Everyone has heard the Real Estate term, “Comps”. It’s thrown around often and you’ve probably even heard it on a popular HGTV Real Estate TV show. But what are comps? A “comp” is short for comparable, and more specifically, comparable homes. Comparable homes are incredibly important to almost every real estate transaction because that is how Realtors and Appraisers determine the value of the home. Based off what the “comps” show, that will drive how much you list and sell your home for. But finding comps isn’t as simple as just looking up a few homes nearby online. There is a lot of analysis that goes into finding accurate and relevant comps. For every listing presentation that I do, I try to find a minimum of 10 good comps. Of those, maybe 2-3 will be priced higher and maybe slightly nicer than the home in question, 5 will be very close comps in the price range I determine to the home in question to be in, and 2-3 will be priced lower than the home in question, and probably not as desirable. This will help determine us hone in on the perfect price range for your home. So, let’s look at how we determine great comps! Listed below are the 5 factors that are the most important for finding relevant comps:
- Time. What I mean by this, is how recent the comparable home sold. Your neighbor’s home may have sold for $200,000 in 2016, but this is not recent enough for the time value of the comp to be relevant. What I look for is sales in the past 6 months or less. If there are many great comps available, then we try to go as recent as possible! I also look at homes that are currently on the market, which we will discuss in #4!
- Location. This is obviously critical, and the best comps are ones pulled from your direct neighborhood or ones very close. This can be easy in urban areas with defined neighborhoods of similar homes, but is much harder in rural areas. Even within the same city, prices can vary from area to area, so knowing the neighborhoods and nearby neighborhoods is critical. Additionally, if you are selling a home in a small town, we may need to look at nearby, similar sized towns to gather enough quality comps!
- Similar. I try very hard to choose comps that are similar to the home in question. There are a multitude of factors that play into this, but some common ones are number of bedrooms, bathrooms, garage size, lot size/acreage, architectural style, and size of home. We will search for homes that closest match your home in terms of all these factors to ensure we are comparing “apples to apples”!
- Current Competition. Past sold comps are great, but so is knowing what you are competing against, and knowing what homes didn’t sell. Active homes are homes that are currently on the market that would compete with the home in question for buyers. Active offer and pending homes are homes that are on the market, but have an accepted offer. These can be a great example of homes and price points that were attractive to buyers and received an offer. This helps us zero in the most current market conditions possible. We also look at comparable homes that did not sell, and we try to price and market the home so this does not occur!
- Condition. This is a big one. Online comparable home data will get you in the ball park, but the condition of the home will really help you zero in on the exact value. Similar sized homes, with equal lot sizes, and the same number of bedrooms and bathrooms can vary wildly if one is completely renovated and one hasn’t been touched in decades. This is really where the expertise of a Realtor who views countless homes comes in. They can compare this to what they are seeing in similar homes, what buyers want, and ultimately where the home should be priced and how it should be marketed.
I hope this helps shed some light on what comparables (comps!) are, and why they are so critical for pricing and selling a home. I also hope it shows how much work and research great Realtors put in to ensure you have a successful sale. If you’re considering selling your home in the Chippewa Valley – please reach out! I’d love to “pull the comps” and show you how much your home would sell for to a ready, willing, and able buyer! Until next time…
~ Tim Nelson| RE/MAX Affiliates | firstname.lastname@example.org