Have you ever wondered how sellers determine the list prices for their properties? The answer lies in real estate comps. In this beginner's guide, we'll explore the concept of real estate comps and how they can help you set accurate list prices backed by research and data.
What Are Real Estate Comps?
Real estate comps, short for comparables, are homes that are similar to the property you are trying to buy or sell. These comps are used to determine the price or value of the property. Licensed real estate agents can access data from the Multiple Listing Service (MLS) to identify similar properties within a neighborhood and draw comparisons. When pulling MLS comps, agents consider factors such as size, condition, features, age, and proximity. The MLS provides valuable data points like listing prices, sale prices, and number of days on the market.
Types of Comps
There are several types of real estate comps you can examine when evaluating comparable home values. These include home sales, pending sales, current homes for sale, expired listings, and withdrawn properties. Each category offers insights into the market and can help you gauge the listed prices of similar properties in your area.
Why Use MLS Comps?
MLS comps are widely used for determining a property's listing price. By comparing data from recently sold homes in a given market, sellers can identify properties that are most similar to their own. Having access to current market data through the MLS allows sellers to set a listing price that is fair yet competitive. Picking the correct price point is critical for a successful deal, as overpricing can turn off potential buyers. The MLS also provides information on listing and selling dates, helping investors estimate how long it will take to sell a property.
Additionally, comps serve as a valuable tool for devising a marketing strategy. By comparing similar properties that have sold recently, sellers can identify unique features to highlight in photographs, marketing materials, and during open houses.
Who Uses Real Estate Comps & How
Real estate comps are beneficial to various professionals in the industry. Here's how different individuals use MLS comps to their advantage:
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Sellers: MLS comps are crucial in determining the listing price for a property. By comparing their property to similar ones that have sold recently, sellers can set a competitive price and highlight the property's unique features.
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Buyers: Buyers can use comps to research similar properties and compare prices, amenities, and property values. This helps ensure they get a fair price and avoid overpaying for a home.
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Appraisers: Appraisers use comparable properties to determine the value of a property. MLS comps provide a baseline for appraisers to conduct their work efficiently, ensuring fair pricing for buyers and sellers.
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Real Estate Agents: Agents rely on MLS comps to provide the best services to buyers and sellers. They use them to monitor local market trends, set up listings effectively, and manage buyer expectations.
How To Find Real Estate Comps
Knowing how to find comps on the MLS is a valuable skill for conducting accurate comparative market analysis. However, only licensed real estate agents and appraisers have access to the MLS. There are workarounds for other real estate professionals, such as building symbiotic relationships with agents or obtaining their own real estate licenses. Alternatively, there are online resources like Zillow, Trulia, Realtor.com, and Redfin that provide access to comps without MLS access.
How To Run Comps On MLS
Running comps on the MLS requires a credible research method. Here's an overview of how to conduct a competitive market analysis:
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Size up the neighborhood: Evaluate the location's desirability and proximity to amenities using tools like Google Maps and Street View.
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Check estimates and forecasts: Utilize free tools like Zillow and HouseCanary to determine estimated values, listing prices, and future market trends.
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Assess the property listing: Compile a list of the property's qualities, noting features like location, size, condition, and unique amenities.
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Pull MLS comps: Ask a licensed real estate agent to pull MLS comps that match the property's features as closely as possible.
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Calculate price per square foot: Calculate the average price per square foot of the comps to estimate the value of the property.
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Appraise property condition: Consider any issues or special features that may affect the property's value.
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Set the listing price: Use the research findings to set a competitive listing price that reflects the property's value and the local market.
Real Estate Comps Template
Using a detailed spreadsheet is recommended when analyzing comps. Start a new spreadsheet using Google Sheets or Microsoft Excel with columns for MLS number, status, square footage, lot size, year built, list price and date, sale price and date, number of bedrooms and bathrooms, and other property characteristics. This format allows for easy comparison and analysis of relevant information.
Free Real Estate Comps
If you don't have access to the MLS, there are free online resources that provide comparable property information. Zillow, Redfin, Trulia, and Property Shark are popular websites that offer search features and data on recently sold properties, helping you find comps for your area.
Summary
Real estate comps are a vital resource for real estate professionals, whether they are buyers, sellers, appraisers, or agents. Utilizing comps enables accurate pricing and informed decision-making. By understanding the process of finding and running comps, you can set fair and competitive prices for properties and make confident investment decisions in the real estate market. Ready to get started? Take an online real estate investing class to learn more!