One of the most frequently heard terms in real estate is the word comparable sale or comps for short. Comps is a real estate appraisal term which refers to properties that are similar as possible to the subject property whose value is being established.
A comparable sale is sale that would be considered an alternative choice to a buyer considering a subject property
A comp for a property should possess as many as possible of the same characteristics and amenities of the subject property. These traits include, but are not limited to physical compatibility such as square footage, number of bedrooms, location, condition, home style, and age. The conditions of the sale, financing terms, local market conditions also factor into the valuation of a home.
When establishing value for a home it is common practice for appraisers to look for 3 to 4 settled listings with the same characteristics of the subject property, and the combination of either 1 Pending and Active listing, or 2 Active listings. Obviously the final sales price of a Pending or Active listing is unknown, but an estimated sales price can be extrapolated based upon the percentage of selling price to the last price data that has been established by similar settled listings.
The number of bedrooms will trump a home with a the same square footage that has one less bedroom – the value of a home with an additional bedroom will have a greater market value. Also location plays a big part in the valuation of a home as it pertains to a home’s proximity to a busy road. It is not uncommon to see the value of a similar house on a double yellow line road be $10,000 to $15,000 less than a home located on a neighborhood street.
Comps play a vital role in establishing the value for a property for people on either side of the buying and selling fence. A agent should put the time into gathering valid comparable data for his/her client. Don’t buy or sell a home without it!