Real estate comps (or "comparables") are similar homes in a community that real estate professionals use to help them set home prices for buyers and sellers. Real estate professionals also use comps to help them review the results of a home appraisal, especially when the appraised value of the home is lower than its sale price.
Real estate comps typically consider things like the location of a house, its square footage, the number of bedrooms and bathrooms, the condition of the foundation, roof, electrical, plumbing, and heating and cooling systems, the age of the home, the date the last time the home was sold, and especially the price at which it was sold. Comparable homes are most useful when they were sold recently because that gives information about current home prices in a community.
Where do you find real estate comps?
The easiest way to find real estate comps is through a real estate professional or home appraiser who has access to the Multiple Listing Service (or “MLS”) database.
They can search the MLS database for similar homes located closed to a home you are looking to buy or sell. Real estate professionals often use a one-mile radius for their search. After reviewing comparables, they can give advice on the listing price or offer price for a home.
While the real estate comps you get from a professional are generally the most accurate and reliable, you can do some research yourself. For example, you can use online home listing sites and public records to research similar homes in your community.
How do you use real estate comps when buying a home?
Real estate comps can help you make sure a home is reasonably priced. For example, if you are looking to buy a 1,600 square foot home with four bedrooms and two bathrooms listed for $300,000, you would search on sites for similar homes in the same community that also sold for $300,000. If similar homes only sold for $275,000 however, you might decide to offer less than the list price of that home.
You can also use real estate comparables to review the results of your home appraisal. This usually happens when the appraised value is lower than the sale price of the home. This is important because a lower appraisal value can affect your ability to get approved for a mortgage or might require you to increase the amount of your down payment.
In these cases, your real estate agent may be able to use real estate comps to demonstrate that the appraisal price is too low and that the price you want to pay is a reasonable price for that home.
How do you use real estate comps when selling a home?
If you’re looking to sell a home, real estate comps can help you determine an appropriate price for your home. You don’t want to price your home too low because you could leave money on the table. But you generally don’t want to price your home too high either, because that makes your home harder to sell.
Most buyers will research the price of similar homes before they make a bid on yours and are unlikely to offer you substantially more money for your home than they would for a similar home in your neighborhood.
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