Real estate comparables mean different things to different people. For agents, it’s crucial to create ones for clients that move the buying process forward, or for seller clients to establish the correct list price for their property. For appraisers, comps simply establish the value of a house being sold for mortgage companies, and also for those sellers who decide to hire an appraiser on their own.
“I aim to choose comparables as an appraiser would, but I believe agents should provide value added,” says Usdan. “Ideally, we first try to select properties online within the same neighborhood, with the same bedroom and bathroom count, similar lot size and condition, outdoor features like pool, tennis court, pool house, etc. But there is absolutely no substitute for first-hand knowledge and nuance.”
Comps can be as basic or as complex as you decide to make them. There are the basics that every comp has, and then there are the add-ons that clients may or may not appreciate. Let’s look at the basics first.
The Multiple Listing Service (MLS) provides the vital information foundation from which comps are built, along with national portals such as Homes.com and Zillow. Homes that are currently for sale—or those that have sold within the last six months or so—should be the ones used to provide information.
“Once you start finding comparable properties, which are all properties in the area, they are not limited to what’s in your MLS,” notes CRS Data Executive Vice President Sara Cooper. “You are then able to find very good comps, those properties that really are comparable to the subject property. You can get four different estimated market values based on different formulas, and decide which one fits best with what’s going on through your active listings.”
Comp “musts” include:
- Age. A home built 50 years ago will be valued differently than one built five years ago when they are basically the same size- and condition-wise.
- Number of rooms. Two houses with the same square footage can be very different if one has a massive great room and the other has four smaller rooms.
- Lot size and topography. A house on a solid, flat half-acre lot is more desirable than one with a steep incline in back, or partially in wetlands.
- Condition. Has one home undergone major renovations or upgrades? This will make a big difference.
- Square footage. One home may have all useful space, while another may count an unfinished basement or an attic as useful when it is clearly not.
- Location on block. A property on a quiet cul-de-sac would be more desirable than another on a busy thoroughfare.
- Number of bedrooms. “Not all three-bedroom homes are the same,” says Thistle. “Are all three bedrooms adequate size, or is one a smaller room with no closet, or is it in the lower level? Is a bedroom without a closed door really a bedroom?”
- Number of bathrooms. More is better.
- Neighborhood amenities. Proximity to stores, parks, public transportation, a golf course, etc., can influence one home’s value over another.
- School district. A crucial determinant if one is much higher rated than another close by.
- Taxes. One town may charge much more for a house that is close by but in another municipality.
Viewing properties under consideration for comps provides a crucial, added analysis. While listing photos and even drone footage can sometimes be misleading, what your eyes tell you cannot lead you astray. While it’s best to see the inside as well as the outside of a home under consideration to be used as a comp, if you cannot gain access, then walking the property and viewing what you can will at least provide clues to how well it is maintained, landscaping, quality of materials, position on the block, curb appeal of immediate neighbors, etc.
Driving around the neighborhood can also provide clues that can impact comps. Proximity of commercial establishments may or may not affect a particular home’s appeal, but walkability to those places can also come into play.
