to the local office to request sales information in-person.

How to compare real estate comps

For starters, make sure you are comparing homes that are similar in terms of the number of bedrooms, square footage and locale. Once you have a selection, what should you consider as you compare properties that seem very similar? A few tips include:

• Adjust for differences: A home with recent renovations or updates is often valued higher than one with older features. You may also want to check for any distinct seller concessions, such as including furniture in the price or paying for closing costs.
• Consider market changes: In an active real estate market, things can change rapidly. A home’s value may or may not change within months.
• Weigh features differently: Certain home features are more important than others despite being used to filter comparable properties. For example, total square footage is generally more valuable than the number of bedrooms.
• Watch for outliers: There are different situations in which a home will be sold for less than its true market value, such as a sale between family members or a sale under distress. These cases may be included in a list of real estate comps and skew perceptions of value.

Bonus tip: Digging deeper into the data

You may be able to draw conclusions about the current market by reviewing other aspects of real estate comps. Besides home features, the average days on market (DOM) and list-to-sale price ratios can be important to understand. If homes in an area are being sold with low DOM, for instance, this may indicate a seller’s market and inflate sale prices.

You can also use average DOM and list-to-sale price ratios when assessing a property’s value. For example, a home may be underpriced if its comps are higher than its listing price, potentially indicating a promising investment. In contrast, a home with fluctuating comps nearby may indicate an unstable market and a risky investment.

In conclusion

Understanding how to gather and interpret real estate comps is an important part of buying or selling a home. Working with a real estate agent who has access to advanced compiling tools may give you an advantage when it comes to assessing property values. When it’s time to buy, you may want to consider connecting with an experienced Home Lending Advisor who can walk you through the steps to borrow.