How to Price Your Home With Real Estate Comps

Real estate comparables are vital to helping homebuyers and home sellers find the fair market value for a home. This post will give you some tips and tricks to help you understand where to find real estate comparables. Also, I have included which factors to use when seeking out home comparables.

Once you know how to find real estate comps you will be able to either price your home for sale accurately or feel confident about the price you are offering for a home. Let’s get into learning about comps.

What are Comps in Real Estate?

Home comparables, also known as comps, are homes which are used as points of relativity to find the value of some other home. Home comparables include recently sold homes that are similar to one another and similar to the home which is using the comps in order to be valued.
Using comps to find the value of a home is easy once you know which comps to use. Comps as a set of homes creates a range of values for a home. However, you first must know what makes a good comp.

What Factors Should I Use When Finding Comps?

The key to using the comp method to valuing a home is knowing how to find the right comps. Comps come from similar, recently sold homes. Real estate agents and appraisers use certain leading factors to define which homes are comps and which are not.

This is a list of factors commonly used in finding comps. Also, these factors are ordered with the first carrying the most effect on the value.

• Location – Location, location, location is true in real estate. The same home in different locations has different values.
• Above Ground Finished Square Footage – The size of the home does matter. Bigger homes are worth more than smaller homes.
• Number of Bedrooms – More bedrooms means the home can meet more homebuyers’ needs. Therefore, homes with more bedrooms are typically worth more.
• Number of Bathrooms – Homes with more bathrooms are typically more expensive than homes with fewer bathrooms.
• Below Ground Finished Square Footage – In the above ground square footage we learned that size matters; larger homes are worth more. Below ground finished square footage is added to the size of the home. However, appraisers and real estate agents typically apply a lower value per square foot for below ground square footage vs. above ground finished square footage.\
• Condition & Upgrades – The condition of the home and its upgrades absolutely affects value. Clean, well-maintained homes and homes with upgraded finishes are worth more.
• Design – The design of the home affects value per finished square foot. Ranches are typically worth more than two-story homes. But, a two-story home is typically worth more than a split-level or Cape Cod style home.
  Build Year – The build year is an indication of the home’s design and construction style. Older homes are typically worth less per square foot.
• Lot Size – The lot size does affect the value. However, in most instances it is quite a bit further down the list than many would expect.
• Garage or No Garage – A garage does change the value of a home quite a bit.
• Features – Features in the home should be similar to the home you are trying to comp. Features include a fireplace, main bedroom with en-suite bathroom, walk-in closets, landscape installations, a pool, a three-seasons room, or some other added feature.

Steps for Assembling the Best Comps

Homebuyers or sellers can follow these steps to put together a set of comps on their own.

Step 1: Find A Source of Sold Listings

Your first step in finding comparable home sales is finding a resource with accurate information about sold properties. This can be a challenging step, but has become easier in recent years.

There are several sources to find recently sold homes. You may live in a county where the local government makes the information easily obtainable. There are real estate websites with databases where you can view data about recently sold homes, too.

Step 2: Determine the Right Search Criteria to Use

When finding comparable home values you need to use the right search criteria to find similar homes. The first step here is to define the home you are trying to value for. This is the home you are comping; the home you are trying to buy, sell, or find the value of. You can hone in on the right criteria by answering these questions:

• What is the home type? Single family house, duplex, townhome, or condo
• What neighborhood is the home in?
• What school district is the home in?
• What is the home’s size?
• How many bedrooms and bathrooms?
• What is the condition of the home?
• When was the home built?
• What is the lot size?
• What features does the home have?\

Step 3: Search for Similar Recently Sold Homes

Search your database of recently sold homes. Filter through the homes using the search criteria similar to the home you are trying to comp. Try to whittle down the results to a set of five to twenty homes.

If you are finding too many homes, tighten the criteria more. You can do this by using more criteria or placing tighter ranges on criteria. If you are coming up with too few results, do the opposite. Widen the criteria ranges or use fewer criteria.

Step 4: Find Where the Home Belongs In The Comp Set

Now that you have your set of real estate comps, find where the home you are comping belongs in the value range. This is done by reviewing all of the comps. Look at the overall styling, condition, and amount of updates in each home.

Accurate comps should already have the core features of the home you are comping. Therefore, what should really matter at this point is overall condition, quality, and overall aesthetic.

The home being comped could be the lowest, in the middle or the highest among the set. And, yes, it could break through the low or break through the high.

How Do Home Sellers Use Comps?

Home sellers use real estate comps to determine the accurate value of the home they plan to sell. Many home sellers initially overprice their home. This occurs due to the homeowner’s subjective connection to the home, not being fully informed of the marketplace, and the psychological event of valuing the thing you own more than it is really worth.

Comparable home sales are real world data points. Home sellers should use relevant comparable home sales as guideposts when valuing their home. Comps also help a home seller from overvaluing a specific feature or addition the seller has made to the home.

On the other hand, comparable home sales data can reel in a seller from thinking the home is like one that sold at a higher price. However, always make sure the criteria you used for your comps provides an accurate reflection of the home you intend to sell.

How Do Homebuyers Use Comps?

Homebuyers use real estate comparables to determine what price to offer for a home for sale. Comparables can keep a homebuyer from overpaying for the home. Homebuyers can also use comparable home sales to justify an offer price less than the list price.

Homebuyers can also use real estate comps early in their home buying process. Sometimes a buyer’s wishlist is too extensive and expensive for the buyer’s budget. Pulling comps on the home you are hoping to purchase can give a homebuyer a good idea whether or not the demands are realistic compared to the budget.

How Do Real Estate Agents and Appraisers Use Comps?

Real estate agents use comps to provide guidance to their clients. When representing a home seller, the real estate agent uses comps to provide the seller with a marketable listing price for the home. On the hand, when representing a buyer the real estate agent uses comps to guide the buyer to a fair offer for the home.

Appraisers use real estate comps, too. Appraisers are hired by the mortgage lender making the loan on the property. The appraiser has several jobs including certifying the property’s value is equal to or greater than the purchase price. Appraisers use comps to make this determination.

How to Find Real Estate Comps?

There are several ways to find real estate comps. Some are free with a lot of work whereas others come with a cost but are much easier to complete.

• Government Records – Most states and counties require a home sale be reported. These records are typically available to the public. Though free, it can be very difficult to filter through to find comparable homes.
• Real Estate Websites – Many real estate websites now carry some or all of the recently sold homes in an area. Not all real estate websites carry this information, though. However, there are specific pay to play websites which provide real estate data.
• Real Estate Agents – Real estate agents have incredible access to comparable properties. This is due to their membership in an MLS database. Additionally, experienced real estate agents have the skills to find correct comps. If you are trying to avoid hiring a real estate agent you may find one willing to give you a current market analysis (CMA) for a fee.
• Appraisers – Appraisers can provide you with an appraisal of the property. This will include comparable properties. There is a cost for an appraisal.
• Quadwalls.com – Quadwalls.com provides a free online valuation for homes located in Northwest Indiana. If you are looking for the value of your home in Northwest Indiana complete your Quadwalls E-Valuation, here.

Tips for Finding the Most Accurate Comps

The most important part of comping a home is getting accurate comps. These are some tips to help you get the most accurate comps.

• Use Sold Homes – Live listings and homes under contract are meaningless. Look only at sold homes that closed in the last 12 months or less.
• Keep the Search Area Tight – You should think about the area in two ways. First, if your home is in a clearly defined neighborhood include those comps. Secondly, looking at homes in a larger area but with some limiting factors based on how people search for homes in your area. This could be by location within a certain school district or proximity to something. Alternatively, a radius search can work, too.
• Review the Photos – Carefully view the photos of each comp. Look through the photos and be honest about whether your home is better or worse regarding the condition, cleanliness, and quality of finishes.
• Same Home Type – If you are comping a condo, only look at other condos. If you are comping a house your comps should all be houses. If a house, search with more specific by focusing on homes with the same design.
• Make Adjustments – Psst…real estate agents make a lot of adjustments. We just know how to and when to. Think of seasonality, economic issues, or some unique attribute about the home.

Calculations on Real Estate Comps

Once you have the comps now you need to know how to calculate a home price based on comps. There are several ways to use the comps to find the value of the home you are valuing. In may even be useful to use more than one of these real estate comp calculations and average those.

The Average Sale Price

Find the average sale price of the real estate comps. To do this simply add up the total sales price of all the comps and divide it by the number of comps.

Average Price Per Square Foot

This one takes a couple steps. In the first step you will need to divide the sale price by the number of finished square feet. This will give you the price per square foot of each home. Then, add those up and divide by the number of comps. This will give you the average price per square foot.

Using this multiply the number of square feet you have by the average price per square feet.

Range Finder

Find where in the range your property belongs. This is not a mathematical method. Instead, it is more subjective, but is the way real estate agents do it. This can only be done if you have access to the photos of the home which was sold. Review the photos and place the home you are valuing somewhere in the spectrum. It is possible your valuation is above the top or below the bottom, too.

Managing Expectations

When pricing your home to sell you must manage your expectations. Comps guide homebuyers’ decision making. Therefore, as a home seller you need to accept the reality illustrated by the comps.

If you are unhappy with the valuation produced by the comps, take action to change the situation. First, start by ensuring your comps are accurate. Secondly, look for ways to make your home look more expensive. The Quadwalls Real Estate Team has written a post with 19 Little Things That Do A Lot To Make Your Home Look More Expensive.

Regardless, do not overprice your home. Homebuyers ignore overpriced homes. Additionally, it is most likely the buyer will have an appraisal. Even if the buyer is willing to pay the higher price, the appraiser may rain on your parade. Keep your expectations realistic.

Conclusion: Comps Help Homebuyers & Home Sellers Get the Price Right

Comps guide homebuyers and home sellers on the current fair market value for a home. There are many sources to find comps. What is most important is to find true comparable homes. The homes must be similar regarding the most important factors such as the home’s location, size, and core features like the bedroom and bathroom count.

If you are trying to find the valuation of a home in Northwest Indiana contact us. Or, we can provide you with an online valuation for your Northwest Indiana home by completing the Quadwalls E-Valuation, here.