fbpx

Real Estate Comps:- 2022 Guide to Comps in Real Estate

A real estate comp is a real estate analysis that compares one real estate property to similar properties.

The purpose of a real estate comp is to help real estate professionals determine the fair market value of a property.

There are several factors that real estate agents consider when performing a real estate comp.

The most important factors include the size, location, and condition of the properties being compared.

A Real Estate Agent Uses a Variety of Methods to Find Real Estate Comparables.

The most common methods include real estate databases, real estate listings, and real estate appraisals.

When performing a real estate comp, real estate agents should always use the most recent data.

The Most Recent Data is Typically the Most Accurate Data.

Real estate agents should also consider the market conditions when performing a real estate comp.

The market conditions can affect the fair market value of a property.

When performing a real estate comp, real estate agents should always use the most recent data.

The Most Recent Data is Typically the Most Accurate Data.

There are several real estate valuation methods real estate agents use to determine the fair market value of a real estate property.

Each method has its advantages and disadvantages.

However, no real estate analysis technique trumps all the others.

Most real estate agents use real estate comps as part of their real estate analysis.

The real estate comps give them a good starting point to determine the fair market value of a real estate property.

The real estate comps help real estate agents determine the price at which a property will likely sell in the current market conditions.

When performing a real estate comp, real estate professionals should always use the most recent data.

How Do Real Estate Agents Come Up With Comps?

When realtors want to list a property and set a selling price, they usually start by reviewing recent sales of comparable properties in the area.

They also look at other similar properties currently on the market and how many and which offers they’ve received so far.

By applying what they’ve learned from those comparisons to their client’s property, they determine a fair asking price.

The 3 Most Common Methods for Determining Market Values are:

Market analysis using:

  1. Recent sales of identical or comparable properties in the area,
  2. a cost approach that takes into consideration how much it will cost to reproduce a similar building and land, and
  3. Balance sheet approaches based on income, replacement value, and net worth.

Each method has its pros and cons. The best real estate agent uses all three methods to come up with the final list price.

What Are Real Estate Comps?

Comparables or “Real Estate Comps” are properties considered similar to your home in size, age, features, and location within your market.

When real estate professionals want to determine the value of a property, they research similar properties that have sold (or are currently for sale) to establish a “market value.”

If you’re curious about the value of your home, or just want to know how much the homes around you are selling for, real estate comps are a great place to start.

Your realtor will probably use real estate comps as part of their overall market analysis when recommending a listing price for your home.

The 3 Most Important Factors For Real Estate Comps:

1. Size – The size of the property being compared is one of the most important factors a real estate agent considers when performing a real estate comp.

2. Location – The location of the property being compared is also a very important factor a real estate agent considers when performing a real estate comp.

3. Condition – The condition of the property being compared is also a very important factor a real estate agent considers when performing a real estate comp.

Why Use Recently Sold Properties For Real Estate Comps…

When you are looking to buy or sell a property, it is important that you have a realistic idea of what the property is worth.

One way to get an idea of what a property is worth is to look at real estate comps.

Real estate comps is a list of recent sales of similar properties in the area.

There are several reasons why you should use recently sold properties for real estate comps:

– The data is current: The data for real estate comps are updated regularly, so you can be sure that you are getting accurate information.

– The data is comprehensive: The data for real estate comps includes information on a wide variety of properties, so you can find the right comparison for your property.

– The data is unbiased: This real estate comps list includes a variety of properties, so you can be sure that you are getting accurate information without a real estate agent trying to sway you.

For real estate comps, several services can provide listing from multiple real estate agents for free, including realtor.com and Zillow.

You should check out my favorite: www.EmpireBIGData.com

In most cases, real estate comps will be used to determine the value of a property to complete an appraisal for lending purposes or tax assessment purposes.

Real estate comps can also help when making decisions about renting out a property.

When you’re Looking to Buy a House…

Real estate comparables are one of the most important things you’ll need to look at.

This will give you a good idea of what the market is like for houses in that area and how much you should expect to pay for a house that’s similar to the one you’re interested in.

If you’re looking to sell your house, it’s a good idea to get a real estate agent to help you compile a list of comparables.

This will give your agent an idea of what your house is worth and what price range to market it in.

Comparables are an important part of real estate transactions, whether you’re buying or selling a house.

They will give buyers an idea of what houses in that area typically sell for and allow realtors to price properties according to the current real estate market.

Let’s take a look at Comparables Examples…

…and see how they can be useful in real estate transactions.

For example, if your realtor starts showing you houses priced above $400,000, but you know that other houses in your neighborhood have sold between $330,000 and $350,000, you can ask your realtor to adjust the price range they’re looking at.

If they show you a house that’s listed for $435,000 and it’s basically in the same condition as all the other houses, then you know that the asking price is too high and can make an offer accordingly.

Year-over-year comparables aren’t useful if they’ve been on the market for less than 12 months or if there have been significant changes made to them since last year.

For example, if someone bought a house in 2010 and put over $100,000 into renovations, but it’s still not selling after six months on the market, then only real estate comparables from this year would be useful in determining what to offer.

When looking at comparables, you should remember that price is only one factor to consider when making an offer on a house.

You’ll also need to take into account the size of the house in comparison to yours, any renovations or repairs that need to be done, and what the current real estate market is like.

For example, if comparables show that houses in your area are selling for $400,000 but they’re all ranch-style houses with two bedrooms while yours has three bedrooms and they haven’t raised their asking prices since 2008 when real estate was more affordable than it is today, then trying to get your property sold quickly might not be realistic.

Here’s Another Example:

Let’s say you’re looking to buy a house and the real estate comparables in your area show that the average price per square foot is $200.

If you find a house that’s 1,000 square feet and the asking price is $200,000, then you know that the asking price is right in line with what houses are selling for in that area.

However, if you find a house that’s 2,000 square feet and the asking price is also $200,000, then you know that the asking price is too high and can make an offer accordingly.

House Comps are a Great Way to Get an Idea of What Houses are Selling for in your Area.

They can help buyers make offers according to the current market and help sellers determine if they’re being realistic about their asking price.

Checking house comps before making an offer or selling a house will put you ahead of the competition.

House Comps Are The Key To Success. The house price comparison websites show how house prices have changed over time.

How To Find Real Estate Comps From Multiple Listing Service

When looking for house comparables, many people turn to Multiple Listing Service (MLS).

MLS is a system that real estate agents use to share information about houses they’re selling.

This system allows agents to see what houses are currently on the market, what’s been recently sold, and what houses are currently being offered as rentals.

Back in the days when looking for house comparables, your best bet was to ask your real estate agent to pull up the MLS listing for you.

But to find real estate comps in this time and age, all you need to do is go to a house price comparison website like www.EmpireBIGData.com and input the address of the house you’re interested in.

Once you’ve entered the house’s address, the website will show you a list of houses that are similar in size, style, and condition.

You can even use this website to compare house prices in different neighborhoods or cities.

What Is A Comparative Market Analysis?

Comparative market analysis is the process of assessing and comparing the relative strengths and weaknesses of two or more markets.

It can be used to identify opportunities for businesses to enter new markets, or to assess the potential profitability of a product or service in a given market.

But What is Comparative Market Analysis in Real Estate?

A comparative market analysis is an evaluation of the relative strengths and weaknesses of two or more markets.

This can be used to identify opportunities for businesses to enter new markets, or to assess the potential profitability of a product or service in a given market.

However, CMA’s in real estate refers to assessing and comparing the relative strengths and weaknesses of two or more real estate markets.

A CMA is used by buyers and sellers alike as a means of identifying what’s happening on both sides of the transaction:

  • What properties are selling for,
  • How long those transactions generally take, and
  • How much profit those properties are generating on average.

Data from comparative market analyses are often used as part of an offer on a home as well as during negotiations over the purchase price of a home.

When you’re looking to buy or sell a house, comparative market analysis (CMA) is one of the most important tools in your arsenal.

The Advantages of Real Estate Comps

Buying a house is an important decision, not only because it’s costly, but also because you are making an investment in your home.

Comparing properties can help you make sure that you are getting the best deal possible.

Property comps are useful for determining price ranges for neighborhoods and specific homes.

When you’re looking at a home to buy, it’s always a good idea to research the homes in the neighborhood and see how they compare in terms of square footage and style.

It’s even more important when your goal is to invest in real estate for short to mid-term goals.

Are you looking to Flip Houses?

If you’re looking to flip houses, then the comparative market analysis is an essential part of your business plan.

By analyzing the data from a CMA, you can get a good idea of how much you should offer on a property, as well as how much you can expect to make in profits.

You can also use this information to determine what neighborhoods are the best for flipping properties.

When buying a home to flip, you must find a property that needs some repairs.

This way, you can add value to the home by making some simple repairs and upgrades.

It’s also important that you find a home that is in a desirable neighborhood.

If the house is in a bad neighborhood, it will be difficult to sell it for a profit.

The Disadvantages of Comparative Market Analysis

While comparative market analysis can be an incredibly useful tool, it does have some disadvantages.

One such disadvantage is that it is often based on past data.

This means that the information may not be relevant to the current market conditions.

Another disadvantage is that it can be subjective.

What one person considers to be good property, another person may not.

It’s important to remember that a CMA should only be used as a guide, and you should always consult with a real estate agent before making any decisions about buying or selling a home.

Now that you know a little more about comparative market analysis, you can use this information to your advantage whether you’re buying or selling a home.

Remember to always consult with a real estate agent before making any final decisions especially if you are new and not willing to invest in coaching and mentorship.

Some Additional Pointers on Real Estate Comps

Recently sold homes are more accurate real estate comparables to use in your analysis as opposed to listed homes that are not yet sold.

Licensed real estate agents are no longer necessary to get access to accurate comps. Use www.EmpireBIGData.com for access.

In this time and age, you don’t need local multiple listing service access to get access to hundreds of millions of meaningful data.

An experienced real estate agent won’t have the time to be pulling comps for you anyway; so don’t bother.

Make sure your comparable home sales are in the same neighborhood to determine the best estimate of a property value.

Against, the property value is best estimated with proven comparable home sales and NOT anticipated sales.

How Real Estate Investors Use Comps

Comps, or Comparables, are a crucial tool for real estate investors.

By looking at similar properties in the area, investors can get an idea of what a property is worth and how much they can expect to make on a sale.

There Are Two Main Types of Comps: Closed & Active.

Closed comps are properties that have been sold in the past, while active comps are properties that are currently for sale.

It’s important to use a mix of both when doing a valuation, as each has its own strengths and weaknesses.

Closed comps are more reliable, as they reflect the true market value of a property.

However, they may not be relevant to the current market, as conditions may have changed since the property was sold.

Active comps are more indicative of the current market, but they may not be as reliable as closed comps.


See more below…


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.

Playlist To Our Newest Videos