Comp Properties

Finding comparable properties when buying or selling a home

Real estate agents often stress that the importance of "comps," or comparable properties, can't be understated. These homes are a crucial way for a homeowner to determine a realistic price for their property, and for buyers to see if a residence is overpriced or underpriced.

Comparable homes can be difficult to find, though. While residences may share neighborhoods and overarching features, there are numerous factors that can affect value – everything from the age of the roof to the outdated wood paneling in the den.

With a little patience, you can come up with a few listings that will allow you to set a price range on a home. This can be an important tool in making an offer or negotiating a price.

Location is a key factor in finding comps. The real estate site Zillow says your search should look at properties within half a mile of the home you're selling or considering. Marilyn Lewis, writing for the financial site NerdWallet, says it helps to find residences that are on the same street, or at least in the same neighborhood and school district. This also means the comparable property will have similar community amenities, such as proximity to a park or access to public transportation.

Timing is also a crucial issue. Michael Estrin, writing for the financial site Bankrate, says this factor can depend on local market conditions, and that sales as distant as six months ago may be included as comps. However, it's better to find transactions that were completed more recently. Elizabeth Weintraub, writing for the financial site The Balance, says sales within the past three months are ideal.

Your comparable properties should ideally have the same number of bedrooms and bathrooms, and should be the same type of residence; if you're looking at a single-family home, you shouldn't be comparing it to a condominium. Estrin says finding comps can be much easier in condo complexes and planned communities, since several homes are often built based on the same plan.

Lewis says you should also look at similar home styles.

Square footage is a major consideration in home transactions, so your comps should be similar in size to the home. Zillow says a comparable home should be within 300 square feet of the size of the property you are considering. Weintraub says the square footage shouldn't differ by more than 10 percent in either direction.

The lot size should be comparable as well, though you'll want to consider qualities of the land such as how large the yard is. Ideally, a comparable property will have been built around the same time; Zillow says this typically means that the condition of major systems such as the roof and HVAC system will be similar to the condition of the home you're comparing it to.

However, this isn't always the case; a home that is comparable in most ways may have sold for considerably less if it was poorly maintained or otherwise in poor shape. Carl Vogel, writing for the home improvement site HouseLogic, says foreclosures and short sales can skew a comparison, since distressed properties are usually sold at a discount.

Certain amenities can complicate a comparison. Features such as a newly upgraded kitchen can lead to a higher sale price. Outdated features typically result in a lower sale price, since there is an expectation that the buyer will need to invest in renovating the property.

Similarly, some circumstances that affect a sale price won't be conveniently recorded with the transaction. A seller might have accepted a low bid because they needed to relocate quickly for a new job. The price also won't reflect certain factors in the negotiation of the price, such as a buyer picking up a property at a lower price in exchange for giving a seller extra time to move out of the home.

Contacting a real estate agent can be a useful step in finding comparable properties. Zillow says agents are not only familiar with the local market, but also have access

to a multiple listing service which will let them scrutinize recent sales.

Visiting a comparable property in person is also beneficial. Lewis says this will let you see if the listing photos accurately capture the home and its neighborhood. For example, the property may be near a noisy road

or other unattractive feature that resulted in a significant reduction to the sale price.

Only use homes that have sold, not residences that are currently on the market. Zillow says an asking price can drop considerably if a seller set it too high. Alternatively, a home might sell above asking price if the price was set low and sparked a bidding war.