If you have ever been in the market for buying or selling a home, then you have probably come across your fair share of real estate lingo. It is important to have an understanding of some basic real estate terms so you can make informed decisions when it comes time to buy or sell. “Real estate comps” is one of those terms.
Real estate comps (aka real estate comparables) is a term used to describe homes in your area that have recently sold and are comparable to the property of interest. For a home to be considered comparable, there is a list of commonly considered criteria which include factors such as location, size, condition, and more. Real estate comps help to determine the fair market value of a home and in turn, helps buyers and sellers make informed decisions in the current real estate market.
Who Uses Real Estate Comps?
MLS comparables provide the most accurate and current market data for recently sold homes. However, it is important to recognize that MLS listings and comparables are only accessible to licensed real estate agents and appraisers. There are other tools available for buyers and sellers who wish to search for real estate comparables on their own, although it should be noted that these sources can sometimes be inaccurate or out of date.
Real Estate Agents
Real estate agents have various tools under their belt that can help them determine the fair value of a home in any given market. Real estate comps are one of those tools! They can be used to create a comparative market analysis, keep buyers/sellers informed and help develop appropriate strategies.
Sellers benefit from real estate comps as they help them determine the best price to list their homes in the current market. Whether a seller is working with a real estate agent or is selling the property themselves (commonly called FSBO), real estate comparables are a vital component of setting the right price.
Buyers can benefit greatly from having knowledge of the comparable homes in the area and the value at which they sold. Comps can give buyers a competitive advantage when it comes to making an offer and negotiating the price of a home.
Appraisers almost always use real estate comparables in order to help determine the current fair market value of a property. This benefits both buyers and sellers and ensures that both parties are getting a fair evaluation of the home.
Criteria to Consider When Comparing Homes
When it comes time to finding comparable homes, there are some key factors to take into consideration. Below you will find some of the most important criteria that can increase or decrease the value of a home when compared against another.
When looking for comparable properties it is recommended that you keep the range of search as close as possible. In urban areas, it is recommended to stick to homes in the immediate neighbourhood. If there are no comparable homes in the immediate area, expand the search radius and look for comparable homes and neighbourhoods close by.
In rural locations, finding comparables in the immediate area can be a little tough. Try to stick to comparable homes that are close to the home of interest and pay extra attention to the proximity of desirable features.
Home Size / Price Per Square Foot
You want to find homes that are similar in size, typically within 300 square feet of each other. Evaluating comparable properties and the price per square foot it sold for can help you compare them and determine the right price for the property of interest.
Property Size & Features
The property size of a home can have a significant impact on the overall value even if the size and features of the home itself are nearly identical. More acreage often means more value. Additionally, features such as a fenced-in yard, pool, mature shade trees, decks, etc., can play a role in the overall value when comparing homes.
Number of Bedrooms
The number of bedrooms a home has can make a huge difference in the selling price. Even the addition of a single bedroom can add a significant amount to the overall value. Another important consideration is the size of the bedrooms.
Number of Bathrooms
The number of bathrooms is an important consideration when comparing homes. It is vital that you also address the difference between full bathrooms and half bathrooms and adjust accordingly.
Homes that are well-built, well-maintained and/or have gone under recent renovations tend to sell for a higher value when compared to an equal counterpart with outdated features and a worn exterior.
Age of Home
The age of the home is crucial in the overall value of a home and comparables should try to be kept in the same range. This helps compare major systems such as furnaces, roofs, plumbing and electrical as they were built around the same time (unless a renovation or replacement has been done which should be noted in the home’s description). Newer homes, on average, tend to have more value than older homes.
It’s very important to keep in mind the proximity to desirable features such as a school, transit, grocery store, park, etc. Walkability and accessibility can make a big difference in a buyer’s decision when looking for a home.
When looking at comparable homes you want to look at homes that were sold in the last few months. A general rule of thumb is homes that were sold in the past 3-6 months. It is crucial to keep in mind the pace of the market as faster-moving markets could mean fast turnaround times and a shorter time frame that you should observe.
Housing prices are constantly changing as a result of the dynamic nature of the real estate market. Real estate comparables are a vital tool that is used to help evaluate the current market value of a property that can greatly benefit both buyers and sellers. Sellers can feel more confident in the price at which they list their homes, while a buyer can use comparable homes to determine a fair offer and negotiate the purchase price of their home.
While information regarding recently sold homes is sometimes available to the public, it can often be outdated or inaccurate and shouldn’t be the only factor in determining the price of a home. The best method of collecting accurate real estate comps and effectively processing the information is by teaming up with a local real estate agent who understands the current state of the real estate market in your area.
Looking To Sell Your Home In The Niagara Region?
If you are thinking about selling your home in the Niagara Region and are looking to get a fair market evaluation of your home, call Davids & DeLaat today. We are experts in the local real estate market and are constantly monitoring market trends and conditions to provide you with the most accurate and competitive market value for your home. Contact us today to book your free home evaluation!