How to Use Real Estate Comps: A Guide to Accurate Home Pricing for Buyers and Sellers

Using real estate comparables, or "comps," is the most reliable method for determining a home's fair market value. By analyzing recently sold properties that are similar in location, size, and condition, sellers can set a competitive listing price, buyers can make informed offers, and appraisers can substantiate their valuations. The most accurate comps are homes sold within the last three to six months, located within a half-mile, and matching key features like square footage and bedroom count. This guide details how to find and use comps effectively.

What Are Real Estate Comps?

A comp (comparable sale) is a recently sold property used as a benchmark to assess the value of a similar home. For a comp to be valid, it must share critical characteristics with the subject property, including proximity, size (typically within 300 square feet), number of bedrooms and bathrooms, age, condition, and features like updated kitchens or proximity to schools. Accurate comps form the foundation of a Comparative Market Analysis (CMA), a report real estate agents create to advise clients on pricing.

How Do Different Parties Use Comps?

Comps are essential for everyone involved in a real estate transaction.

• For Sellers: Comps are the primary tool for setting a listing price. An accurate price, based on solid data, attracts more buyers and minimizes the time a home spends on the market. Even when working with an agent, understanding comps helps sellers feel confident in the recommended price strategy.
• For Buyers: Buyers reference comps to ensure they do not overpay. By comparing the asking price of a home to what similar properties recently sold for, a buyer can formulate a competitive yet reasonable offer.
• For Appraisers: A lender will require an appraisal before approving a mortgage. The appraiser will independently source comps to verify that the home’s sale price aligns with its market value, protecting the lender's investment.
• For Real Estate Agents: Agents use the Multiple Listing Service (MLS) to pull comps and generate a CMA. This allows them to provide data-driven pricing advice and stay informed on local market trends.

How to Find Accurate Real Estate Comps

You can find comps independently or with the assistance of a real estate agent. Using multiple sources provides the most well-rounded view.

1. Work with a Real Estate Agent The local MLS, accessible primarily by licensed agents, is often the most accurate source for comps. An experienced agent can interpret data with an understanding of neighborhood trends. Many agents provide a free CMA as part of their service. They can account for nuances that online tools might miss, such as the value of a quiet cul-de-sac location versus a busy street.

2. Use Online Resources and Public Records If you are researching on your own, several resources are available:

• Online Real Estate Platforms: Use the "Recently Sold" filter on major real estate websites. You can filter by ZIP code, square footage, and other features.
• Public Property Records: County records document sale prices and can often be searched online. A key limitation is that these records may not reflect seller concessions (e.g., a price credit for repairs), showing only the final adjusted price.

Key Factors to Consider When Evaluating Comps

When selecting comps, rigor is critical. Aim to find at least three properties that meet these criteria:

Practical Tips for Using Comps Effectively

1. Only Use Sold Properties: Ignore active listings or pending sales. A home is only worth what a buyer actually paid for it, not what a seller is asking. 2. Compare like with like: Do not compare a single-family home to a condo or townhouse. Property type significantly influences value. 3. Scrutinize Listing Details: Carefully review photos and descriptions. A new roof or updated HVAC system, which may not be visible in pictures, can justify a higher sale price. 4. Check the Exterior and Neighborhood: If possible, visit the comparable property. Note the condition of the exterior and neighborhood factors like noise levels or school district boundaries. 5. Account for Seasonality: Market activity fluctuates. A sale from a slow winter market may not be directly comparable to one from the competitive spring season.

To formulate your price, combine data from multiple sources: MLS comps from your agent, online data, and your own research. After establishing a price based on comps, you can compare it to an automated valuation model, like the Zestimate, as a secondary check. Remember, these tools have a margin of error and are less accurate than a professional assessment.

For the most unbiased valuation, consider hiring a professional appraiser. The cost, typically $400-$500, is a worthwhile investment for an accurate price, especially in a unique market or for a highly renovated home. Avoid shortcuts; pricing a home requires careful analysis of multiple data points, not guesswork. By following these steps, you can confidently arrive at a market-supported price.