Real Estate Comps: What are They and How Do You Find Them?
You have a client so now you need to talk about home value.
Whether you help a client buy or sell a property, you need to know the real estate value.
This is because you need to have a fair listing price to attract sellers or a fair purchase offer to close the deal.
So, where do you begin?
Real estate comps are the best way to price a property like a pro. No other method gives you an accurate value price outside of hiring a real estate appraiser.
What are Real Estate Comps?
Let’s first start with the definition of real estate comps.
You may or may not have heard of the term “real estate comps.”
So, what are they?
“Comps” is short for “comparables.” Real estate comps are comparable home prices. Therefore, “finding comps” is the process of comparing the price of homes within a short radius of a listing.
Real estate agents use comps to help both buyers and sellers.
Comps help sellers estimate their home’s listing value to set a fair price.
Comps also help buyers know the selling price of similar homes in the area. Therefore, you and your client can make a fair offer.
How to Find Real Estate Comps
You need to know how and where to find comps to benefit your client. By doing so, you provide the best service and build trust.
That’s vital to build a network of previous, happy clients.
So, let’s talk about 2 methods you can use to find real estate comps for your client.
Let’s start with the method that is most widely and commonly used, the Multiple Listing Service.
#1 Using the MLS to Find Real Estate Comps
The Multiple Listing Service (MLS) is the most common tool used to find real estate comps.
The MLS is a database that has a record of all agent sold properties. This database includes homes that are “pending” or in escrow.
Active agents are required to be MLS members. Therefore, this is the most common way they find real estate comps.
The MLS is easy to use. It filters properties by location and price, and it also gives the user details on the property.
How to Price Property with the MLS
When you price a home, use the MLS to find what similar homes sold for in the same area. Ideally, you should find homes that have similar characteristics.
A few example of similar characteristics to look for are:
- Number of bedrooms
- Number of bathrooms
- Square footage
- How many floors
The MLS can filter these sold properties with ease.
Finding sold properties on the MLS to set listing prices is a smart choice.
There is already a record to substantiate that the home will sell within a given price range. This is crucial because it shows your seller that their home will sell quickly with the right price.
The MLS is comprehensive. But, it does not capture EVERY home sold.
Therefore, you might miss out on other comparables to use.
Why is finding every comparable important? It is important because you could potentially list your client’s property for a higher price.
#2 Using Title Representative to Find Real Estate Comps
Ok, so you may ask how this is possible.
Well, some sellers DON’T use an agent to sell their home. Those sales are called FSBO or “for sale by owner.”
You may have seen those “for sale by owner” signs on a property’s lawn.
A house is not placed on the MLS if a real estate agent does not sell it. In other words, FSBO homes are not placed on the MLS.
This is where your trusty title representative comes in.
Your title rep can give you computer access to the title database. This database contains all properties that are sold. This includes FSBO properties.
How is this possible?
Every transaction closed goes through the county record’s office. Therefore, the title rep has access to all recorded transactions.
This includes properties on the MLS, excluded from the MLS, and even FSBO.
Why this Helps with Pricing
Why is checking this title database so important?
In some cases, it can greatly affect the outcome of pricing your listing.
Checking both databases is doing your research. This is vital for real estate professionals.
When you check every database you avoid discounting your listing.
Here’s an example:
After viewing every sold property in your area on the MLS, you arrive at a listing price of $1,000,000.
But, the title database has a few “for sale by owner” homes that sold for $1,300,00 and $1,500,000. This shows you that you can list this property at a higher price.
This is helpful when you price an area that does not have many sold properties.
If the MLS is yielding a low return of sold properties in that particular area, the title database may find more.
Final Thoughts on Real Estate Comps
Remember that using real estate comps help with your clients.
When you work with buyers, they benefit. This is because you find offers to get the best value. Buyers respect a data driven offer.
When you work with sellers, the ultimate goal is to get their property SOLD. Whether you use the MLS or your title representative, it all starts with the right, data-driven price.
This leads to sold properties, having a happy client, and putting a commission in your pocket!
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