What is a comparable sale in real estate?
A comparable sale in real estate is where you compare the value of several recently sold homes in the neighborhood similar to the home you want to buy/sell.
These recently sold homes must have similar features as the intended home, including; size, condition, features, and location.
I always use comparable sales as a home buyer/seller to develop the most accurate listing price.
Prospective homebuyers and appraisers will also use the same concept to ensure that a home listed for sale is accurately priced. If you overprice your home, you will likely get fewer offers.
However, if you underprice your home, you will sell it fast and end up losing capital.
How do real estate agents use MLS comparable?
MLS stands for local Multiple Listing Services. When I hire a real estate agent, they will use the MLS data to develop a report of Comparative Market Analysis (CMA). The CMA database generated by the agent will give me a summary of similar homes that have been recently sold around the neighborhood.
The agent will use this report to guide me in setting the most accurate listing price for my home.
As a home seller, I always have two options for finding real estate comparable.
First, I could hire a real estate agent who can access the local MLS database to provide current homes for sale.
The other option would be to conduct market research on my own (For sale by owner) FSBO method.
I use the following methods to find real estate comparable without MLS.
- Reviewing public property records- You can visit the county’s local courthouse or search their website online to see how similar homes were recently sold. Understand that the price provided is usually the final price and not the original listing price, so use the figures provided to estimate the actual listing price.
- Online listing sites- I use various real estate online listing sites such as Zillow, Trulia, and Craigslist to find out the price of recently sold homes. These online sites allow you to quickly filter search results to meet certain home specifications such as square footage, size, ZIP code, and features.
Factors to consider when looking for the perfect real estate comparable. My rule of thumb is to find at least similar homes that can meet the following criteria;
- Homes located not more than a quarter to half a mile from the intended home you want to buy or sell.
- Recently sold homes that were closed in the last six months.
- Homes that are within 300 square feet of the intended home size.
- Homes that have the same number of bedrooms and bathrooms.
- The condition of the homes in terms of renovations or features must be closely related.
- Homes must have been built at the same time as mine to increase similarity and condition.
- The homes have similar amenities to intended house—for instance, schools, accessibility, security, and other recreational facilities.
- Homes with similar or closely related prices per square foot. To get the price per square foot, I usually divide the sale price by its square footage.
Tips that I use to identify the best real estate comparable
To get the best comparable listing price estimate, I try as much as possible to eliminate any emotional attachment I have with the house to concentrate on the facts alone.
When selling a home, I use the following tips when identifying the best real estate comparable:
- I focus on recently sold homes only. Active Listings in your area are not the best benchmarks. It’s crucial to pick a similar home that has already closed.
- Picking homes that are similar to yours. If you are selling a single-family home, always compare it with a recently sold single-family home in your local area, not condos or townhouses.
- Picking homes that have almost the same features as yours. Pay more attention to the type of appliances, fixtures, and flooring each house has before picking them.
- Double-check the listing description to understand specific upgrades that the home sellers made that might have been missed when viewing the listing photos.
- Try your best to view the homes in person to see the condition of the exteriors and interiors, if possible. It also gives a unique opportunity to view surrounding amenities.
As you research the various comparables, carefully record every essential detail to ensure that you have enough information when calculating the ideal listing price.
Collecting multiple data from different sources, including the MLS and online real estate-related sources, can help you make a realistic listing price within the recommended market rates and current trends.
Conclusion
So, as you can see, real estate comps are a critical component of making the best decision when you’re thinking of buying or selling a property.
When you know the things to look for and how to interpret them, you’ll be well on your way to making the most rational decisions as you navigate your home search.
Looking forward to joining you all in this journey to Financial Freedom & Education!
