Earlier this year, an investor snagged a property well below market value, all thanks to one thing: real estate comps.
Real estate comps, short for comparables, are data points from similar properties in the area that help determine a property’s asking price and market value.
Knowing how to find and use real estate comps is crucial — whether you’re eyeing your next big deal or planning an exit strategy.
It’s a key part of your real estate lead generation, and if you’re wondering where to start, you’re in the right place.
Today, we’ll explore what real estate comps are, why they’re essential, and how you can find them to make smarter investment decisions today.
What Are Real Estate Comps?
So, you may be wondering… what exactly are real estate comps?
Well, think of them as your secret weapon.
They’re properties similar to the one you’re interested in — same neighborhood, similar size, condition, and features — that have recently sold, are on the market, or were taken off the market.
Real estate comps help you figure out the fair market value, so you don’t overpay or undersell. It’s like having a crystal ball but with a lot more data and a lot less mysticism.
Who Needs Real Estate Comps & Why?
- Real Estate Investors: You need real estate comps to evaluate potential investment properties, make competitive offers, and predict future returns. It’s all about making informed decisions and maximizing profits.
- Real Estate Agents: They use comps to price properties accurately and advise clients on buying and selling. This helps set realistic expectations and close deals efficiently. (And no, you don’t actually need a real estate license to flip houses.)
- Appraisers: Their job is to determine the market value of a property for lenders, and they heavily rely on real estate comps to get it right. Accurate appraisals keep the market stable and transactions smooth.
- Sellers: They need comps to set a realistic asking price and attract serious buyers without leaving money on the table. Proper pricing based on comps ensures quicker sales and satisfied sellers.
- Lenders: Banks and mortgage companies use real estate comps to assess the property’s value before approving a loan. This minimizes their risk and ensures loans are backed by fair property values. (This includes private money lenders, too!)
What Factors Are Included in Real Estate Comps?
Ready to dive into the nitty-gritty of real estate comps?
Great! Understanding the different factors that go into these comparisons will give you a sharper edge in your REI business.
Let’s break it down:
Location
First and foremost, location is king. Properties in the same neighborhood or even on the same street can have vastly different values. Schools, amenities, and overall desirability all play a role. Make sure to compare properties that are as geographically close as possible to get an accurate comp.
Property Size
Size matters — especially in real estate — both the lot size and square footage of the home itself. A larger property generally commands a higher price, but you have to look at the cost per square foot to make a fair comparison.
Condition
The condition of the property is another biggie. Newly renovated homes will fetch higher prices than those needing significant repairs. Pay attention to the age of the roof, HVAC systems, and any recent upgrades when evaluating comps.
State of the Local Real Estate Market
Market conditions can vary widely, even within the same city. A hot market with low inventory will drive prices up, while a cold market will do the opposite. Knowing whether you’re in a buyer’s or seller’s market helps you contextualize your comps.
Interest Rates
Lower rates generally increase buying power, which can drive up home prices. Keep an eye on current rates as they can affect both the sales price and the speed at which properties change hands.
Comparable Sale Dates
The timing of comparable sales is crucial. The real estate market can shift quickly, so recent sales are more relevant. Ideally, look for comps sold within the past few months to ensure you’re getting up-to-date comparisons.
Unique Features
Finally, don’t overlook unique features like pools, finished basements, or large garages. These can add considerable value to a property and should be taken into account when comparing homes.
How to Find Real Estate Comps
Alright, now that you know what goes into real estate comps, let’s talk about where to find them.
Relying on multiple sources is key to getting a well-rounded view of the market. Each platform has its strengths and limitations, so using a variety will help you cross-check information and get the most accurate comps possible.
Here are some go-to sources to find real estate comps:
- Local MLS (Multiple Listing Service): This is the gold standard for real-time data on property listings and sales. It’s typically accessible through your real estate agent. (Or, you could get your RE license and search as much as you want!)
- Real Estate Agent: A seasoned investor-friendly real estate agent can offer expert insights. They can help you find accurate comps tailored to your specific investment goals with the best possible data. (Create a win-win situation; the agent can run comps for you, and you agree to bring them deals they can earn commission on, for example.)
- Zillow: Known for its user-friendly interface, Zillow provides a wealth of information including recent sales, current listings, and Zestimates. (It’s widely known, however, that Zestimates can be “off” by about 20%, so keep that in mind.)
- Trulia: Similar to Zillow, Trulia offers detailed property information and also includes neighborhood insights, which can be crucial for making informed decisions.
- Redfin: Redfin not only provides comps but also offers data on market trends, which can help you understand the bigger picture.
- Public Records: County assessor websites and local government databases often provide free access to property sales records. These can be invaluable for getting historical data.
- Realtor.com: This site pulls data directly from the MLS, offering another reliable source for finding up-to-date comps.
- LoopNet: While primarily focused on commercial real estate, LoopNet can be useful for investors looking at multi-family properties.
- Homesnap: This app provides real-time MLS data and even lets you take a picture of a home to get instant property information, including comps.
- RPR (Realtors Property Resource): Exclusively for Realtors, this tool offers comprehensive data, including comps, for properties nationwide.
- Property Shark: Great for in-depth property reports and accessing public records, especially useful in urban areas.
Break it Down – Real Estate Comps: How to Find Them
Before you go, let’s break this down…
We’ve talked about what real estate comps are and why they’re your go-to tool for making smart decisions in your REI business.
We covered the key factors like location, property size, and market conditions that make up good comps.
Plus, we looked at the best sources for real estate comps — like the local MLS, Zillow, and public records — to find those golden nuggets of information.
So, remember: Using real estate comps isn’t just something to think about… it’s a must for anyone serious about real estate investing.
They give you an edge, help you avoid overpaying, and boost your confidence in every deal you make.
Ready to dive into your next investment with a solid game plan?
Always start with your comps.
Trust me, your future self will thank you.
