Comp Prop Explained How to Compare Property Values Accurately
How to pull and analyze comps like a pro to determine accurate property values.
Austin Beverigde
Tennessee
, Goliath Teammate
Understanding property values can be overwhelming, especially if you're trying to make a sound investment or sell your home. Many people struggle with comparing property values accurately, leading to poor decisions that can cost them money. This guide will break down the concept of comparable properties (comp props) and provide you with straightforward methods to assess property values effectively.
Quick Answer
To compare property values accurately, start by identifying comparable properties in your area that have sold recently. Look for homes with similar features, such as size, location, and condition. Use online real estate platforms to gather data on these properties, and calculate the average price per square foot to estimate your property's value. Adjust for differences in features or conditions to refine your assessment.
What Are Comparable Properties?
Comparable properties, or "comps," are homes that are similar to the property you are evaluating. They are usually located in the same neighborhood and have comparable characteristics, such as size, age, and amenities. Real estate agents often use comps to help determine a fair market value for a property.
Steps to Compare Property Values
1. Gather Data on Comparable Properties
Start by researching recent sales in your area. Look for properties that have sold within the last six months. Websites like real estate listing services or local property records can provide this information.
2. Analyze Key Features
When comparing properties, consider the following features:
Size (square footage)
Number of bedrooms and bathrooms
Location (neighborhood, proximity to amenities)
Condition (new, renovated, fixer-upper)
Lot size and outdoor features
3. Calculate Price Per Square Foot
To get a clearer picture of property values, calculate the price per square foot for each comp. Divide the sale price by the square footage. This will help you see how much buyers are paying for similar homes in your area.
4. Adjust for Differences
Not all properties are identical. Make adjustments based on differences in features. For example, if a comparable property has a finished basement and yours does not, you might deduct a certain amount from its value to account for that difference.
5. Determine Your Property’s Value
After analyzing the data and making adjustments, you can estimate your property's value. This figure will help you set a competitive price if you’re selling or determine a fair offer if you’re buying.
Realistic Examples
Consider two homes in the same neighborhood:
Home A: Sold for $300,000, 2,000 sq. ft., 3 beds, 2 baths, finished basement.
Home B: Sold for $280,000, 1,800 sq. ft., 3 beds, 1.5 baths, no basement.
Calculating the price per square foot:
Home A: $300,000 / 2,000 sq. ft. = $150/sq. ft.
Home B: $280,000 / 1,800 sq. ft. = $155.56/sq. ft.
Adjust for features: If your property is similar to Home A but lacks a finished basement, you might adjust its value down by $20,000 to account for that difference.
Checklist for Comparing Property Values
Identify at least three comparable properties.
Gather recent sale data for those properties.
Analyze key features and differences.
Calculate price per square foot for each comp.
Make necessary adjustments for differences.
Estimate your property’s value based on your findings.
Common Mistakes to Avoid
When comparing property values, avoid these common pitfalls:
Using outdated sales data: Always use the most recent sales to ensure accuracy.
Ignoring location differences: Even small changes in location can affect value significantly.
Not adjusting for features: Failing to account for differences in condition or features can lead to inaccurate valuations.
Overlooking market trends: Be aware of current market conditions, as they can affect property values.
Relying solely on online estimates: While online tools are helpful, they may not reflect the true market value.
FAQs
What is a comparable property?
A comparable property, or comp, is a home that is similar in size, features, and location to another property. Real estate agents use comps to help determine the market value of a property based on recent sales.
How do I find comparable properties?
You can find comparable properties by researching recent sales in your neighborhood through online real estate platforms, local property records, or by consulting a real estate agent.
Why is price per square foot important?
Price per square foot helps you understand how much buyers are willing to pay for similar properties in your area. It provides a standardized way to compare homes of different sizes and features.
Can I use comps from different neighborhoods?
While it’s possible to use comps from different neighborhoods, it’s generally not recommended. Location significantly impacts property values, so it’s best to stick to comps within the same area.
How often should I update my property value assessment?
It’s a good idea to reassess your property value at least once a year or whenever there are significant changes in the market or your property itself, such as renovations or changes in neighborhood dynamics.
