Comparable sales, or “comps” in our real estate industry lingo, is one of the most important factors for homebuyers – maybe even before location.
Like a Swiss Army knife, comps perform in the real estate toolkit by not only helping homebuyers know how much to offer for the home on their radar, but by also guiding home sellers in listing their home at the right price, and aiding appraisers in estimating the right value of a home.
But, because there are so many moving parts in an ever-changing market, nailing down the perfect comp can be complicated, so it’s best left to the professionals.
Here’s what to know:
Comps: The Definition
House comps, or comparable sales, means the sales price of similar properties within a close distance to determine a home’s current market value. (Comps usually entail multiple nearby properties to strengthen the accuracy of the estimate.)
Similarities of the property include:
- Square footage of the house and lot size – This is the price of the home per square foot, which should be within 10 to 20 percent of your home’s size and the size of the lot.
- Location – The closer the comp home is to yours, the better – ideally, within a couple-mile radius, in the same school district, near the same parks, and in the same proximity to similar restaurants and attractions.
- Number of bedrooms and bathrooms – This comp factor greatly impacts the home value.
- Age and condition of the home – It is recommended that comp homes be no more than five years’ difference in age and stands in the same condition. A comp should also consider any upgrades, additions, or remodeling to the home. Special features will also add value, such as an impressive outdoor living space, outdoor pool, grand view, upgraded kitchen cabinetry, and more.
- Date of sale – The sales should usually be within three to six months of each other because the market changes so rapidly. (And, remember, a home’s list price and sale price are not the same.)
- Property taxes – Comp homes need to be within the same subdivision or municipality to have similar property taxes.
Why Comps Matter to Homebuyers
In essence, homebuyers should use comps procured from their real estate agent to arm them with giving a fair offer during negotiations, rather than overpaying. Comps can also benefit house hunters before making an offer to learn more about the target area and community, and its overall value and features.
Why Comps Matter to Sellers
Again, because the market is rapidly changing, current comps are important to know how much market values have changed since you first purchased your home. Comps also allow real-world data to speak for a seller’s realistic listing price, instead of the lofty listing price they have in mind because of their emotional attachments to the property. Comps may also help sellers know which features of the home to highlight in their listing.
Real estate agents often use a Comparative Market Analysis (CMA) to accurately calculate a home’s appraised value by analyzing up to 12 comps that consider market trends, like the inventory level, the number of days the home has been on the market, and more.
Why Comps Matter to Other Industry Professionals
Comps are a valuable tool for many others in the real estate industry besides homebuyers, sellers, and their agents, including appraisers for mortgage approvals and lenders to establish home loan terms and to determine if the mortgage loan aligns with the home’s true value. Comps may also be used to resolve contested estate settlements, insurance claims, or divorces.
It is critical for homebuyers and sellers to rely on a real estate agent who is an expert on comps to hone in on the most accurate value of a home in today’s market. Realtor Paige Bird is your solution. As a real estate agent in Myrtle Beach since 2004, she has been named the #1 RE/MAX Agent in South Carolina for 9 consecutive years.
In 2022, she closed on 75 properties for a total $26,472,347 in sales volume and an average list-to-sales price of 99.10%.
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