In the dynamic world of real estate, understanding the value of other properties in the area is paramount. To estimate the worth of a property, real estate comparables are crucial.
Real estate professionals use comps to help influence decisions ranging from buying, selling, and gauging accumulated home equity. Let Real Estate Skills help you understand the art of pinpointing and understanding comps. We'll cover insights into how you can run real estate comps on a house, find them without a realtor, or even look them up online for free. By the time you finish, you'll have the know-how to compare property values with the precision that top real estate investors swear by.
So, whether you're a seasoned investor, a homeowner aiming to get the best deal, a fix & flipper, or a real estate agent wanting to refine your valuation skills, this guide promises value at every turn. Dive in and empower yourself with the knowledge that's been pivotal in generating millions in real estate profits at Real Estate Skills.
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Real estate comps, or comparables, refer to comparable properties within a specific region or neighborhood, assisting professionals and enthusiasts alike in deriving a property's current and potential value.
Picture this scenario: You're gearing up to put your three-bedroom townhouse on the market. Before setting a price, you'd naturally scout around for properties with a similar layout and features in your neighborhood. This reconnaissance mission offers you a clear pricing blueprint for your home. On the flip side, if you're looking to buy, comps act as your compass, ensuring you tread the terrain with a clear understanding of a property's genuine market value.
While the golden era of real estate saw professionals like Realtors and appraisers at the helm of property valuation, the digital age has ushered in a change. Today's tech-driven tools empower individuals, offering a panoramic view of property values sans intermediaries.
But remember, the power of comps extends beyond buying or selling. It's a tool, or a lens, offering invaluable insights into the broader housing market landscape. Harnessing real estate comps is essential to navigating today's ever-evolving market. With a finger on the pulse, tracking properties—be they active, under contract, or recently sold—becomes a breeze, ensuring every property endeavor is rooted in knowledge and strategy.
From novice homebuyers to seasoned real estate magnates, one tool that unites them all in their quest for properties is real estate comps. Here are a few common examples of people who use real estate comps:
Finding real estate comps can be as simple as looking for similar properties to your own that have recently been sold.
Four primary ways to find real estate comps are:
Understanding the value of your property isn't just about knowing its worth today; it's also about anticipating its potential future value. Having this insight is crucial whether you're considering selling now or holding onto your investment for the long haul.
But how do you find these comps? The process may seem a tad intricate to a newcomer, but with the right steps, it's a straightforward affair. Let's dive into the systematic approach to uncovering and understanding real estate comps:
Your first step should be to have a comprehensive understanding of your property's distinct features. Begin by cataloging all pivotal specifications of the home in question. Note down the property's location, its total square footage, the plot size, and the count of bedrooms and bathrooms. Additionally, take into account any specific amenities it offers, such as a swimming pool, a fireplace, or a renovated kitchen.
Diving deeper, consider nuances that might significantly affect the valuation. Elements like the quality of local schools, the convenience of nearby public transit, or the availability of recreational spaces like parks can all play crucial roles in property desirability and, thus, its market value.
Once you've thoroughly understood your property's features, the next step involves scouting for properties with akin characteristics that have recently been sold. Should you collaborate with a real estate agent, they would typically turn to the local MLS (multiple listing service) to furnish you with pertinent data. For those venturing independently, platforms such as Zillow or Redfin offer insights into the local housing climate. Emphasize your search on properties marked "sold" rather than merely "listed." This distinction is paramount as listings denote the initial asking price, contrasting with the final settled transaction amount.
Ensure that your research is localized, focusing on properties within the same vicinity and of analogous dimensions. Additionally, stay consistent with the property type—when assessing a condominium's value, for instance, draw comparisons exclusively with other condos rather than branching out to single-family residences. Be astute in considering amenities, like the provision of parking or the quality of neighborhood facilities.
For a contemporary perspective on the housing market's dynamics, prioritize properties sold within the last half-year. However, if the local real estate scene is on the slower side, it might be necessary to extend your reference frame beyond this six-month benchmark, though such scenarios are increasingly rare in today's ever-evolving housing market landscape.
Now that you have your list of potential comparables, it's time to scrutinize each to determine those that are closely mirroring your property. In real estate, always be specific. Consider, for instance, two homes bearing resemblance in terms of area and interior finishes, located within the same school district, and both equipped with in-ground pools. Their proximity—less than a quarter-mile apart—would typically signify congruent values. On the other hand, if the property under evaluation stands out distinctly from its neighbors or finds itself in a more rural or less densely populated setting, you can afford to be more flexible in determining comparables. This means broadening your criteria slightly to capture a more diverse range of properties that can still provide relevant insights.
While online platforms provide a wealth of information, they may not capture the entirety of a property's story. Certain nuances can considerably influence a property's value and might go unnoticed in digital listings. For example, one property might exude charm, nestled on a quiet cul-de-sac with a stunning exterior, whereas another, albeit similar in features, might be positioned near a noisy highway, diminishing its appeal.
To truly understand the intricacies of each potential comparable, consider visiting them in person. Experience firsthand the ambiance, surroundings, and other intangible aspects. If direct visits aren't feasible, consider contacting the real estate agents who managed those sales. Their insights can reveal unlisted details and provide a more holistic understanding, ensuring you make informed decisions about which comps are truly comparable.
After meticulously selecting your real estate comps, it's time to delve into the numbers. Begin by comparing the sale prices to establish an initial gauge of the potential market value of the home in question.
To further refine your estimate, a popular metric to consider is the Price Per Square Foot (PPSF). To compute this:
For instance, let's say the PPSFs of your selected comps come out to be $210, $225, $230, and $240. This gives an average PPSF of $226.50. If the property you're examining is 1,900 square feet, then, using the PPSF method, its estimated value would be around $430,350.
Utilizing this calculation method can provide you with a more grounded estimate of the property's market value.
*For in-depth training on real estate comps, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!
The MLS is one of the best ways to find real estate comps. Whether you're a homeowner, investor, or a real estate professional, a thorough, methodical approach to market research is instrumental in setting accurate property values.
Before we begin covering how to run comps on the MLS, if you don't currently have access, we invite you to view our video below to learn how to get access to the MLS even without a license!
Now, let's map out our streamlined method to navigate MLS comps:
Prioritize Sold Properties: To gain a true reflection of the market's pulse, focus on recently sold properties rather than active listings. Current listings might deviate from genuine market values due to strategic pricing.
The Real-World Tour: Consider an on-site visit. Observing a property's environs and the amenities it offers can shed light on the locale's appeal, impacting the listing price.
Evaluate Listing Photos: Dive deep into MLS photos. They'll give insights into the expected standard of appliances, flooring, and fixtures for the property's price range.
Gauge the Locale: Location is paramount. Utilize tools like Google Maps and Street View to ascertain the neighborhood's allure and assess its proximity to amenities, which greatly influence listing prices.
Harness Online Estimations: Platforms such as Zillow and HouseCanary provide valuable metrics on estimated property values and their potential trajectory. These online figures also echo public sentiments about market trends.
Craft a Property Profile: List out salient features of your property, ranging from its position in the neighborhood to its size, condition, and unique attributes. This blueprint aids in identifying congruent properties.
Engage in MLS Research: Here, a real estate agent's expertise is vital. Once on MLS, they'll earmark properties resembling yours in terms of features, size, and other parameters. The closer the match, the more accurate the comp.
Decipher the Price Per Square Foot: By averaging the price per square foot from various MLS comps, you'll have a reliable metric. This value, multiplied by your property's total square footage, furnishes a ballpark property value. [For a detailed walkthrough on determining square footage, click here.]
Incorporate Unique Features: Once your property's preliminary value is gauged, adjust for specific elements or discrepancies that weren't covered in general comps.
Determine Your Listing Price: Having conducted exhaustive research, you're now primed to set your listing price. Remember, it's essential to align this value with prevailing market conditions, property attributes, and the deduced value. Confident pricing stems from robust research corroborated by credible data.
Understanding the market value of a property is pivotal, especially if you're aiming to achieve the best sale price. This is where real estate comps, or comparables, come into play. They are a cornerstone for assessing a property's present and future worth, making them a must-have tool for homeowners and real estate professionals.
Here's why real estate comps are vital:
Current Market Insights: Real estate comps offer a snapshot of the existing market, allowing homeowners to gauge the competitiveness of an offer. No longer do you need to rely on guesswork; with accurate comps, every property offer can be evaluated against current market trends.
Predicting Future Value: Pondering a kitchen or bathroom revamp? Real estate comps can forecast how such renovations might uplift your property's value. By analyzing recently renovated homes in your vicinity, you can identify the potential financial benefits of specific upgrades.
Guidance on Value-Boosting Renovations: If you're often asking, "Which enhancements will bolster my home's value?" comparables can provide answers. Examining renovated properties nearby reveals the sought-after features and corresponding sale prices, offering insights into fruitful renovation choices.
A Must-Have Tool for Professionals: For real estate professionals, especially investors, understanding the potential worth of a refurbished property is essential. This projected value post-renovation is commonly referred to as the "ARV" or "After-Repair-Value." Other synonymous terms include "After-Renovated-Value," "After-Remodeled-Value," and "After-Rehabbed-Value."
By harnessing the insights offered by real estate comparables, both homeowners and professionals can make informed decisions, ensuring properties are priced aptly for the market.
Finding the most relevant real estate comps is a nuanced process. While it might be tempting to pull up any recently sold home in the vicinity, there's a science to the selection. To increase accuracy, ensure you're giving weight to these factors:
Proximity: Start by zeroing in on your immediate neighborhood. Limit your search to homes within a quarter to a half-mile radius, ensuring the environmental and societal influences are consistent.
Square Footage Price Analysis: Divide the sale price by the home's square footage to get the Price Per Square Foot (PPSF). This gives an objective metric to compare across homes, highlighting the price weightage given to space.
Recent Sales Only: Trends in real estate can shift in a matter of months. Ideally, look for homes sold in the last 3 to 6 months. In volatile markets, narrowing this window further can be beneficial.
Similar Size: It's crucial to compare apples to apples. Look for homes within a 200-300 square feet range of your property to ensure size-based valuation accuracy.
Condition & Renovations: The state of a property can significantly swing its value. Whether it's a fresh coat of paint or a revamped kitchen, such upgrades can push up a home's price. Always factor in the condition and any renovations when selecting comps.
Bedrooms and Bathrooms: A two-bedroom home and a four-bedroom home can vastly differ in value. Ensure the homes you're comparing have a similar number of bedrooms and bathrooms.
Construction Era: A vintage home may not be directly comparable to a new build, even if they share other features. Aim for homes constructed around the same era as yours.
Neighborhood Amenities: Proximity to conveniences like shopping centers, scenic views, or public transport can influence a home's attractiveness and, by extension, its value. Ensure the comps you select share these neighborhood characteristics.
Local Schools & Transportation: Especially for families, the quality of nearby schools can be a deal-maker or breaker. Similarly, easy access to public transportation can be a significant boon in urban areas.
Remember, precision in comp selection is pivotal. While online tools and databases are beneficial, seeking expert insights, and even considering a professional appraisal, can offer the clarity required to price a property accurately.
Before we begin our example for finding real estate comps, here are the Real Estate Skills search criteria:
Now, let us show you an example of using the Real Estate Skills Comp Criteria for finding comps and determining the future value (ARV). This example will help you tremendously if you are a real estate wholesaler, house flipper, or homeowner who wants to add value to their home to sell it at a higher listing price in the future.
Let’s say the subject property you are analyzing is a 3 bed / 2 bath 1,200 sq. ft. property and you want to find the ARV (After-Repair-Value) to determine its future value.
We've been asked a lot to make a handout with the Real Estate Skills Comp Criteria, so we made it into a PDF just for you.
Now you will always remember how to find real estate house comps in your area! You can download the Real Estate Skills Comp Criteria Cheatsheet for free!
Here's what to do in this scenario:
Keep in mind that the less "comparable" a property is to your subject property in terms of square footage, location, bed/bath count, and features; the less it should be used as a completely accurate representation of the future value of your subject property!
A lot of real estate professionals wonder "How Do I Get Better At Finding Comps?" Our answer is that nothing replaces actually DOING THE WORK. You get better at finding accurate comps the more you use this method of finding comps. Over time, you will get a better eye for seeing why properties sell at certain prices and where your subject property will sell at!
Be sure to review the section above constantly to find comps. The Real Estate Comp Criteria is the method that we & our clients and students use to accurately analyze the property to determine its current or future value.
So, maybe you've heard about real estate appraisers or realtors finding comps and have some questions about this, as well. Before we wrap up, let's get those questions answered!
Real estate comps, especially when derived from reliable sources like MLS, are instrumental in deciphering a property's true worth. By mastering the intricacies of pulling and analyzing comps, both property sellers and buyers can make more informed decisions, maximizing their investments and ensuring they don't undervalue or overpay.
As the saying goes, knowledge is power, and in the world of real estate, this power translates to tangible profits and optimal investments.
Ready to harness this power? Dive deeper into the world of real estate and elevate your expertise. Join our FREE real estate training today, and set yourself on the path to becoming a market maestro.
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