How to Find Sales Comps for Real Estate Investment Property
Have you ever thought of how a seller determines their listing price? Or how a buyer decides their offer price during a negotiation? They don’t just look at a property and estimate its value. They make use of sales comps or real estate comps.
To excel in buying and selling property in real estate investment, you must use sales comps. With accurate comps, you can price your home to attract buyers and minimize your time on the market.
No matter which side of the transaction you are on; a buyer, a seller, an agent, or an appraiser, you need to grasp all facts about real estate comps. By using correct real estate sales comps, you can be sure you are dealing with a profitable investment before buying it.
What are Sales Comps?
These are properties that have sold recently and are similar to the property you are examining in terms of location, condition, features, and size.
If, for example, the house you are looking at has three bedrooms and two bathrooms, you will look at recent sales of properties in that area that have the same number of bedrooms and bathrooms.
This gives you an idea of what a similar property has sold for already in the current market conditions so you can price your home accordingly at a similar price.
One thing that can differentiate the value of your home and past homes that have sold recently is the condition of the properties. Make sure to find renovated properties if you plan to do renovations to your property to compare apples to apples in terms of condition of the similar properties.
Who uses Sales Comparables and How?
By looking at related properties, there is a lot you can learn about your home. Here are ways real estate professionals use real estate comps for better decision making:
Setting your asking price based on sales comps is important when selling your property. By comparing the prices of similar properties in the local housing market, you can determine a listing price that is fair and competitive.
Choosing the right price will ensure you don’t under or over price the property. A price below the market value will reduce your profit margins. Also, an overpriced property may drive away potential buyers. For this reason, you need to conduct an in-depth comparative market analysis based on sales comps.
Real estate comps are a valuable tool when devising your market strategy. By looking at similar sold properties within the past few weeks, you can identify features that can make your listing unique. You can carefully examine photographs and marketing materials to figure out what to include in your listing.
Analysis of sales comps can tell you how long a property remains in the market. Using this information, you can estimate the time it will take to sell your property. It will be easier to factor in holding costs in your deal analysis to come out profitably.
Are you worried that you are likely to overpay for a property? You don’t want to buy a home and later find out its current value is less than its original value. It is therefore advisable to pull sales comps before getting into negotiations.
By finding out the selling prices of homes sold in recent weeks, you can gauge your property’s fair market value. By doing your analysis correctly, you are likely to get a property at an attractive price and make a profit.
Comps from multiple listing services (MLS) provide easy access to comparable homes for appraisers to use and work more efficiently. They use them to determine the current value of a property.
An appraisal’s strongest indicators of a property’s current value are comparable sales closed within the last 90 days. Appraisers only use pending listings and sales to show the current market condition. They don’t consider them in the final opinion on the worth of a property.
Appraisers attempt to get value to support the purchase price while still following appraisal guidelines. They ensure both parties get a fair price for the home.
#4: Real Estate Agents
Among the essential day-to-day duties of a real estate agent is analyzing sales comps. They rely on them to provide the best services for buyers and sellers.
By gathering comparables in the area, an agent can decide on a good listing price with the seller or the best offer price with the buyer. Comparables assist agents to monitor their local real estate market and gauge trends.
Also, an agent will know which features or house sizes are trending using sales comps. With this information, they can quickly set up listings to sell properties or understand the buyer’s expectations when searching for a new home.
Factors to Consider When Finding Sales Comps
It is essential to know what you are looking for before you start your search for comparable properties. Here are factors to consider:
Smaller distances will provide a more accurate representation of your home. During your search, consider homes within a quarter to a mile radius from your home.
#2: Property Type
There are different types of property in real estate. Single-family homes, multi-family homes, and condos, to mention a few. To get the best comps, use home types similar to your property.
#3: Property Size
Properties within 200-300 square feet of your property provide the best real estate comps. Also, ensure the home has the same number of floors as yours.
#4: Room Count
Search for properties with the same number of bedrooms and bathrooms as your property for more straightforward comparability.
#5: Age of the Property
Check on the year of construction to ensure the home was built around the same time as yours.
#6: Condition of the Home
Find homes with nearly the same physical condition as your property. Don’t forget to factor in renovations and improvements.
If your property has facilities such as a cooling and heating system, you should look for homes with the same equipment for comparison.
#8: Same Features
These are things like balconies, verandas, garage, and swimming pool. A property with the same elements will give you accurate sales comps. Check also on the neighborhood features such as waterfronts, views, access to public transportation, and local schools.
#9: Timeframe for Sale
Depending on how rapidly your market changes, focus on properties sold within a small duration. It can be 3 to 6 months or even shorter.
How to Find Sales Comps for Real Estate Investment
If you want to run an up-to-date and accurate comparative market analysis, you must learn how to find comparables. Here is how to go about it:
#1 – Hire a Real Estate Agent or Appraiser
A licensed real estate agent and appraiser are the only real estate professionals with access to the MLS. Multiple listing service has details on properties currently for sale or sold in a given area.
From MLS data, a real estate agent or appraiser can easily pull real estate comps. In light of the information, they can accurately estimate your house’s value in the current market.
#2 – Obtain your Real Estate License
Personal access to the MLS will significantly benefit your business. You will receive accurate comparables and save on the expense of hiring a real estate agent.
That’s not enough, with a license you have easy access to potential deals, cash buyer listings, and motivated sellers. It will also increase your credibility and boost your control over real estate transactions.
However, you must be ready to take the real estate course and study for the agent exams.
#3 – Have a Symbiotic Relationship with a Real Estate Agent
Since only authorized real estate agents and appraisers can access the MLS, it is hard for other professionals to run comparables independently. Therefore as an investor, you must creatively work around this challenge. For instance, you can request an agent to provide you MLS comparables in exchange for referrals on clients and listings.
#4 – Free House Value Sites
Without access to the MLS, you can still use these online tools to get your real estate comps.
Zillow allows you to search within a city to find your locality and zoom into getting your property. You can then see nearby listings.
Filter your search using your home features. It can be the number of bedrooms and bathrooms or square footage. Compare homes with exactly similar features to yours to get the value of your property.
Trulia has public records of properties that have been sold near your locality. It provides comparables based on proximity to your home. Narrow down your search to features similar to that of your home. It can be property type or square footage.
#5 – Paid House Value Sites.
Provides a detailed report on a property. This includes nearby sales with a map, neighborhood summary, advanced report with risk analysis, and statistical charts.
Produces a property’s parcel map, comparable sales, automated valuation, neighborhood information, custom searches and transaction history.
For any positive financial outcome, there must be due diligence and research behind it. Good investing is not based on luck; it is directly proportional to the time and effort you input.
To make good returns when buying or selling a home, you must conduct a thorough comparative market analysis using sales comps.
To find your real estate comparables, you can hire an agent or appraiser, get a real estate license or use online platforms. Whichever way you go, ensure that your comps are precise. With accurate real estate comps, you will precisely estimate the current value of your property and maximize profits.
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