Real Estate Comps: How To Find Comparable Properties In 5 Steps

Understanding the value of comparable properties in the area is paramount. Real estate comparables, commonly referred to as "real estate comps," are essential for accurately estimating a property's worth.

Real estate professionals rely on comps to inform decisions on buying, selling, and assessing home equity. In this comprehensive guide, we'll explore the significance of real estate comps and provide you with all the knowledge you need to master them. You'll learn how to run comps on a house, find comps without a Realtor, and even look them up online for free. By the end of this article, you'll have the expertise to compare property values with the precision that top real estate investors rely on.

Whether you're a seasoned investor, a homeowner aiming to get the best deal, a fix-and-flipper, or a real estate agent looking to refine your valuation skills, this guide offers valuable insights at every turn. Comps truly are a game changer, which begs the question: What are comps in real estate? To get one step closer to the answer, let's start with the following:

• What Are Real Estate Comps?
• Why Are Real Estate Comps Important?
• Who Uses Real Estate Comparables?
• Where To Find Real Estate Comps
• How To Find Real Estate Comps: Step-By-Step
• How To Run Comps On The MLS
• What To Consider When Finding Real Estate Comps
• Real Estate Comp Search Criteria & Example
• How To Find Real Estate Comps [FREE PDF DOWNLOAD]
• What If You Find No Comparable Properties?
• Frequently Asked Questions (FAQs) About Real Estate Comps
• Final Thoughts

Ready to take your real estate investing to the next level? Understanding and being able to break down real estate comps is just the beginning. Schedule a FREE Strategy Session with us to learn how our Ultimate Investor Program can unlock even more opportunities and strategies in your market. Don't miss out—take the next step toward maximizing your investment potential today!

What Are Real Estate Comps?

Real estate comps are comparable properties within a specific area used to determine the value of an investor's subject property. These property comparables provide a benchmark for understanding a property's market value by comparing it to similar properties that have recently sold, are currently on the market, or are under contract. Understanding what comps are in real estate is crucial for making informed investment decisions.

Investors often learn how to run comps on a house to calculate its value; this involves identifying similar properties in size, layout, condition, and location. By analyzing these comparable real estate investment properties, investors can adjust for differences and establish a realistic market value for their subject property. This process ensures they neither overpay for a purchase nor undervalue a sale.

Accurate valuation is key to maximizing profits and minimizing risks in real estate investing. Free real estate comps available through various online tools empower investors with the knowledge to navigate the market effectively. By leveraging property comparables, investors can make strategic decisions, ensuring their investments are sound and profitable.

But remember, the power of comps extends beyond buying or selling. It's a tool, or a lens, offering invaluable insights into the broader housing market landscape. Harnessing real estate comps is essential to navigating today's ever-evolving market. With a finger on the pulse, tracking properties—active, under contract, or recently sold—becomes a breeze, ensuring every property endeavor is rooted in knowledge and strategy.

Read Also: How To Find Distressed Properties: 10 Best Strategies For Investors

Why Are Real Estate Comps Important?

Understanding the market value of a property is pivotal, especially if you're aiming to achieve the best sale price. This is where real estate comps, or comparables, come into play. They are a cornerstone for assessing a property's present and future worth, making them a must-have tool for homeowners and real estate professionals.

Here's why real estate comps are vital:

1. Current Market Insights: Real estate comps offer a snapshot of the existing market, allowing homeowners to gauge the competitiveness of an offer. No longer do you need to rely on guesswork; with accurate comps, every property offer can be evaluated against current market trends.

2. Predicting Future Value: Pondering a kitchen or bathroom revamp? Real estate comps can forecast how such renovations might uplift your property's value. By analyzing recently renovated homes in your vicinity, you can identify the potential financial benefits of specific upgrades.

3. Guidance On Value-Boosting Renovations: If you're often asking, "Which enhancements will bolster my home's value?" comparables can provide answers. Examining renovated properties nearby reveals the sought-after features and corresponding sale prices, offering insights into fruitful renovation choices.

4. A Must-Have Tool For Professionals: For real estate professionals, especially investors, understanding the potential worth of a refurbished property is essential. This projected value post-renovation is commonly referred to as the "ARV" or "After-Repair-Value." Other synonymous terms include "After-Renovated-Value," "After-Remodeled-Value," and "After-Rehabbed-Value."

By harnessing the insights offered by real estate comparables, both homeowners and professionals can make informed decisions, ensuring properties are priced aptly for the market.

The Limitations Of Real Estate Comps In Property Valuation

Real estate comps, or comparable sales, are a popular tool for estimating property values, but they have several limitations that investors should be aware of. One significant drawback is that comps rely heavily on recent sales data, which may not always reflect current market conditions. This lag can lead to inaccurate valuations, especially in rapidly changing markets. Additionally, real estate comps may not account for unique property features such as renovations, lot size, or location-specific attributes that can significantly impact value.

Another limitation is the quality and availability of data. In areas with few recent sales, finding truly comparable properties can be challenging, leading to less reliable estimates. Moreover, comps often fail to consider the motivation behind a sale, such as a foreclosure or a quick sale, which can skew the perceived market value.

Investors should also be cautious of relying solely on comps without considering other valuation methods, such as income approaches or appraisals. Overreliance on real estate comps can result in overlooked factors that might affect the investment’s profitability. By understanding these limitations, investors can make more informed decisions and avoid potential pitfalls in property valuation. Remember, while comps are a useful tool, they should be just one part of a comprehensive property assessment strategy.

Who Uses Real Estate Comparables?

From novice homebuyers to seasoned real estate professionals, one tool that unites them all in their quest for properties is to learn how to run comps on a house. Here are a few common examples of people who know how to comp properties:

• Homebuyers: When you've found a home that's caught your eye and you're poised to make an offer, it's imperative to ensure you're not overpaying. Enter real estate comps. By evaluating similar properties in the vicinity, prospective buyers can gauge the fairness of the listing price, ensuring they approach negotiations with knowledge as their ally.
• Home Sellers: Imagine you're about to list your property on the market. How do you strike that sweet spot between enticing potential buyers and maximizing your returns? Comps offer sellers an insightful mirror to their neighborhood's pricing trends. Not just that, by analyzing the standout features of recently sold homes, sellers can emphasize unique selling points, giving their property an edge.
• Banks & Appraisers: Arguably, the most pivotal role in the property transaction process is that appraisers are tasked with deducing the accurate market value of a property. While they utilize a mosaic of factors to ascertain this, comps serve as a pivotal cornerstone. The impartiality of the appraisal process hinges on accurate and timely comps, influencing critical transaction decisions.
• Real Estate Professionals: For real estate agents, a real estate comparables tool isn't just an added benefit; it's their guiding light. With access to resources like the MLS (Multiple Listing Service), agents can pull comps to conduct a comparative market analysis. Whether advising a buyer or guiding a seller, this insight arms them with data, ensuring their clients benefit from strategic, informed decisions. Understanding how to calculate comps real estate professionals can use can't be underestimated; it's the foundation of their entire business.

Read Also: How To Invest In Real Estate: 10 Best Ways To Start Building Wealth

Where To Find Real Estate Comps

Finding real estate comps can be as simple as looking for similar properties to your own that have recently been sold. That said, there are four sources that stand out from the rest when identifying comparable sales.

Four primary ways to find real estate comps are:

• Realtors Or Real Estate Agents: Realtors, real estate agents, or even brokers can easily find real estate comps for your subject property. Usually, the real estate professional will compile the comps into a data sheet called a "CMA." CMA stands for Comparative Market Analysis. CMAs are commonly put together at no charge for homeowners who are using a Realtor's, real estate agent's, or broker's services for buying/selling a home.
• Multiple Listing Service (MLS): The Multiple Listing Service is the database of all houses in your area's market. These include both active and sold properties, which are comps that you need to determine a property's value. The MLS in your area is accessible through an online database. However, access requires being a licensed real estate agent or broker or having MLS assistant access.
• Online Real Estate Platforms: There are several free options to find real estate comps online. Public websites such as Redfin, Zillow, Trulia, and Realtor.com can be used to access historical sales data in your neighborhood and look up real estate comps around your subject property. If you do not have access to the MLS in your area, then the websites listed above are phenomenal secondary resources for finding your comps.
• Appraisers: An appraiser is a professional you can pay in order to get the current value of a real estate asset. Appraisers are commonly used by banks & lenders to find the value of a home in order to make an informed decision on whether or not they should lend on a property via a mortgage.
• Real Estate Comp Software: The best real estate comp software comes down to the eyes of the beholder. If for nothing else, there are countless real estate comparables tools to choose from, whether it's a real estate comps app or real estate comparables software. That said, the best one to choose is the most comprehensive one in your area. More often than not, the best platforms are the MLS, Zillow, and Redfin. However, as comprehensive as those platforms are, they may not cover your area. If that's the case, try Realeflow and PropertyShark.

Again, there are several ways to find free real estate comps, but we've found the ones we discussed above to be the most efficient and trustworthy.

Read Also: 6 Ways To Get MLS Access (Even Without A License)

How To Find Real Estate Comps: Step-By-Step

Understanding the value of your property isn't just about knowing its worth today; it's also about anticipating its potential future value. Having this insight is crucial whether you're considering selling now or holding onto your investment for the long haul.

But how do you find these comps? The process may seem a tad intricate to a newcomer, but it's a straightforward affair with the right steps. Let's dive into the systematic approach to uncovering and understanding real estate comps:

1. Detail Your Property's Features & Amenities
2. Research Recent Sales Of Comparable Properties
3. Refine Your Selection
4. Dive Deeper Into The Details
5. Crunch The Numbers

1. Detail Your Property's Features & Amenities

Your first step should be to have a comprehensive understanding of your property's distinct features. Begin by cataloging all pivotal specifications of the home in question. Note down the property's location, total square footage, plot size, and the number of bedrooms and bathrooms. Additionally, take into account any specific amenities it offers, such as a swimming pool, a fireplace, or a renovated kitchen.

Diving deeper, consider nuances that might significantly affect the valuation. Elements like the quality of local schools, the convenience of nearby public transit, or the availability of recreational spaces like parks can all play crucial roles in property desirability and, thus, its market value.

2. Research Recent Sales Of Comparable Properties

Once you've thoroughly understood your property's features, the next step involves scouting for properties with akin characteristics that have recently been sold. Should you collaborate with a real estate agent, they would typically turn to the local MLS (multiple listing service) to furnish you with pertinent data. For those venturing independently, platforms such as Zillow or Redfin offer insights into the local housing climate. Emphasize your search on properties marked "sold" rather than merely "listed." This distinction is paramount as listings denote the initial asking price, contrasting with the final settled transaction amount.

Ensure that your research is localized, focusing on properties within the same vicinity and of analogous dimensions. Additionally, stay consistent with the property type—when assessing a condominium's value, for instance, draw comparisons exclusively with other condos rather than branching out to single-family residences. Be astute in considering amenities, like the provision of parking or the quality of neighborhood facilities.

For a contemporary perspective on the housing market's dynamics, prioritize properties sold within the last half-year. However, if the local real estate scene is on the slower side, it might be necessary to extend your reference frame beyond this six-month benchmark, though such scenarios are increasingly rare in today's ever-evolving housing market landscape.

3. Refine Your Selection

Now that you have your list of potential comparables, it's time to scrutinize each to determine those that are closely mirroring your property. In real estate, always be specific. Consider, for instance, two homes bearing resemblance in terms of area and interior finishes, located within the same school district, and both equipped with in-ground pools. Their proximity—less than a quarter-mile apart—would typically signify congruent values. On the other hand, if the property under evaluation stands out distinctly from its neighbors or finds itself in a more rural or less densely populated setting, you can afford to be more flexible in determining comparables. This means broadening your criteria slightly to capture a more diverse range of properties that can still provide relevant insights.

4. Dive Deeper Into The Details

While online platforms provide a wealth of information, they may not capture the entirety of a property's story. Certain nuances can considerably influence a property's value and might go unnoticed in digital listings. For example, one property might exude charm, nestled on a quiet cul-de-sac with a stunning exterior, whereas another, albeit similar in features, might be positioned near a noisy highway, diminishing its appeal.

To truly understand the intricacies of each potential comparable, consider visiting them in person. Experience firsthand the ambiance, surroundings, and other intangible aspects. If direct visits aren't feasible, consider contacting the real estate agents who managed those sales. Their insights can reveal unlisted details and provide a more holistic understanding, ensuring you make informed decisions about which comps are truly comparable.

5. Crunch The Numbers

After meticulously selecting your real estate comparables, it's time to delve into the numbers. Begin by comparing the sale prices to establish an initial gauge of the potential market value of the home in question.

To further refine your estimate, a popular metric to consider is the Price Per Square Foot (PPSF). To compute this:

• Divide the sale price of each comp by its total square footage (this gives you the PPSF for each property).
• Calculate the average PPSF from all your chosen comps.
• Multiply the average PPSF by the square footage of the property you're evaluating.

For instance, let's say the PPSFs of your selected comps come out to be $210, $225, $230, and $240. This gives an average PPSF of $226.50. If the property you're examining is 1,900 square feet, then, using the PPSF method, its estimated value would be around $430,350.

Utilizing this calculation method can provide you with a more grounded estimate of the property's market value.

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

How To Run Comps On The MLS

The MLS is one of the best ways to find real estate comps. Whether you're a homeowner, investor, or a real estate professional, a thorough, methodical approach to market research is instrumental in setting accurate property values.

Before we begin covering how to run comps on the MLS, if you don't currently have access, we invite you to view our video below to learn how to get access to the MLS even without a license!

Now, let's map out our streamlined method to navigate MLS comps:

1. Prioritize Sold Properties: To gain a true reflection of the market's pulse, focus on recently sold properties rather than active listings. Current listings might deviate from genuine market values due to strategic pricing.

2. The Real-World Tour: Consider an on-site visit. Observing a property's environs and the amenities it offers can shed light on the locale's appeal, impacting the listing price.

3. Evaluate Listing Photos: Look closely at MLS photos. They can provide insights into the expected standard of appliances, flooring, and fixtures for the property's price range.

4. Gauge The Locale: Location is paramount. Utilize tools like Google Maps and Street View to ascertain the neighborhood's allure and assess its proximity to amenities, which greatly influence listing prices.

5. Harness Online Estimations: Platforms such as Zillow and HouseCanary provide valuable metrics on estimated property values and their potential trajectory. These online figures also echo public sentiments about market trends.

6. Craft A Property Profile: List out salient features of your property, ranging from its position in the neighborhood to its size, condition, and unique attributes. This blueprint aids in identifying congruent properties.

7. Engage In MLS Research: Here, a real estate agent's expertise is vital. Once on MLS, they'll earmark properties resembling yours in terms of features, size, and other parameters. The closer the match, the more accurate the comp.

8. Decipher The Price Per Square Foot: By averaging the price per square foot from various MLS comps, you'll have a reliable metric. This value, multiplied by your property's total square footage, furnishes a ballpark property value. [For a detailed walkthrough on determining square footage, click here.]

9. Incorporate Unique Features: Once your property's preliminary value is gauged, adjust for specific elements or discrepancies that weren't covered in general comps.

10. Determine Your Listing Price: After conducting exhaustive research, you're primed to set your listing price. Remember, aligning this value with prevailing market conditions, property attributes, and the deduced value is essential. Confident pricing stems from robust research corroborated by credible data. To set your listing price, we recommend averaging out your comps. Add up the total value of all the comps you decide to use and divide the number by the number of properties you included.

What To Consider When Finding Real Estate Comps

Finding the most relevant real estate comps is a nuanced process. While it might be tempting to pull up any recently sold home in the vicinity, there's a science to the selection. To increase accuracy, ensure you're giving weight to these factors:

1. Proximity: Start by zeroing in on your immediate neighborhood. Limit your search to homes within a quarter to a half-mile radius, ensuring consistent environmental and societal amenities.

2. Square Footage Price Analysis: Divide the sale price by the home's square footage to get the Price Per Square Foot (PPSF). This gives an objective metric to compare across homes, highlighting the price weightage given to space.

3. Recent Sales Only: Real estate trends can shift in a matter of months. Ideally, look for homes sold in the last 3 to 6 months. Narrowing this window further can be beneficial in volatile markets.

4. Similar Size: It's crucial to compare apples to apples. Look for homes within a 200-300 square feet range of your property to ensure size-based valuation accuracy. For a more accurate comp analysis, don't look at homes with more or less than 20% of the subject property's square footage.

5. Condition & Renovations: A property's condition can significantly affect its value. Whether it's a fresh coat of paint or a revamped kitchen, such upgrades can push up a home's price. Always factor in the condition and any renovations when selecting comps. When possible, try to use recently renovated comps.

6. Bedrooms & Bathrooms: The value of a two-bedroom home and a four-bedroom home can vastly differ. Ensure the homes you're comparing have a similar number of bedrooms and bathrooms. You want the number of bedrooms and bathrooms to match your subject property, but that's not always possible.

7. Construction Era: A vintage home may not be directly comparable to a new build, even if they share other features. Aim for homes constructed around the same era as yours.

8. Neighborhood Amenities: Proximity to conveniences like shopping centers, scenic views, or public transport can influence a home's attractiveness and, by extension, its value. Ensure the comps you select share these neighborhood characteristics.

9. Local Schools & Transportation: The quality of nearby schools can be a deal-maker or breaker, especially for families. Similarly, easy access to public transportation can be a significant boon in urban areas.

Remember, precision in comp selection is pivotal. While online tools and databases are beneficial, seeking expert insights and even considering a professional appraisal can offer the clarity required to price a property accurately.

Real Estate Comp Search Criteria & Example

Before we begin our example for finding real estate comps, here are the Real Estate Skills search criteria:

• Half Mile Radius from Subject Property
• Previous 6-Month Sales to Current Day Sales
• +/-20% of the Square Footage of the Subject Property
• Same Bed/Bath count, or as similar to the Subject Property as possible

Now, let us show you an example of using the Real Estate Skills Comp Criteria for finding comps and determining the future value (ARV). This example will help you tremendously if you are a real estate wholesaler, house flipper, or homeowner who wants to add value to their home to sell it at a higher listing price in the future.

Real Estate Comp Search Example

Let’s say the subject property you are analyzing is a three-bedroom/two-bath 1,200 sq. ft. property, and you want to find the ARV (After-Repair-Value) to determine its future value.

1. You can look up the search criteria/function by going into your MLS system or using one of the free public real estate websites listed above.
2. From there, type in the address of your subject property and pull up a half-mile radius around the property.
3. Then, in the search criteria, modify the search so that you are only looking for sold properties within the past six months. We do not want to initially look at comparable properties that have sold outside of 6 months; this means that if today is July 1st, 2024, we would only want to look at properties sold from January 1st to July 1st, 2024.
4. In the search criteria, make sure the initial square footage you are looking for comparable properties is within +/-20% of the subject property. In this example, the subject property is 1,200 sq. ft. - this means you would only look for properties that have SOLD in the past six months between 1,000 sq. ft. & 1,400 sq. ft. Additionally, you do not want to use comparables that have a different bed and bath count than your subject property. Since your subject property has three beds and two baths, you want to find comparable properties that also have three beds/two baths.
5. From there, you will now begin to see all of the "comparable" properties within a .5-mile radius around your subject property.
6. Now, you use comparable properties that have been renovated to current market trends to determine the future sales price of the home for your subject property when it is renovated. Let's say you find a 1,112 sq. ft. three bed/two bath renovated home that sold at $390,000 two months ago on the same street as your subject property. Then, you will find a 1,300 sq. ft. three bed/two bath home that sold for $410,000 one month ago on the same street as your subject property.
7. Now, take the average of those two comparable home sales and determine that your ARV will be right around $400,000 for your subject property once it has been renovated, given the 1,200 sq. ft. three bed/two bath property used in the example!

How To Find Real Estate Comps [FREE PDF DOWNLOAD]

We've been asked a lot to make a handout with the Real Estate Skills Comp Criteria, so we made it into a PDF just for you.

Now, you will always remember how to find real estate house comps in your area! You can download the Real Estate Skills Comp Criteria Cheatsheet for free!

What If You Find No Comparable Properties?

Free real estate comps are immensely beneficial. It is worth noting, however, that whether you know how to pull comps on the MLS or how to run comps on online listing sites, there is always the chance there are no comparable properties. Here's what to do if you can't find any comparables real estate homeowners already have on the market:

• Expand the half-mile radius property search a little wider to .75 mile radius
• Expand from looking for properties within the past six months to nine months
• Expand from looking for properties within +/-20% of the square footage of the subject property to +/-25 to 30% of the square footage of the subject property
• Expand from looking within the same Bed/Bath count to more/less beds and more/less baths

Keep in mind that the less "comparable" property is to your subject property in terms of square footage, location, bed/bath count, and features, the less it should be used as a completely accurate representation of the future value of your subject property!

A lot of real estate professionals wonder, "How Do I Get Better At Finding Comps?" Our answer is that nothing replaces actually DOING THE WORK. You get better at finding accurate comps the more you use this method of finding comps. Over time, you will get a better eye for seeing why properties sell at certain prices and where your subject property will sell at!

Be sure to review the section above constantly to find comps. The Real Estate Comp Criteria is the method that we, our clients, and our students use to analyze properties accurately to determine their current or future value.

So, maybe you've heard about real estate appraisers or realtors finding comps and have some questions about this, as well. Before we wrap up, let's get those questions answered!

Frequently Asked Questions (FAQs) About Real Estate Comps

Have questions about real estate comps? You're not alone. In this FAQ section, we'll break down common concerns to help you understand how property comparisons affect your buying or selling ventures.

How are real estate comps used in pricing a property?

Real estate comps are recent sales of similar properties in your area. By analyzing these comparable homes—considering factors like size, condition, and location—you can determine a fair asking price for your property. This ensures your pricing aligns with current market conditions and what buyers are willing to pay.

How far back should you go when pulling real estate comps?

When pulling real estate comps, you should generally look at sales from the past three to six months. This recent data reflects current market conditions and helps ensure your property's pricing is accurate. If the market is changing rapidly, focusing on the last three months can provide even more precise insights.

Can I use real estate comps from a different neighborhood?

Using real estate comps from a different neighborhood isn't ideal, as property values can vary greatly between areas due to factors like schools, amenities, and local demand. For accurate pricing, it's best to use comps from the same or a very similar neighborhood. If you must look elsewhere, adjust for the differences carefully.

Are comps the only factor to consider when determining a property’s value?

While comps are essential for determining a property's value, they're not the only factor to consider. You should also account for the home's condition, unique features, market trends, and economic factors. A comprehensive valuation looks at all aspects that could influence what buyers are willing to pay.

What’s the difference between comps and an appraisal?

Comps are recent sales of similar properties that give you a ballpark idea of your home's worth. An appraisal is a formal valuation done by a licensed appraiser, who uses comps plus a detailed inspection of your property to determine its official market value.

How do I know if I’m using the right comps?

You'll know you're using the right comps when they closely match your property in size, condition, age, and location. The best comps are recent sales—ideally within the last three to six months—in your neighborhood. Matching these criteria helps ensure your pricing is accurate and reflective of current market values.

Final Thoughts

Real estate comps, especially when derived from reliable sources like MLS (and not just a basic real estate comps app), are instrumental in deciphering a property's true worth. By mastering the intricacies of pulling and analyzing comps, both property sellers and buyers can make more informed decisions, maximizing their investments and ensuring they don't undervalue or overpay. As the saying goes, knowledge is power, and in the world of real estate, this power translates to tangible profits and optimal investments.

Ready to take your real estate investing to the next level? Understanding and learning how to break down real estate comps is just the beginning. Watch our Free Real Estate Investor Training to learn how our Ultimate Investor Program can unlock even more opportunities and strategies in your market. Don't miss out—take the next step toward maximizing your investment potential today!

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.