A Useful Guide To Help You Understand Everything About Real Estate Comping
Whether you're buying or selling a home, it's important to have an accurate idea of what the property's worth. This is where real estate comping comes in. It can prove invaluable when you're reading your favorite listing for the week or putting your house on the market.
In this article, we'll provide you with a comprehensive guide to real estate comping. We'll be discussing what it is and how to do it effectively, whether you're a first-time homebuyer or a seasoned real estate pro.
What Is Real Estate Comping?
It's the process of analyzing recent sales of similar properties to determine the market value of a piece of real estate. This process is also known as comparative market analysis (CMA). In order to do a real estate comp, you'll need to gather data on comparable properties, also known as "comps." Comps can be pulled from public records, MLS listings, or other sources.
The most important part of the process is ensuring that the properties you're comparing are truly similar. This means they should be in the same general location, have similar square footage and features, and be within the same time frame. Once you have your comps, you can start to analyze them to come up with a fair market value for the property you're dealing with.
Helpful Resources
There are plenty of blogs written by real estate professionals that can provide helpful insights and tips on comping properties. A quick search on Google or another search engine should turn up plenty of results. There are also many specialist websites devoted to this subject. You can learn how to comp a property by considering the location and size of the house. You can also discover why unusual designs can be a big factor, and older properties can cause headaches.
These websites can be a great way to get detailed information and learn from the experiences of others. You may also wish to check out the following online articles:
How to Use a CMA: Comparative Market Analysis (The Balance)
Comparative Market Analysis: What is a CMA Report for Real Estate Buyers? (Zillow)
What Is a Comparative Market Analysis? The CMA Explained (Realtor.com)
The Importance Of Real Estate Comping
As we said earlier real estate comping is invaluable because it helps you determine the fair market value of a property. This is essential information whether you're buying, selling, or simply trying to keep tabs on your investment.
If you're thinking of buying a piece of real estate, comping can help you figure out how much to offer. By looking at recent sales of similar properties, you can get an idea of what the market will bear. You can then use this information to make a smart offer that has a good chance of being accepted. Similarly, if you're selling a property, comping can help you come up with a fair asking price.
The Different Types Of Real Estate Comping
Direct comps are properties that are very similar to the one you're interested in. They should be in the same general location and have similar features. Indirect comps are properties that aren't as similar to the one you're interested in, but they can still be helpful in determining value. If you're trying to value a three-bedroom house in San Francisco, a direct comp would be another three-bedroom house there. An indirect comp might be a three-bedroom house in a different city or a four-bedroom house in San Francisco.
In general, you should start with direct comps and then look at indirect comps if you can't find enough data. If you're trying to value a very unique property, you might not be able to find any direct comps. In that case, indirect comps can still give you some idea of value.
How To Find Real Estate Comps
Public Data
There are a few different ways to find real estate comps, and the most common one is to seek data for property sales in the same local area. This should typically be a public record and be found online or at the local courthouse. MLS listings can also be helpful, although they don't always include all the information you need.
Professional Appraisers
Another way to find real estate comps is to hire a professional appraiser. Appraisers are experts in determining the value of properties and they have access to a lot of data that the average person doesn't. However, appraisals can be expensive, so they're not always a practical solution.
Doing It Yourself
Finally, you can also try to find comps on your own. This requires a bit of research, but it's often worth it if you're trying to value a very unique property. The best way to do this is to look for properties that have sold in the past six months or so and that are similar to the one you're interested in.
Some Tips For Real Estate Comping
Here are a few nuggets to keep in mind during the process:
Make sure you're looking at recent sales because the value of a piece of property can change rapidly.
When you're looking at comparable properties, make sure you're taking note of all the different features and amenities that are included. A small difference in square footage or the number of bedrooms can make a big difference in value.
Don't just look at one or two comparable sales and assume that's all the data you need. The more comps you have, the more accurate your estimate will be.
If you're having trouble finding comps or understanding their significance, it might be worth it to hire a professional appraiser.
There are lots of factors that you need to consider, including the location, property size, age and condition, nearby amenities and schools, crime rates and local economy. Whilst comping is not an exact science, it's one of the best ways to discover a property's value. Once you're armed with the relevant information you'll be best placed to deal with your property transactions and experience a good outcome.
