How to Research Real Estate Comps
Comparable properties, AKA “comps,” are a key tool for real estate brokers and property owners preparing to list a house or business for sale. These data show what similar properties are worth, allowing for the development of a fair listing price that's likely to appeal to potential buyers. Historically, real estate agents researched comps on their own and took the information back to clients, a process which was sometimes rather opaque. Today, that process has been made much more simple and transparent with the aid of the Internet, allowing people to investigate comps on their own.
Several factors go into the evaluation of a home to identify comparable properties. learn about these and you'll be prepared to conduct your own DIY research on comps for your sale price.
As a basis for comparison, property type is obviously key. It needs to be defined as commercial, residential, or industrial, with a consideration of subtype. A duplex is very different from a single family home, for instance, while a standalone business with a residential apartment above is not the same thing as a strip mall.
Another consideration is location; a home in the fashionable Pacific Heights district of San Francisco cannot be compared to another in the down-at-heel Tenderloin, because the two neighborhoods are so different. While both homes may be similar in terms of square footage, number of bedrooms, and other factors, their locations have an enormous impact on their value.
Features are also important. Factors like a top-of-the-line, efficient heating system installed by a top San Francisco HVAC contractor will affect the price of a property. In the case of residential real estate, hardwood floors, decorative accents, elegant architecture, high quality appliances, recent remodeling, and other extras can make the value of a home much higher. A teardown doesn’t make a great comp for new construction, or for a home that just received a kitchen remodel to put in state-of-the-art equipment. Considerations for commercial real estate can include equipment and fittings, the presence of a larger power drop to run industrial equipment, and so forth.
Look at Listings
Describing a property as fully as possible allows for the development of an accurate list of comps. These can be pulled together from a number of different sources. One is the current market; you can look at listings for similar properties and see how much people are asking for them. You should evaluate how long they have been on the market when doing this, and take note of any factors that might be affecting the sale. If you notice that an apparently comparable property is much higher than you would expect, dig a little deeper to find out why; maybe the property has some extras, like green features for example, or maybe the owners are simply expecting too much.
Check Recent Sales
You can also look up recent property sales, which are a matter of public record. Historically, this required going to a records office to look them up, but today you can often do it via internet. Records offices sometimes host this data online, or you can find it on private websites, which let you narrow results by type of property, location, and features. This can allow you to generate a useful list of sold property to see what sold, when, and for how much. These data are crucial for tracking market trends and identifying more comparable properties.
With this information in hand, you can make a better assessment of how much you should ask for your own property, though it can help to consult a real estate agent and a skilled property assessor. You can also use comps in your own house search and price negotiations. If you are interested in a home but feel the owners are asking too much, don’t be afraid to furnish your research data as part of your argument when you make an offer below the listing price.
s.e. smith writes for Networx.com.
Updated December 5, 2018.
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