How to Keep Comps High for Real Estate

Comps give insight into the value of a home.

Real estate agents select a group of comparable homes, also known as comps, when valuing a home for sale or purchase. Comps are selected based on the proximity of the comparable properties to the property in question, relative size, relative amenities, age and property condition. Agents are invested in selecting the highest-priced comps to support a higher price point for properties they market; since agents are typically paid a percentage of the sale price of a home, a higher purchase price results in a more ample paycheck.

Things You'll Need

• Access to your local Multiple Listing Service (MLS)

Instructions

1. Search the MLS for comparable properties using criteria such as square footage and property age. Select only comps that are in the property's neighborhood, if possible, as they will be the most comparable. Include only comparable properties that have sold in the last three to six months. Agents typically do not include listed properties in comps; however, if many homes are for sale in a rapidly appreciating area or, conversely, there are too few comps, use closely comparable, recent listings to support the price point.

2. Weed out undesirable comparable properties. Favor properties that are slightly larger and in good condition over properties that are in poorer condition than your subject property. Read the descriptions and view the photos: Does the selling agent advertise the property as a fixer-upper? Does the home appear to be outdated by twenty years? Avoid these properties when selecting comps.

3. Pay attention to who is listed as the owner of the property. Not all descriptions will mention clearly that the listing is bank- or investor-owned. Seller-occupied properties tend to fetch a higher selling price since they are usually better maintained; this is especially the case with bank-owned properties, which are purposely priced low to sell quickly or create a bidding war.

4. Determine the price per square foot for each comparable you have selected. Multiply this number by the square feet of the subject property; this is the selling price. Since you have chosen only the most attractive, closely matched comparable properties, this number may be slightly high for the area. Fortunately, you now have a list of high comps to support that amount.

Tips & Warnings

• Do not factor in comps with homes listed for sale by owner (FSBO). Often the sale price was not evaluated by a professional, and buyers frequently make offers several thousand dollars lower than market value for FSBO properties because they are aware that the seller is not paying a commission to an agent.

References

• Bankrate: How accurate are home 'comps?'
• Bankrate: 8 moves for homebuyers, sellers in '08
• REI Club: Effectively Using Real Estate Comps