How To Determine Property Value Using Comps
Determining the value of a property can be tricky. This is where real estate comps come in.
When you’re buying or selling a home, you want to be sure you’re getting a fair value. However, you have to be careful not to over or underestimate the value of a property.
One of the best methods utilized to determine property value is to use comps.
But what are real estate comps? How can you use them to determine property value?
Let’s take a look at how you can use comps to accurately estimate the value of a property.
What are Comps in Real Estate?
Comps is short for comparables. Comps refers to similar properties to the one that you are evaluating. This takes factors such as location, size, age, features, condition, and more into account.
Essentially, you’re trying to find the most similar properties in the area and using the values of those properties to help estimate the value of another property.
There are a few factors to consider when using comps to determine the value of a property.
The value of any property is affected by its location. Whether you’re buying, selling, or investing in a property, you have to consider its location.
Consider factors such as:
- Crime rate
- Noise level
- Average Income
- Proximity to major cities
These factors, among others, can positively and negatively impact the value of a property.
Of course, size is also a major factor when determining a property’s value.
You don’t have to find properties with the exact same square footage as the home you’re looking at, but you should be looking for properties that are at least comparable in size.
For example, you shouldn’t compare a 1,000 sq ft. home with a 2,000 sq ft. home. However, you can definitely compare a 1,000 sq ft. home with a 1,200 sq ft. home.
There’s no rule for comparing square footage, but be reasonable in your evaluations.
Does the property you’re interested in have a pool? That could add significant value to a home located in an area with high temperatures. As a result, it might not be comparable to a home in the same area that doesn’t have a pool.
You should consider other factors, including:
- Size of backyard
- Deck space
- Recent renovations
- Eco-friendly Appliances
- And More
The more features you can find that your property has in common with others, the better.
Beds & Baths
Homes with different numbers of bedrooms and bathrooms may vary significantly in value, even if they are nearly the same size.
Be careful not to compare a home with 5 bedrooms and 3 baths with a home that has 2 bedrooms and 2 baths.
Again, using real estate comps to determine value is only effective when using very similar properties to compare to the one you want to buy or sell.
Use Comps to Determine Property Value
How can you use real estate comps to determine property value?
First, you can comb through recently sold and recently listed properties.
Search for homes with as many similar features as possible and simply browse through the listing prices to get a good estimate of how much the property you are evaluating is worth.
Websites like Trulia and Zillow are great for this. You can browse listings by location, square footage, amenities, and more to find real estate comps. You can even take 3D tours to see how similar the interiors are to the property you are appraising.
That’s really all there is to it. Using real estate comps to determine property value can be very effective when buying or selling a home. Of course, getting an expert appraisal will help confirm the accuracy of your estimates, but using comps is a great start.