myEmpirePROIn this lesson, you will discover my personal 10 main keys to finding comps for real estate you may have an interest in.
If you are wondering, comps is basically another word for comparable which is a word used to describe other comparable properties to a property of interest.
For example, you are taking a look at a property to either purchase or flip.
The first step is to determine what the property is worth in today’s market.
Sometimes we refer to that number as the after repair value (The ARV) or in the more mainstream market, fair market value.
When I did my first property walk-through in 2004, I just wanted to be a landlord.
Thank goodness that didn’t work out because frankly, that would have been a disaster if I purchased or locked a piece of property under contract without first determining what it is worth in the market.
“What is the highest amount that a willing and able buyer wants to pay for that property after a reasonable level of marketing and exposure?”
The idea is to answer that question.
In order to do that, we need 3 comparable properties or what the industry commonly refers to as the comps.
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For your information, I personally use www.EmpireBIGData.com to find and pull comps for any property I have an interest in. You can take a free trial for 7 days.
That tool is your best bet to get real estate comps without a realtor or without being a realtor.
And of course, you can also comp properties on the multiple listing systems (The MLS) but you have to be a licensed agent as far as I know.
Also if you are up for a little manual analysis effort, zillow and redfin may be useful for you.
I personally do not like wasting time on things technology can handle so I opted for www.EmpireBIGData.com Its calculator analyzes the comps effortlessly.
With that being said, these are the 10 main keys and attributes I pay attention to when I want to pull a list of 3 properties I would consider a comp to a subject property.
With these criteria, none of them should be used as absolute.
However, the closer a criterion is to that of the subject property, the more valid it is. This is a financial decision being made; be careful.
(1) Subject property
We need to know the physical address of the property you’d like to comp. It’s not good enough to have the city or zip code only because any city can have different types of neighborhoods.
(2) Sale Date Range
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You need to determine what date range you want to pull comps from.
A property sale that happened 2 weeks ago is much more of a valid comp than one that happened 4 years ago.
(3) Size (Square Feet)
When pulling comps for a property, you want to use a comp within the same range of usable area and overall size of the property.
The size of the landed area also matters. We like the comps size to be within plus or minus 10% of the subject property’s size.
(4) Distance (Miles)
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Real estate is still about location. So the closer the comp is to the subject property of interest, the better. We like to keep this within 1-mile radius of the subject property or less.
(5) Number of Bedrooms
If your subject property has 3 bedrooms, the first step is to look for comps that also have 3 bedrooms each; they are more comparable.
The only time you are allowed to use comps that have 4 bedrooms is when there are no comps with 3 bedrooms. In that case, the next-most comparable will be 4 bedrooms.
(6) Status
Depending on the purpose of the evaluation you are performing, you want to pick the appropriate comps from the right status.
Status could be active, sold, pending, expired, etc. In evaluating a piece of property for the purpose of investing, always pull comps with the status sold.
Somebody actually paid for the property and not just speculation from a potential seller which is what you may see with using active listings as comps.
(7) Property Class
It doesn’t matter if a comp property looks exactly like the subject property. If it is not under the same class as the subject property, you cannot use it as a comp.
For example, many doctors or attorney’s office buildings can look like a replica of a residential building in many neighborhoods.
That is an office/commercial or mixed-use building. It’s not an appropriate comp for your subject property which is zoned in the residential class.
(8) Property Type
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Single-family homes should only be compared to other single-family homes and not 2 or 3 family homes. The type of properties should also match when comping a piece of property.
(9) Number of Bathrooms
The same rules when comparing the number of bedrooms between the comp and the subject property are also applicable.
You can break this rule but only when there are no other more appropriate comps to use.
(10) Year Built
The year a property is built is important but only to a certain extent.
Typically, the properties within a particular neighborhood are built within the same period; at most one or two decades apart.
The ideal is to use a comp built at around about the same year (within 5 years) of each other.
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