Real estate comps play a large role in the market. And even though they are used to determine the appraised value of a home, potential homebuyers often do not have much insight into the process. In this post, I want to shine a light on real estate comps to help both buyers and sellers better understand how real estate comps are chosen and used by different parties.
What Are Real Estate Comps?
Real estate comps are comparable properties that help to show what the value of a particular property might be.
How Are Real Estate Comps Used?
Real estate comps are used by a variety of different parties in the real estate industry. Sellers use real estate comps to determine the listing price for their homes. Buyers often use comps to decide how much to offer on a property. And mortgage appraisers use comps to determine the value of a home for lending purposes. If you want to refinance your home, comps will be used again to assess the value and determine eligibility.
How Do Realtors Find Real Estate Comps?
Finding real estate comps is an art, not a science. However, sticking to a set of criteria can make the process more strategic. Realtors, who have specialized market training and access to industry tools, use their knowledge and tools like MLS to zero in on comparable properties. Their experience makes it easier to find potential comps and then whittle down the field.
What Do Realtors Look for When Evaluating Comps?
Sometimes, comparing two homes in the same neighborhood can actually be like comparing apples and oranges. The best real estate comps come from comparing apples with apples. Realtors have certain things they look at when comparing properties to make it easier to identify similar properties, including the following.
When the home was sold: Realtors look for homes sold recently to ensure that market conditions are similar. Comparing a home to one sold a year ago will not present an accurate picture of current market conditions. It is better to compare a home sold within the past few months. Rapid home sale price increases during Covid have made this even clearer. With home prices in Tampa increasing month over month, it is important to have recent comps to fairly assess the value of a property.
How close the home is: To make sure the home has similar amenities, Realtors look for homes that are near the one they are assessing. Nearby homes are more likely to share a school district, have similar walkability scores, and be close to the same parks, stores, and other places. Finding comps more than a mile away could misrepresent the value of a home. When novices attempt to find real estate comps, they may ignore this criterion. However, since location is such an important aspect of real estate, it should not be overlooked.
How large the home is: When looking for a comp, Realtors consider the number of bedrooms, bathrooms, the square footage of the home, and the size of the property. They may also use the price per square foot as a measure to help assess similarity. It can sometimes be difficult to find comps with the exact same numbers. Realtors often have a set margin they look for, like within 250 square feet.
How old the home is: Homes that are similar in age are important for estimating the potential value of a property because they give insight into the age of the roof, HVAC systems, and more.
The condition of the home: To best assess the value, Realtors try to only compare homes that are in similar condition. A home that has been remodeled should not be compared with one considered a fixer-upper.
Can Anyone Look for Real Estate Comps?
Yes. Anyone can look for real estate comps. However, real estate professionals tend to have more experience vetting comps and additional tools to help them more quickly assess the possible value of property. If you want to find real estate comps, be prepared to do some digging and even visit different neighborhoods. Because Realtors are familiar with their stomping grounds, they can more quickly assess the similarities and differences between properties and neighborhoods. If you want to find comps for a neighborhood you are not that familiar with, you may need to stop by to get a sense of the features and amenities of the specific location.
Do I Need to Look at Real Estate Comps to Buy a Home?
When you work with a reputable Realtor, you do not need to concern yourself with comps. Your Realtor will do the heavy lifting for you! Your Realtor wants to help you find the property that is best for you. She will research the neighborhood and real estate comps so that you can put together a compelling offer that takes into consideration what similar properties are selling for.
If you enjoy looking at real estate comps, though, have at it! Just know that your Realtor will also be checking them and will likely have access to more resources.
Do I Need to Look at Real Estate Comps to Sell a Home?
If you partner with a Realtor to sell your home, you do not need to identify comps. Your Realtor will find comps to help you set the best possible selling price for your goals. She can fill you in on what similar homes are selling for and how long they stay on the market so you make an informed decision regarding the listing price.
What if My Appraisal Comes in Lower than Comps in the Area?
If you have received a lower-than-expected appraisal, it could be due to a variety of factors. If you believe you have received an unfair appraisal, talk to your Realtor for further advice.
Ready For the Next Step?
If you want to list your home or buy a new one, talk to a reputable Tampa Realtor to get the latest info on real estate comps and the market. As a Tampa native, I know the area like the back of my hand. I would love to share that expertise with you. Contact me to discuss your real estate goals.