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Determining a home’s value is complicated for several reasons, including market fluctuations, the latest real estate trends, and the house's condition. But one way to get an accurate estimate is by looking at the sales information for similar properties in your area, also known as "comparables" or "comps."
While comparables aren’t a foolproof way of understanding your home’s worth, they’re a crucial tool for both sellers and buyers. They help sellers land on a reasonable listing price and let buyers know whether they’re getting a fair deal.
Dig deeper: How much is your house worth? How to determine your home value.
In this article:
What are comparables in real estate?
In real estate, a comparable, or "comp," is the sales information on a property similar to yours. By looking at comps for homes that have recently sold in your area — assuming they're roughly the same size, age, and condition as yours — you can get a good idea of your home's fair market value.
A real estate agent can prepare comps for you using a private database called a Multiple Listing Service (MLS). This database gives them information about listed homes, including the square footage, sales prices, and locations.
MLS data will likely give you the most accurate comps, but you can also do your own research to create a list of comparable properties in the area. An appraiser also uses comps to determine a house’s value during the home appraisal process.
Read more: What do real estate agents do, and do you need one?
How comparables work
Comps don't give you an exact prediction of what a home will sell for, but they do help sellers set a reasonable price.
Comps allow you to see how your house stacks up against nearby properties, specifically regarding listing prices. If you’re selling, you should compare your home to at least three homes that resemble yours and are likely to appeal to the same buyers. For example, if possible, you'll want to look at homes in your neighborhood with the same architectural style and number of bedrooms and bathrooms.
When you or your real estate agent search for comps, here are some of the main details to pay attention to:
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Proximity: Search for homes nearby, ideally within a half-mile radius.
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Size: Price per square foot is important, so focus on homes no more than 300 square feet larger or smaller than yours.
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Property type: Find only the same property types, whether condos, single-family homes, or otherwise.
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Beds and baths: Hopefully, you can find three homes with the same number of bedrooms, bathrooms, and, if applicable, half-bathrooms.
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Condition: Look for properties with similar maintenance, repairs, or renovation levels.
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Features: Find homes with similar appliances, finishes, and features such as porches, garages, and HVACs.
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Age: Search homes built in the same time period.
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Recent sales: Ideally, look for properties sold within the last three months — and nothing sold more than a year ago.
Learn more: 12 popular types of houses
Why do comps matter?
Real estate comparables help all parties involved in a home sale. For example, sellers can use comps to explain the listing price, and buyers can use comps to know they’re getting a fair price or negotiate for a better deal.
Here's why comps matter to each party:
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Sellers: Comps inform your asking price and help you recognize offers that are too low. They can also give you a sense of whether it's a good time to sell or if you have enough equity for your mortgage lender to dismiss your private mortgage insurance (PMI).
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Buyers: Comps help home buyers ensure they're getting a fair price and can help them narrow down the best homes that fit their needs and wants.
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Appraisers: Appraisers use comps to assist them in estimating the property’s value based on the local housing market. During a home appraisal, the appraiser will bring their own comps.
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Real estate agents: Comps help Realtors assess local trends, promote their clients' homes by listing them on the MLS, and recommend the best listing price for a property.
How can you find real estate comps?
You can get real estate comps in a few different ways, although some approaches yield better results than others. Here are your options.
Hire a real estate agent
For the most accurate information, hire a licensed real estate agent or broker, and they'll prepare comps on your behalf using an MLS. This is often a complimentary service offered to earn your business.
Dig deeper: Real estate agent fees — What percentage do Realtors get?
Get an appraisal
An appraiser is an unbiased professional who uses their expertise to determine the value of your home compared to similar homes. Their services may cost several hundred dollars, but you can easily offset that cost by using the appraisal to set a fair but competitive listing price.
An appraisal is almost always necessary in the home-buying process — even if the buyer waives the appraisal contingency, the mortgage lender will require it before closing on the loan.
Learn more: How a home appraisal works
Do your own research
Creating comps independently isn't the most reliable approach, but it is one option, especially for those trying to sell their home without using a real estate agent.
Start a spreadsheet or a list comparing the characteristics of multiple properties. Then, search for similar properties in your area that have recently sold (not ones still on the market) and add the information to your spreadsheet, including the sale prices. You can find this information by pulling public property records from your county and searching for properties on sites like Zillow, Redfin, or Trulia.
After choosing at least three properties that most closely resemble yours, pinpoint the differences between each home and yours. Try to estimate how much value that difference adds or subtracts to the property and adjust the value of your house accordingly.
Again, preparing comps yourself isn’t always the simplest or most accurate way to go about the process. Relying on a real estate agent — whether you’re a seller or buyer — is much easier.
Comparables in real estate: FAQs
How do you pull comps on an MLS?
Information in a Multiple Listing Service (MLS) is not available to the public. If you want to access MLS information, a licensed agent or broker can pull it on your behalf.
What's the rule of three comparables?
According to the rule of three comparables, a real estate agent should compare your property to at least three similar properties to estimate its value. This is a general rule of thumb when selling a house.
How do you select comparables in real estate?
To select the best real estate comparables, you should look for properties with similar characteristics to yours, located as close to your home as possible, and sold within the past few months.
This article was edited by Laura Grace Tarpley.
