It is important to examine and understand comparable home sales. Sometimes called “comps” by those who work in the real estate industry, these sales are an important part of the property transfer process.
Knowing what comps are, how to find them, and how to interpret the results you receive can give you the upper hand in pricing negotiations. This is regardless of whether you're trying to sell your home or purchase a new one.
Here is everything you need to know about comparable home sales to come out on top when buying or selling a home:
What Are Comparable Sales For Buying or Selling a Home?
Whether you are buying or selling a home, you will often hear the term “comps” tossed around by your real estate agent, or perhaps by friends and family who are also involved in a property transfer.
But what does it mean?
“Comps” is short for comparable home sales, which is a tool that real estate agents, home sellers, and potential homebuyers can use to evaluate the validity of a home's price.
How Do Comparable Home Sales Work?
Comps are a perfect way to evaluate the worth of a particular home. But, to effectively use the comps “tool,” you need to first understand the three principal qualifications for a good comp.
They are as follows: to consider a home a good comp, you want it to be as similar as possible to your home (or the home you want to buy!), as close as possible to your home, and sold as recently as possible.
Why Are Features Important to Comparable Sales?
If you are looking to buy a two-story home with a detached garage in Anytown, USA, it is not worth your time to use a one-story ranch-style with an attached garage as a comparable sale, if it is right next door and sold yesterday.
This is because the two homes are not comparable in features, which is one of the main points. When selecting comps to negotiate the price of your home, you should also consider the square footage and upgrades of the houses you select for comparison.
For example, more square footage, even if only by a slight amount, could be cause for a higher sales price. As in the case with upgrades – if the home you would like to use as a comp has a fully updated kitchen, and the home you are interested in buying or selling does not, then the price should not be as high.
Why is Time of Sale Important to Comparable Sales?
The real estate market is a constantly changing thing. Because of this, a comparable home that sold six months ago is not really a good indicator of how much your home is worth. The two properties entered the market under completely different conditions.
When selecting a good comp, you should look for homes that were sold no more than a month ago, if possible. This way, you can be sure that the home sold under current market conditions and is therefore still a valid comparison tool.
Why is Location Important to Comparable Sales?
Any comps you look at should be as close as possible to the home you are selling (or the home you want to buy!) If possible, you should only be looking at comparable homes in the same neighborhood as your home, the same zip code if you need to expand your reach.
This is because a home's immediate location can cause its value to differ greatly. For example, if you built two identical homes 50 miles away from each other, their values are going to be significantly different.
One of the homes could be close to railroad tracks, while the other is on the end of a cul-de-sac. One could be a 5-minute drive to the grocery store and other shops, while the other is a 25-minute drive from anywhere. So, when looking for comps, you can see that you need to stay as close to “home” as you possibly can.
What is an Example of a Good Comp?
Let's say your home is 2 stories, has 3 bedrooms, 2,450 square feet, and its original kitchen. Then good examples of homes you could use for a comparable sale would be these:
Home #1 is 5 miles away. It has 2 stories, 4 bedrooms, 2,200 square feet, and an updated kitchen. The seller received $260,000 for this home.
Home #2 is 1 mile away. It has 2 stories, 3 bedrooms, 2,300 square feet, and its original kitchen. The seller received $244,000 for this home.
To land on a fair price for the home you want to buy or sell, you would consider its number of bedrooms, a large amount of square footage, but also lack of an updated kitchen, to arrive somewhere in the middle.
How Do I Discover the Comps in My Area?
It's very easy to discover comparable home sales. All you have to do is a quick online search for “recently sold homes in (your location)” and comb through the results for matches that fit the criteria.
Or, to make things even easier, you could just use Clever. Our online search tool makes finding comps in your area a breeze.
Remember Not to Stress over Comps
Finding local comparable home sales is only one small part of buying or selling your home. You don't need to spend hours stressing over finding the perfect comps. Remember to partner with a real estate agent you can trust. She can take most of the guesswork out of the process. She can also provide you with a few recently sold homes to look over.
Are you buying or selling a home? Want to partner with a Realtor who can take the stress out of finding comps? Clever is here for you! Call us today at 1-833-2-CLEVER or fill out our online form to get started.