Selling a home involves setting a good asking price that maximizes profits while not scaring off potential buyers. To get a good reference for what a decent starting price is, sellers can use real estate comparables, also known as comps. Comps provide a real-world perspective on property valuation, allowing homeowners to make more accurate pricing decisions.
Whether you are a first-time FSBO (For Sale By Owner) seller aiming to establish a fair and competitive price or an investor looking for profitable opportunities, it’s useful to understand and leverage real estate comps properly. In this article, we’ll explain what a real estate comp is, how to find it, and how to use it effectively.
What are Real Estate Comps?
Real estate comps, short for comparables, are recently sold properties similar in size, condition, location, and features to a property you are looking to buy or sell. These comps serve as benchmarks to estimate the fair market value of a property and are an important tool for real estate agents, appraisers, and FSBO sellers.
Comps typically include details such as the sale price, square footage, number of bedrooms and bathrooms, lot size, age of the home, and any special features. Using the data provided by comps can help sellers make data-driven decisions when it comes to pricing a property.
Why are Real Estate Comps Important for FSBO Sellers?
Without the assistance of a professional real estate agent, FSBO sellers must rely on their own knowledge and resources to determine an appropriate listing price. Comps can help sellers ensure their property is priced competitively while maximizing its appeal to potential buyers.
Accurate Pricing Attracts Serious Buyers
Setting the right price is one of the most important tasks for FSBO sellers. A home priced too high can deter potential buyers, while underpricing may lead to leaving money on the table. By leveraging comps, you can set a competitive price that aligns with market expectations, attracting serious buyers who recognize the value of your property.
Serious buyers often rely on their own agents or research to determine if a property is fairly priced. A well-priced home based on comps signals to buyers that the seller has done their homework, increasing the chances of receiving offers quickly.
Accurate Pricing Speeds Up The Sale Process
An accurately priced home is more likely to sell quickly. If a property has been on the market for an extended period, potential buyers wonder if something is wrong with the home. Using comps helps you determine a fair market value that resonates with buyers and expedites the sale process.
In addition, pricing your home correctly minimizes the likelihood of appraisal issues during the sale process. If a buyer’s lender appraises the property for less than the sale price, it can delay or derail the transaction.
How To Find Real Estate Comps
Finding accurate and relevant real estate comps is a critical step when determining the value of your home. This process involves gathering data on similar properties that have recently sold, ensuring you have a reliable basis for comparison. Here are several methods to locate these comparables:
Use Online Real Estate Platforms
Platforms like Zillow, Redfin, and Propbox provide tools to search for recently sold properties in your area. You can filter results based on criteria such as size, location, and price range. These platforms often display comprehensive details about each property, making them an excellent starting point for finding comps. These platforms often include market trend data, which can help you understand broader pricing patterns as well as pricing for specific features of a home.
Consult Public Property Records
Local government offices maintain property records that include details about recently sold homes. These records are often accessible online or at your county courthouse. Reviewing public records provides reliable and verified data for identifying comparable properties.
Public property records often include additional details, such as transaction dates and tax assessments, that can offer deeper insights into property values and trends in your area.
County Assessor's Office Or Website
Your county assessor’s office or website is another valuable resource. These offices maintain detailed records of property sales and assessments, which can be particularly useful for identifying comps. Many assessor’s websites allow you to search by address or parcel number.
Beyond finding comps, the assessor’s data can also help you understand the tax implications of buying or selling at a particular price point. This information is especially useful for buyers looking to plan their budgets effectively.
Hire A Professional Appraiser
If you want expert insight, consider hiring a professional appraiser. Appraisers conduct thorough analyses of comparable properties to determine an accurate market value for your home. While this option involves a fee, the precision of an appraiser’s evaluation can be invaluable, especially for FSBO sellers who lack extensive market knowledge.
Appraisers also provide documentation that can be useful during negotiations, especially if buyers question your pricing or if lenders require additional evidence of value.
What to Look for in a Good Comp
To make the most of real estate comps, it is essential to know which factors contribute to a strong comparison. Focusing on specific attributes that closely align with your property can help get a more accurate assessment of its value. Key aspects to evaluate include:
Similar Size And Square Footage
A good comp should be similar in size and square footage to your property, typically within 10% of your home’s size. For instance, if your home is 2,000 square feet, look for comps ranging from 1,800 to 2,200 square feet. Homes with significantly different square footage can skew the perceived value, as the price per square foot often varies depending on overall size. Using comps within this range ensures a more accurate comparison.
Comparable Age And Condition
The age and condition of the property are important factors in finding good comps. Homes built within a similar timeframe and maintained to the same standard will provide more accurate comparisons. A newly renovated property isn’t a suitable comp for an older home in need of repairs.
Additionally, consider the style of the home when evaluating age and condition. A historic property, for example, should be compared to other historic homes rather than modern constructions.
Proximity To Your Property
Location is a key factor when determining property value. For urban properties, look for comps within a 1-mile radius. In rural areas, the acceptable range extends to about 5 miles. The closer the comp is to your property, the more relevant it is.
Proximity is also important because neighborhood amenities, school districts, and local market dynamics can vary significantly even within short distances. These factors greatly influence property values and should be part of your analysis.
Similar Features And Upgrades
Look for comps with similar features and upgrades, such as swimming pools, updated kitchens, or energy-efficient systems. These features can significantly impact a home’s value and should be factored into your analysis. For example, a comp with a fully upgraded kitchen and solar panels might command a premium compared to a similar-sized home without these features.
Similar Number Of Bedrooms And Bathrooms
The number of bedrooms and bathrooms is a primary factor buyers consider when looking for a home. A three-bedroom, two-bathroom home, for example, should be compared to other properties with the same configuration to ensure an accurate valuation.
The layout and usability of these spaces also matter when comparing properties. For example, a home with a large master suite and en-suite bathroom may be more valuable than a similar home with smaller, less functional spaces.
How To Use Comps To Price Your Home
Once you have identified suitable real estate comps, the next step is to use this data to determine a competitive and realistic price for your property. This involves a detailed analysis of comparable sales and an understanding of market dynamics to align your pricing with current buyer expectations. Here are the steps to follow:
Analyze The Sale Prices Of Comps
Begin by analyzing the sale prices of comparable properties. Calculate the median sale price of your comps to establish a baseline. This value represents the middle ground of what buyers are willing to pay for a home similar to yours.
Analyzing a range of comps can also reveal trends, such as whether higher-end properties are selling faster or if certain features command a premium in your area.
Add Or Subtract Value Based On Features And Condition
Adjust the baseline price based on the features and condition of your property. If your home has additional upgrades, like a finished basement or a larger lot, add value. Conversely, subtract value if your property lacks certain features or requires significant repairs.
Remember that not all features hold the same value in every market. For example, a swimming pool might be a major selling point in a warm climate but less desirable in colder regions.
Consider Current Market Trends
Real estate markets fluctuate based on factors like demand, interest rates, time of year, and economic conditions. Review current market trends to understand whether home prices in your area are rising, stabilizing, or declining. Market trends can also help you anticipate buyer behavior. In a hot market, pricing slightly above the median may be acceptable, while in a cooling market, competitive pricing becomes more important.
Common Mistakes to Avoid
Even with the best intentions, pricing a property can lead to missteps that could impact its marketability and sale. Recognizing and avoiding these common mistakes can help keep your home competitive and appealing to prospective buyers.
Overvaluing Home Improvements
While home improvements can increase value, not all upgrades yield a high return on investment. Be realistic about the value added by renovations and avoid overpricing your home based on personal attachment to these improvements. Focus on improvements that align with buyer expectations in your market. For example, energy-efficient windows may be more appealing than luxury finishes in certain areas.
Ignoring Market Trends
Failing to account for market conditions can lead to mispricing. For example, pricing your home based on past trends during a cooling market may result in your property being overpriced and lingering on the market. On the other hand, undervaluing your home in a hot market could mean missing out on potential profits. Sellers must tay informed about current conditions to set the right price.
Using Outdated Comps
Real estate markets change quickly, and using outdated comps can skew your pricing strategy. Ensure that the comps you use are no older than 3-6 months to reflect current market conditions. In rapidly changing markets, even comps from a few months ago might not be relevant. Always verify that your data is up-to-date before making pricing decisions.
Conclusion
Real estate comps are indispensable tools for accurately pricing a home. By understanding what comps are, why they matter, and how to find and analyze them, FSBO sellers can set a competitive price that attracts buyers and speeds up the sale process.
Your home’s value is influenced by real estate comps, but analyzing them doesn’t have to be overwhelming. Propbox provides AI-enhanced valuation tools, task automation, and real-time updates to make FSBO selling effortless. Maximize your profits and avoid unnecessary fees. Use Propbox to sell your home smarter today!