Why is Everyone Talking About Comps?
There are a lot of terms when you are buying or selling a house that might seem like a foreign language to you. One of these terms is “comps.” It doesn’t matter if you are the buyer or the seller; comps will matter to you and here’s why.
Comps stands for “comparables.” These are the houses in the area of the house that you are selling or buying. The comps help to determine the value of the house. How you will use the comps depends on if you are buying or selling.
The ins and outs of comps
To be considered a true comp, houses will have to meet some basic requirements. For starters, the houses need to be in the same location. The closer they are, the more accurate the pricing information will be.
For example, if you live in a small town, a comp could be on the far side of town or even one town over. If you live in a large city, you want to keep it to places that are within a half-mile radius of the house.
The house needs to be as close to your house as possible in size and number of rooms. If your house is a 1,500 square foot 3 bedroom and 2 bath house then you want to look for comps that match this as closely as possible.
You also want to find houses that have the same features as yours. This could include a balcony with a water view, a large back deck, or an open floor plan. The more similarities the better.
Comps also need to be homes that have sold recently. You don’t want to look at houses that have sold over six months ago. The more recent they are, the more valuable the pricing information is when making your decision.
When you are the seller
If you are selling your house, the comps will help you determine what your listing price should be. It will show you what kind of pricing the market can tolerate and the buyers are willing to pay. It’s important that you make sure you are comparing apples to apples.
When you are the buyer
When you are buying a house, the comps will help you determine what kind of offer to make on the house. You want to find houses that are closely related. You can use this information to explain and justify why you are offering a lower amount on the house.
If you see that the comps are in line with what the asking price is on the house, then you most likely will not be able to offer much less and have the offer accepted.
Remember throughout the process that comps are only to be used as a tool in helping you determine the price. The comps help but you still need to look at the full picture.
Chances are there is still not a comp that will exactly match the house you are buying or selling. But being able to leverage info from similar options will help with determining a value rang to consider.