What is a Comp?

If you are going through the process of selling your house, you will hear the term “comp” over and over again. I’m sure some of you are asking yourselves, “What in the heck is a comp anyways?”. Well, today I’d like to spend a little time giving a rundown of what a comp is and why it matters to you when selling a house. First things first, comp is short for comparable sale. What is a comparable sale? I’m glad you asked.

When determining if a house is a comparable sale, you will want to look at a few factors, the most important being:

  • Neighborhood – One of the first things you look for is houses that have sold within your neighborhood. Distance is important, but not the most important factor. I’ve seen a gated community across the street from a regular subdivision which would lead me to believe that houses behind those gates have a higher value than houses across the street. So, you want to make sure you are comparing houses within your neighborhood and not grabbing properties from higher/lower valued areas that are nearby.
  • Size – When finding comps, you are looking for houses that are close to the size of your house. Be sure to factor in both the size of the actual property as well as the lot size. You don’t need to find properties that are the exact same square footage, just pretty close. For instance, if you have a 1,500 sqft house, you can pull in houses that are +/- 250 sqft to yours.
  • Bedrooms and Bathrooms – When it comes to beds and baths, it’s easiest to find the comparables that have the same number of beds and baths. Factoring in value differences for an extra bathroom or one less bedroom is best left to the professionals. If you live in a 3-bedroom, 2-bathroom house, find other 3-bed, 2-baths houses to get an accurate comp.
  • Recently Sold – There is no hard and fast rule defining “recent” sales. If the market you are in has been relatively calm with no sharp spikes or drops in property value, then you can go back as far as 6 to 9 months. On the other hand, if your market is rapidly appreciating or values are falling sharply you should look no further back than about 3 months. The best you can hope for is a similar property that sold yesterday, this will give you the best indicator of your property’s value. Otherwise, make sure to take into account how your local real estate market is changing when determining how far back to go for a “recent” sale.

Now that you have a good idea what a comparable sale is, let’s take a quick look at the next step of the process: adjustments. One quick thing to note first. Adjustments are best done by licensed appraisers or real estate professionals with years of experience within your city. It takes quite a bit of specialized knowledge to know how much to adjust a house’s value based upon an extra half bath or a smaller lot. However, if you just want to do a quick estimation of your property’s value, this is a worthwhile exercise. The key factor to take into account when adjusting is to ask yourself, is this particular aspect of the comp better or worse than my property? Some things you will want to be on the lookout for: condition of the property, pools, views, bedrooms, bathrooms, garage (attached or detached), HVAC system and anything else that sets your property apart from the comparables.

Hopefully after reading this guide, you’ll have a better understanding of comps and why they are so important in determining the value of your house. As I mentioned above, if you want a true, objective opinion on your property’s value, I would recommend hiring a licensed appraiser. But, with a bit of time and practice you should be able to get a ballpark value on your property using the techniques listed here. As always, feel free to reach out if you have any questions about comps, adjustments, neighborhoods or real estate in general.