Simply put, real estate comparables – or “comps” – are comparable properties in a specific area that you’re looking to buy or sell in. Comps are used to determine the value of a home by comparing it to similar properties sold in the same neighborhood or in an area as close as possible to the house being valued. Comps are a way to help you figure out what a home is worth based on the recent sales prices of similar properties in the area. The following will give you the basics of how to find comps and wield them to your advantage…
Comps Are Comparing Apples To Apples
Homes are unlike the majority of other things people buy as the price isn’t set in stone. There may be an asking price; however, that is just a request rather than the set price for the property. It is important for comps to be as similar to your own property as possible. The comp price for a home will depend on each market.
Here are some examples:
- The same area: A comp is a property located within a half-mile radius of the home in question.
- Same square feet: What is the square feet of the home in question? If it is 2,000 square feet, the comp should be around 2,000 square feet.
- The utility must be comparable: Let’s say you own a home with 2,000 square feet of space. It has three bedrooms, two bathrooms, and it sits on a 10,000-square-foot lot. The ideal comp for your home would be a home that was built around the same time as your house, shares similar characteristics, and sold last week. Bedroom and bathroom count also need to be similar. You can have a three-bedroom 3 bath that is 2,000 square feet or you have the same square footage in a one-bedroom/one-bath home.
- Recent sale price: Ideally you are looking at homes that have sold in the past six months and are comparable to your home and in your area.
- Ambiance and aesthetics matter: If you own a condo with a view of the lake or ocean, it will not be priced the same as a unit that faces the parking lot. Although they are similar square footage, and each has 3 bedrooms the lake or ocean view will be taken into account.
How To Use Your Knowledge Of Comps During Negotiations
The more knowledge you possess on the issues in question, the greater your participation in the process of negotiation. In other words, good preparation is essential. To find comps, you can start by looking for recent listings in your area in the newspaper or on realtor.com. And your real estate agent has access to many locations. The database the agent will have has more detail. Realtors will also know how to get all the information into an asking price or offer. If someone offers you less than your asking price you may need to negotiate and make a compromise, but the lowball figure they offered can be proven too low with comps shown to them. This may make them increase their offer. If you are the buyer and the asking price for the home you love is $400,000 and the comps show the homes in the area going for $350,000 you and your agent can inform the seller and show them the comps. Comps add oomph to back up what you are asking or what you are offering. They strengthen your negotiation.
Use the comps as your compass. Comps are the single most useful tool at your disposal when you’re estimating how much a property is worth.
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