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The Definitive Guide to Running Comps in Real Estate📍

What Does Comps Mean in Real Estate?

Comps is simply short for “comparable”.

In real estate, especially real estate investing, you make money when you buy and not when you sell.

So in order to make profit while investing in real estate,

you need to be able to sell at a reasonable price with respect to the market at large.

Real estate comps will allow you to determine what a piece of property is worth.

Without available comps, a piece of property is essentially worthless

….and I will explain that in detail in a few seconds.

When a piece of property doesn’t have comps,

that’s the equivalent of no buyers and no sellers in that marketplace, area or neighborhood.

So if you ever encounter this situation as an investor, you need to run.

Comps will allow you to reverse-engineer profits into your pocket and your investors’ bank accounts; outside of it, you are essentially speculating.

Speculation is a dangerous game to play in real estate

…when you don’t use comparables for the forecast of your investing activities.

comps in real estate

The Definition

Real estate comps are recently sold comparable properties within a predetermined proximity from the subject property of interest; proximity depends on the local market. 

Why are Comps in Real Estate Important?

I was saying earlier that comparables are what allows you to determine the value of a property

…before you get into the deal.

Essentially as a wholesaler, you are serving investors. The investors expect you to have determined a profitable price point before you engage them.

Ensuring a deal is your responsibility; you want to determine what a property is worth before you lock it up under contract.

The idea of wholesaling is to find and identify deals, lock it up under contract

…and then sign that right in the contract over to the investor; the end buyer.

But the characteristics of the contract includes the agreed price for the property.

So if you present a deal that doesn’t have a profitable price point in the contract,

the investor would not be interested in the deal.

Once a lead is generated, you would engage in negotiations with the seller where you will present an offer.

This is a real business. 

So there has to be some kind of maximum allowable offer within the feasibility of profitability for the business.

In order to determine the maximum allowable offer of a property for a potential deal, you need comps.

The maximum allowable offer basically depends on the after repair value of the subject property.

And the only way to determine the after repair value

…is to average out the sales price of the comps in the area adjusted for size and square footage.

That’s why comps are important in real estate.

And it is especially important for you as a wholesaler

if you want to be respected by the investors you will be presenting deals too.

How to Find Free Real Estate Comps Online

There are a few ways you can run comps in the business; some are free and some are paid services .

Running comps for free will cost you analysis time so nothing is essentially free; if it’s free, it will probably cost you or someone else money in one way or form.

However, I am happy to share with you www.realestateabc.com 

It is a platform where you can generate the sales that are happening within one mile radius of a piece of subject property;

it’s free at press time.

But the catch is that you have to analyze the data you collect from that website by yourself all manually.

Analyzing the data can take you hours upon hours just to engage in copy and pasting activity; for me it’s really never worth it.

I’d rather pay a few bucks and have a simple software do all the analytical work that I have to do on

…the data and comps that I collect.

So there is an alternative that I use and you can find at

www.EmpireBigData.com

…which allows you to collect comps but also analyze the data in one or two clicks.

There are also other websites where you can see the plain data of listings and sales within the town; some with specified distance from your subject property.

But again,

usually there is no analytical capabilities for the purpose of generating the after repair value of your subject property.

There is… 

The only thing is that none of these tools comes with is the analytical capabilities of the software that I recommend to you at

www.EmpireBigData.com 

The Best Real Estate Comps Software

The world is moving very fast in the direction of data manipulation

…for the purpose of intelligence at every level of business activities.

In real estate, you can’t afford to swim backwards or against the trends

…when it comes to software that is available to collect and analyze data.

Real estate investments and investing activities require intelligence as well.

It’s not enough to generate comps in a particular city or location.

You have to be able to analyze the data with a piece of simple software,

without employing the services of an agent.

If you are not thinking about business intelligence in real estate wholesaling and investing, you will get left behind.

You have to be obsessed with the idea of leverage, technology, data collection, manipulation, and analysis

…to create the intelligence to compete in this time and age.

There are many software available in the business today for real estate investing

and I have tried a few of them.

At press time, I recommend Propstream and you can get a free 7 days trial of it at www.empirebigdata.com 

Comparable Market Analysis

A proper analysis of a deal is not as simple as running comps for a particular neighborhood; you have to do a full-blown comparable market analysis.

Back in the days, you would have to message a real estate agent to help you with this process

…because an average person did not have access to the MLS.

These 14 states around the nation are considered non-disclosure States:

  1. Alaska
  2. Idaho
  3. Indiana
  4. Kansas
  5. Louisiana
  6. Maine
  7. Mississippi
  8. Missouri
  9. Montana
  10. New Mexico
  11. North Dakota
  12. Texas
  13. Utah
  14. Wyoming

That is to say the county government records only reveal an estimated (as in not close to actual) sales price

…for any sold properties in the area.

So you couldn’t really see that data unless you had access to MLS; the multiple listing systems which are exclusively available to license real estate agents.

But with many software like Propstream, you now have access to the data from MLS.

You don’t necessarily have access to log into the MLS,

but you have access to other softwares that has secured digital access to the same data

via application programming interface (API).

When I started back in 2005, I had to get licensed as an agent

to have access to this level of privilege just so I can run comps.

But thanks to technology, all of that has changed. 

We’re running comps that have 7 different attributes you want to pay attention to.

ON THE PREVIOUS POST: How to Flip Houses for Beginners with No Money📍

Comp Attribute #1 – Distance (Miles)

You want to only consider comps that are within one mile radius of the subject property.

The further away the comps are, the more non-comparable the property is to the subject property.

You cannot use the value of the property too far away

to determine the value of your subject property of interest.

In the same token, the closer the property is to the subject property, the more comparable it is to it; all other factors and attributes being equal.

Comp Attribute #2 – Listing Status

Certified appraisers are sometimes allowed to use active listings

as comparable to determine the market value of a piece of property.

That’s understandable because inventory on the marketplace is also assessed and analyzed

…to determine fair market value in a healthy Market.

But as a real estate investor,

you are on the buying side of a potential transaction and the idea is to secure the best deal.

That means you need to buy at a deep discount

in order to create the highest potential profit for the deal.

Therefore you can’t afford to be using active listings that have not actually sold to determine

…the best price for you to pay for a piece of property.

So to determine the after repair value of a property in order to create your maximum allowable offer,

it is best to only consider sold comps.

Comp Attribute #3 – Sales Date Range

Generally speaking,

a comp that was sold a very long time ago cannot be used as a comp to a subject property.

Let me explain.

A property that was sold just 3 days ago is a better comp

as compared to a comp that was sold 3 years ago.

Why?

Well, the idea is to determine what the market is saying about the value of the property right now; In This Moment.

So the closest to this moment the data is, the better. 

You cannot afford to use a comp that was sold too long ago,

because it is less of a determinant when it comes to the value of the property today.

This is the same principle that the banks that will finance all of these deals use,

to assess the value of the properties when being considered as collaterals.

As you probably know, we are all at the mercy of institutional money from big banks

because we want to sell to people that cannot afford to use cash to pay for those properties.

So, the date range of the sales of comps is a very important determinant when it comes to the value of the property

and the best price for you to pay upfront when you’re buying into these deals.

If you’re not very clear on this,

you will encounter sellers that will try to use how much they paid for the property to negotiate with you.

What was paid for a property is in fact irrelevant to how much you should pay for the property

…as an investor especially when it is more than one year ago.

So in my market, we typically use only comps that were sold in the last 12 months(1 year.)

Your local market may be slightly different. 

The best way to find out is to ask experienced agents and investors in the local area you want to dominate.

Comp Attribute #4 – Property Class

When analyzing comps in real estate; you cannot compare a commercial property to a residential property.

You cannot compare an office building to an industrial Warehouse.

For the purpose of real estate investing and wholesaling, there is a chance that you’re dealing with only residential properties.

So property classes are very important when running comps to determine the value of a piece of property today.

No banks or investors will accept a different class of property as a comparable for the subject property.

Comp Attribute #5 – Property Type

We have the level of the property class, but we also have the level of property types.

Within the property class “residential” there are also different types of properties namely:

  • Single Family Houses
  • Condos And Townhouses (Community leaving types of properties) 
  • Multifamily Properties (2-4 Units)
  • And others

When running comps for a subject property,

you want to make sure that you’re using only comps that is the same property type.

If you don’t, the market will tell you that you’re wrong sometimes

when it’s already too late and after losing money.

TRENDING POST: #1 SECRET to Get Agents to Give You COMPS FOR AFTER REPAIR VALUE 📍 Wholesale Real Estate

Comp Attribute #6 – Square Feet

You want to make sure that you’re using comps within the same size range of your subject property of interest.

In addition to that,

you still want to make sure that you adjust the averages of the sales price

…with respect to the square footage of the comps that you’ve selected to use in your analysis.

Obviously, the size of a property will determine how much a willing and able buyer

is willing to pay for the property.

You can’t afford to use a 26,000 square footage Mansion as a comp for a 1,500 square footage Cape Cod.

Usually these two types of houses will not be on the same block or within a mile radius.

But it does happen when a property falls on the border or intersection or major intersection of a neighborhood.

It can also happen when there are new developments and addon projects in the neighborhood; there are exceptions to every rule.

Every property within a mile radius is not always comparable for a piece of property.

Comp Attribute #7 – Year Built

Last but not least,

you want to make sure that you are using properties that are within the same range of year built.

There is no one particular range.

What I can tell you is that new constructions are usually not comparable to properties built decades ago.

This is especially true when there are lots of new constructions in the area.

It is also true for the other attributes that you see on this list.

CMA vs BPO

Any of the value attributes only becomes a significant attribute

when it is in fact a very common attribute in that area.

Case in point…

A mansion within a block of 1,000 square footage cape cod houses,

will in fact be devalued significantly for being  built in the wrong location.

That’s how comparable market analysis works.

Running comps is synonymous to comparable market analysis (CMA) and it should be considered a professional opinion if done right.

In fact, banks do the same thing for properties that are either facing foreclosure,

or being considered for short sales or already foreclosed-on properties.

They call them the broker’s price opinion (BPO).

The last time I checked, the banks pay no less than $50 to have an agent go by a piece of property

…for an exterior analysis of its value.

Comparable market analysis is a necessity,

not just for investors and banks, but also for you as a real estate professional.

While every analysis is unique and remains an opinion,

it is considered a “professional opinion” because it is backed by empirical data when done right.

Listed for sale properties are not enough comps for you specifically as an investor,

you have to run comps on sold properties.

Essentially, you want to reduce the amount of speculative energy in your comparable market analysis.

What I used to do back in the days is collect data of all sold properties within the area of my subject property,

and then manually analyze them.

I had to manually enter the radius of the comps to the subject property

until I get enough comps to determine the after repair value.

DATABASE, COMPS, CALCULATORS & SOFTWARE

I did create a calculator spreadsheet in Excel that I was able to use over and over again

…but an average person couldn’t do that.

Today, things are quite different. 

You can do everything in one spot.

  • Pull data
  • Marketing
  • Leads Generation
  • List & Leads Management
  • Running Comps
  • Creating Reports
  • Creating Professional-Looking Offers
  • Generating Cash Buyer Data
  • Marketing to Cash Buyers
  • And close deals back to back.

The same software that I used can be tried out for 7 days absolutely for free at www.EmpireBigData.com .

You can basically flip houses nationwide from anywhere, from the beach, from your home virtually and etc.

All you need is a laptop and a simple internet connection.

The whole business comes down to the ability to run comps,

determine value, make offers that turn to deals that investors stomp each other over to get from you.

If you can find and identify this type of deeply discounted deals from the comfort of your home,

money will get wired to you over and over again.

You can travel the world, you can do what you like

…and still be of service and value to many real estate professionals, agents and investors and get paid.

HAVE YOU SEEN THIS: Smart Real Estate Wholesaling (PHYSICAL BOOK)

Conclusion

Running comps for your deals is an art; it is also very much a science because you have to back your numbers up with empirical data.

But it’s an art.

So I can show you step-by-step how to run comps for your deals but it takes practice

because there are going to be nuances that show up from location to location.

You have to practice.

You want to make sure that you’re picking random properties

…even before you start generating leads and just run comps on them just for the purpose of practice.

By getting very good at running comps, you will reduce the amount of times

that the investor tells you that you are delusional when you present a deal to them.

Sometimes, the investors are just too greedy and may be looking for 30 and 40 cents on the dollar.

But for the most part, the numbers are the numbers and not everyone will agree to how you run it.

What I like to do sometimes is present my after repair value in ranges; that way it is clear for the dum dums that they have to do their own due diligence.

The price that a property sells for after being repaired

…depends on many other factors beyond just the market value in that area.

For example, it also depends on how good the repairs on the properties are.

But keep in mind that presentation is everything; .

So when presenting your deals to the end or cash buyers,

be sure to be ready to present a proper market analysis report to them if they do ask for it.

If you run your comps from Zillow, Trulia, Redfin and all the other consumer front ends on the internet,

it is going to be very hard for you to present a professional report.

What do comps mean in real estate?

Comps is short for comparable which essentially another property that can be compared to a property of interest to determine its fair market value.

How do I find comps for my home?

You can find comps from the MLS (multiple listing system) or the county public records if it’s not in a non-disclosure state.

How are real estate comps determined?

Find the weighted average of the sales price of recent sales within a predetermined proximity or distance from a property of interest and determine a weighted average of the sales price.

How do I find real estate comps without a realtor?

Use prostream, an online web based software or similar tool from www.EmpireBIGData.com to access MLS data and public records.

What are comparables in real estate?

Comparables are essentially other properties that can be compared to a property of interest to determine its fair market or after repair value.

How do comps work in real estate?

A comp is another property that can be compared to a property of interest to determine its fair market or after repair value.

How do I get comps in real estate?

Use prostream, an online web based software or similar tool from www.EmpireBIGData.com to access MLS data and public records.