Did you know that over 5 million property transactions take place every year in the United States?
This shows how important the entire real estate market is to the American economy. This market has provided ample opportunities for real estate investors to buy undervalued homes and renovate them before selling them for a profit.
Knowing how to run comps on a house can help you price the property accurately. It’s vital that you price your property accurately as setting the price too high can scare off potential buyers. This can end up costing you both time and money as you try to find another buyer for your home.
Interested in learning how to find comps for houses? You’ve found the perfect blog. Here’s everything you need to know about real estate comps and how to pull comps on a house.
What Are Real Estate Comps?
Real estate comps are groups of properties that share characteristics with each other. Due to the fact that the homes are similar, comparing the value and price of these homes help guide sellers looking to price their home on the market.
When it comes to valuing a home, things can get very complicated very quickly. There are tons of factors that can influence the price of a home, making it an incredibly difficult task to do by yourself. These factors can also evolve and change, meaning that the value of a property today won’t stay the same forever.
What makes real estate comps great is that they give you an accurate picture of how much a property is worth based on previous experience within the market. Instead of having to do all the research yourself, you can simply look at the research that’s been done on a home similar to yours. You can then use that price as a guide to help you put your property on the market.
For example, if you have a two-bedroom home in Atlanta and want to figure out what the market value of your home is, you can use real estate comps to give you an idea of how much it’s worth. Since you are trying to sell a two-bedroom home, looking up the price of the last two-bedroom home that sold in the area would give you a good idea of how valuable your home is.
Factors To Consider
Real estate comps group properties that share similar characteristics. This is not limited to the number of bedrooms each home has but also extends to the location, size, and condition of the home. These variables help narrow down the market so that you can find the most accurate home to compare yours to.
Two homes that are both 200 square feet in size are not necessarily the same on the inside. Nowadays, the finishes and amenities within the home also count. If your home has solar panels, LED lighting, or even a new HVAC system, it could add to your overall property value.
In this case, you should compare your home to other homes in your area that have the same amenities and finishes.
Who Uses Comps?
As mentioned above, comps are a great way to give homeowners a good idea of what a home is worth. While this is a great way for homeowners to know how much to ask for their home, this is also useful to people looking to buy a home. This helps them figure out if a home is overpriced as they look for the best deal.
If you own a home and you want to sell it, the most important metric to work out is the price. The price that you sell your property for is essential as you may need the proceeds to pay off your mortgage or buy another house in another city.
Due to these pressures, sellers typically don’t have time to put their homes on the market for years and wait for negotiations to settle on a fair price for the property. Real estate agents and investors know that the key to selling a home fast is to accurately price it for the market.
When a home is perfectly priced, you open yourself up to the greatest number of potential buyers while also maximizing the amount of money you can make from the sale. If you price your home too high, you may scare off potential buyers. However, pricing the home too low may be throwing money away.
Real Estate Investors
Real estate investors are interested in generating a profit from a property. This can be through flipping the home for a profit or renting the home out to generate an income. Regardless of what the investor plans to do with the property, investors will always do their research to make sure that they are not overpaying for a home.
This is why real estate investors run comps on a home to find out what the home is worth in the market at that time. Especially if the investor plans to flip the home for a profit, a comp can give them a good idea of what the after-repair value of the home would look like.
How Do Homes Get Valued?
While comps simply compare the value of a home with other homes in the area, one of the biggest questions that arise is how to actually value a home. The truth is that there are tons of factors that influence a home’s value. Here’s a quick guide on how homes get valued.
The Property Market
As we may all be aware, everything is about supply and demand. This economic rule also applies in the real estate market as areas that don’t have a lot of housing tend to see a rise in property prices and even the cost of rent.
This is most evident when comparing the living costs in big cities compared to smaller towns. There is a massive difference between renting a three-bedroom apartment in Ohio compared to renting the exact same apartment in the middle of New York City.
Due to the fact that New York City is home to millions of people all looking for housing, the price to rent or buy a home is through the roof. This showcases the principle of how the property market in the area influences the price of the property there.
While some like to isolate this to be about the location, a more accurate way to look at it is the geographical demand for housing. This way you take the location and the demand for housing in that location into account.
Homes come in all shapes and sizes. However, most homes come with the same basic rooms and amenities. This includes common rooms such as a bedroom, bathroom, lounge, and kitchen. However, the state and amenities within these rooms can help set the property apart from others in the market.
For example, a home with a brand-new kitchen is not the same as an old, wooden kitchen from the 30s. In this case, the state and quality of the amenities in the one home help increase the value of the entire property.
Amenities are not limited to the basic rooms but also include things that help make the home unique. Things such as solar panels and smart home devices go a long way in adding value to your home. This adds value by adding convenience but also helps futureproof your home at the same time.
Larger amenities such as a patio, swimming pool, hot tub, cinema room, outdoor kitchen, and even a guest room can all play a big role in increasing your home’s value. Each of these amenities adds value to your property but also allows you to accurately compare them with other homes in the area. This is because the more you have in common with another home, the more accurate the real estate comp is.
How To Run Comps on a House
Comps are a great way to accurately value your property. While you may have a good idea of what the home is worth, comps can help give you a clearer picture of how to price the property.
Real estate investors often plan the entire project ahead of time and work using the after-repair value of the home. However, the market could change as time goes by. This would ultimately change the way you approach selling your home.
Looking for a quick guide on how to accurately value your home? Here’s a quick guide on how to do comps on a house.
1. List Your Home’s Characteristics
Real estate comps use common characteristics to try and find the value of your home. This is why listing your home’s unique characteristics is the best place to start. These characteristics will help you find similar homes in the area for you to compare prices with.
2. Research Recent Sales
Once you know what kind of home you’re looking for, you can then cross reference this information with recent sales in your area. Remember to look for the most recent sale as this would be the most accurate information to work with.
3. Consider the Property Market
The general property market should be taken into consideration as well. This is especially important if anything major has occurred after the last sale in the area. If the general property market is up, you can expect your home to be slightly more valuable than the comp. However, if the market is down, you may have to drop your price a little to attract buyers.
4. Take External Factors Into Account
There are tons of external factors to consider when selling your home. This includes the demand for property in the area and the state of the economy. While many may not like to think about these factors, they play an important role as they dictate whether it’s a seller’s or buyer’s market.
5. Do Some Math
The last step of the process is to do some math to work out a final price for the property. If you have a real estate comp with five homes at five prices, the easiest method to determine your home’s value is to average the five sales prices.
How To Get Comps for a House in Another Area
If you don’t have all the information you need about a home but want to do a quick real estate comp on the property, there are alternative ways to value the home. The most accurate method is to make use of trusted valuation tools.
These tools take basic data into account and estimate the value of any property based on accurate records of previous sales in that area. These valuation tools are incredibly easy to use and can give you the price of any property in any area with just the click of a few buttons.
While some valuation tools are expensive, iBuyer offers a solution for free on our website. Known as iValuation, this online tool lets you enter a physical address and it will do all the research for you in the background. This provides you with a real-time home value based on actual sales data.
Selling Homes Does Not Need To Be Difficult
Ever wondered how to run comps on a house? It’s a lot easier than you may think. While you may have needed to conduct market research by yourself in the past, there are dynamic online tools that make the entire process more efficient.
If you have any questions or want to learn more about how iBuyer can help you sell your home, feel free to contact us. You can also take a look at our website and make use of our online tools to help you accurately value your property.