If you’re thinking of selling or buying a home in Northern Virginia, you’ve no doubt heard the term “comps.” So what are comps, and why are they important to know and understand when either pricing a home for sale or considering the terms of your offer?
What Are Real Estate Comps?
Real estate comps — a shortened term for comparable sales — are statistics that use similar homes in the area to determine your home’s most fair market value. It is important to look at recently sold homes in the area that are most like your property in terms of location, size, age, condition, and features to get the best comparison for pricing your own real estate.
How Are Comps Found?
Comps are one of the most common — and also the most reliable — ways to assess your home’s value. But sometimes they can be hard to find.
As mentioned, the main reason why comps are important is in pricing real estate. Appraisers need to provide fair market value, and that number can’t just be made up, or created in the basis of opinion.
To accurately determine the current market value of a property, agents and appraisers analyze recent comparable sales in the area. They search for three properties, at a minimum, with as close to identical characteristics as possible.
While it would be nearly impossible to find an exact match for your property, there are five main features to look for when comparing the home value of similar properties.
The exact same square footage isn’t necessary, but it is important to find a home of similar size — at least within 25% of the square footage of your potential sale/purchase.
The number of bedrooms and bathrooms is rather important, especially when combined with the square footage.
Large yards, swimming pools, updated bathrooms and kitchens, walk-in closets, hardwood floors, curb appeal, scenic views, and expansions (or room for expansion) are all examples of amenities, or features of the home that may add property value and attract buyers.
The general feel of the neighborhood also says a lot about the home’s value, because a lot can change from one neighborhood to the next, and it definitely matters to home owners what people they are going to be living with and calling their neighbors.
Safety, noise level, owner/renter demographics, and general maintenance all play a part in confidently arriving at a smart offer or sales price for your property.
Recent Sale Prices
After your agents and appraisers find a handful of comps that are similar in square footage, bedrooms, bathrooms, and amenities that were sold recently, they then look to how they were priced for sale and how long they stayed on the market.
All of this will give buyers and sellers an idea of the price bracket they should stay within to be competitive with the other homes on the market.
Obviously when considering sale and offer prices of homes in your area, comps matter, but other factors also play a major role in the final sale price. As we’ve seen over the last year, supply and demand, interest rates, economic growth, and other extras (like a home office, for example) can also play a big part in the asking price/offer.
Do Your Own Comps
Real estate agents have tools and access to real estate data to pull house comps information quickly and easily, but it is possible for you to do some of this research for yourself, especially if you are in the preliminary stages of considering what price would be best to offer for a house you desire.
Your first step in finding comparable properties would be to search recently sold listings in your area. You can’t use active listings because those values aren’t definite — the homes may end up selling for more or less, so they aren’t the best value judgement. Instead, you’ll want to look for properties with similar attributes to the one you wish to purchase (or sell) that have sold within the last six months, are in the same neighborhood, have similar features (as described above), and are of similar construction, age, and condition.
Real estate is always changing, and a houses’s value isn’t always quantifiable. Comps help buyers, sellers, agents, and appraisers to understand the current supply and demand of similar homes on the market as well as to value the home in the right place for it to sell.