Comparable homes, or “comps,” are among the most accurate estimations of any home’s value. Realtors find comps and use this information to inform real estate sales or purchases for their clients. When working with home sellers, Realtors find comps to make the most accurate price possible, so the house isn’t priced out of the market and no money is left on the table. When working with home buyers, Realtors find comps to ensure a home is priced accurately and, if it’s not, to make an solid argument for a lower bid. But how can Realtors tell if a home is truly comparable? And how do Realtors find comps?
What Realtors Look For to Find Comps
Location, location, location. It’s one of the most important factors when buying a home, which makes it an equally important factor to accurately find comps. Realtors try to find comps within a half-mile radius of the home in question. This generally means the homes are in the same or very similar subdivisions or neighborhoods.
Locals know that transitions between neighborhoods aren’t always gradual, and this can be tough to tell from a map. Going down the street past a certain building, or crossing the street out of a gated community can make a big difference in home value. When finding comps, it helps to work with a local expert who understands the unmapped borders between neighborhoods.
Time And Market Conditions
Especially in today’s competitive seller’s market, a lot can change in 6 months. Year over year, average home prices can change by as much as 10% or more in any given neighborhood, which indicates a 6 month delay can change the price by 5% or more. On a $200,000 home, that’s a $10,000 change in 6 months. To find comps with truly comparable prices, Realtors look for homes currently listed for sale as well as those that have sold in the last three months.
Actual Sale Price
While you can see what nearby homeowners are currently asking for their home and public records will show previous sale prices, this isn’t the full story. Sellers’ agents may make concessions to buyers during real estate negotiations, such as covering closing costs or making repairs, that can adjust the actual sale price. Realtors use their local Multiple Listing Service (MLS), which is maintained and updated by other Realtors, to get a more accurate picture of the real sale price.
Size by Square Footage
Two homes in the same neighborhood that were sold around the same time might still have drastically different prices if they’re not the same size. Unless there’s other big repair problems or key features missing, bigger homes tend to generate bigger prices. To find comps, Realtors look at homes with the same or very similar square footage.
Bedrooms And Baths
Square footage isn’t the only important size factor. Two homes with the same square footage may have different numbers of bedrooms and baths, which will change the functionality of the home and therefore the price. When finding comps in the area, Realtors will compare homes with the same numbers of bedrooms and baths, and also consider other functional spaces, like the size of the kitchen or a finished basement.
Remodeling your kitchen, bathroom, or bedroom not only gives you a luxurious space to enjoy, but it also increases the value of your home. This means, to find comps that are truly comparable, Realtors have to consider recent updates, and consider how much these updates are worth. If the home in question has had a lot more remodeling than nearby homes, or it’s missing key updates, it can impact the price more significantly. While the MLS lists this type of information, many other home estimators and listing services don’t.
Some homeowners want to build equity and don’t mind making some repairs to a home. Others are looking for a move-in ready home and don’t want the hassle of repairs. If the home in question needs some work, Realtors will have to skip over newly remodeled homes to find comps, or adjust the price accordingly.
Yard And Property
It’s not just the home that attracts homebuyers. Outdoor amenities such as big yards, fences, decks and patios make a big difference, especially for Michigan homebuyers. To find comps within the area, Realtors will also consider outdoor features.
A variety of other features can drive home prices up or down. Not considering these factors to find comps means overlooking high ROI updates and leaving money on the table during a sale. Different areas may have their own special features, as climate, common house styles, and types of buyers in the market can make certain features more attractive. For example, the cold winters in Michigan make energy efficiency updates an important consideration. In very hot climates, a swimming pool may be more valuable.
In a neighborhood located near a lake, wooded area, or another special feature, home values may vary significantly based on how close or how visible the feature is. A beachfront property, for example, would not be comparable to a beach access property, even if the latter was very similar and located across the street.
To truly find comps that represent your home, it’s important to consider all factors. It’s also important to get local insight, so you’re not comparing homes in neighborhoods that aren’t actually the same. An online estimator is a good place to start and can help you find comps with baseline similarities. However, to get a more accurate valuation, it’s best to work with an expert.
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