In real estate, comps means “comparable sales.”
Comps are one of the tools used to help determine the current fair market value of a property.
They're commonly used by home sellers, home buyers, real estate agents, and appraisers.
What are comps in real estate?
Also known as “comparables” or “comparable sales,” the term “comps” refers to any recently-sold property that's similar to the property you’re trying to market for sale or purchase. Looking at comps can help you determine a list price or how much to offer on the home.
Usually, when comparing recent sales, real estate professionals look at the following criteria to find matches:
Current market conditions: to be considered comparable, the recent sales that you’re considering must have sold within about 6 months under similar market conditions.
Location: comparable properties must also be located close to the property in question.
Square footage: ideally, comparable properties should be of a similar size with similar layouts. Additionally, the value per square foot should also be comparable.
Amenities and upgrades: comparable properties should have similar features and amenities. If one home has upgrades or improvements that another doesn't, that should be reflected in the valuation.
Age: comparable properties should be of a similar age.
Overall condition: comparable properties should ideally be in a similar condition to one another. Adjustments can be made if one property is in better condition than the other.
How are comps used in real estate?
At their core, real estate comps help determine the current value of a property. However, depending on who is using them, their purpose can be slightly different. Usually, four groups use comps:
Home sellers: if not using a real estate agent, home sellers can use comps to help determine a list price.
Home buyers: buyers may use comps to help ensure they’re making competitive offers.
Real estate agents: agents often perform what’s known as a comparative market analysis (CMA), which uses comps from the multiple listing service (MLS) to help their client decide on an appropriate listing price.
Real estate appraisers: appraisers can also use comps, along with property records and a physical inspection of the home, to determine the appraised value of the property.
This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.
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