{"id":8962,"date":"2022-10-24T12:00:45","date_gmt":"2022-10-24T16:00:45","guid":{"rendered":"https:\/\/www.realtyhop.com\/blog\/?p=8962"},"modified":"2022-10-21T15:12:49","modified_gmt":"2022-10-21T19:12:49","slug":"how-to-find-comps-in-real-estate","status":"publish","type":"post","link":"https:\/\/www.realtyhop.com\/blog\/how-to-find-comps-in-real-estate\/","title":{"rendered":"How to Find Comps in Real Estate"},"content":{"rendered":"

Investing in real estate can be highly lucrative. Whether property buyers wish to hold onto a valuable asset or generate rental income<\/a>, they all share a common goal of generating a profit. Buyers and sellers consider their financial objectives when conducting real estate activity to find a transaction that fits their monetary needs. Therefore, they must gather information to make intelligent choices about the property they wish to buy or sell. <\/p>\n

This article explores how buyers and sellers can use real estate comps to influence their buying and selling behavior.<\/p>\n

What do Homebuyers and Real Estate Investors Care About? <\/h2>\n

There is a difference between people who buy real estate and people who are real estate investors. <\/p>\n

People who buy real estate for personal purposes, while aware of the financial consequences of their purchase, will be much more concerned with personal factors like the quality of the home, school districts, and proximity to work. They will also consider how profitable their home will be should they decide to sell in the future. <\/p>\n

Real estate investors, however, care more about financial factors like a property\u2019s appreciation rate, the current and future rental market, and cap rates<\/a>. Investors, therefore, want to guarantee they find a property that returns a significant value.<\/p>\n

Naturally, homebuying raises the question for both personal buyers and investors: How can I genuinely tell when a property is \u201cfairly priced\u201d? To help determine if a property has a fair price, buyers and investors can look at real estate comps.<\/p>\n

What are Comps?<\/h2>\n

In real estate, the word \u201ccomp\u201d is shorthand for a comparable property. Buyers look for comps to determine whether or not they are going to get a fair deal. Sellers look for comps to determine what they could realistically sell their home for on the open market.<\/p>\n

In some cases, finding \u201ccomp\u201d houses can be relatively easy. For example, if your next-door neighbor just sold a home structurally identical to your own house, you will already have a pretty good idea of what you could get if you chose to sell.<\/p>\n

But in other situations, finding an accurate comp might be quite a bit more difficult. If you live in a home that is in an isolated location, is structurally unique, or has not been sold in a very long time, then you might not have any idea what your home is worth. Even if you can find property value estimates online, it is in your best interest to conduct additional research.<\/p>\n

Who Typically Finds Comps?<\/h3>\n

Real estate agents generally use a multiple listing service (MLS<\/a>) to generate a list of compatible real estate properties for their clients. Agents present their clients with comps towards the beginning of the buying process once they establish their budget and desired location. On the seller\u2019s side, an agent offers their client a list of comps while determining the listing price. <\/p>\n

How Do Sellers Determine a Sale Price?<\/h2>\n

When putting their home on the market, most sellers ask, \u201chow much did I originally pay for this home?\u201d<\/p>\n

Even during recessionary periods (think: 2008<\/a>), homeowners want to sell their homes for more than what they paid. Their original purchase price serves as the bare minimum for the current listing price, where sellers look to profit off of the home sale. <\/p>\n

Home Appreciation Rate<\/h3>\n

Many factors help increase the price of a home throughout ownership, allowing the seller to list their property at a higher rate than what they bought it for. During normal economic growth, the average price of a single-family home in the United States increases by about 10 percent<\/a> per year. At this rate, ignoring all other factors, that means that if you purchase a home for $300,000, it will be worth $483,000 in just five years. <\/p>\n

Keep in mind that this can be an aggressive growth projection. However, even if you assume a five percent appreciation rate, that $300,000 property would be worth about $383,000 in about five years. Additionally, changes in the inflation rate might also cause housing prices to increase. This year, high-interest rates influenced market conditions and caused housing prices to grow 33%<\/a> from Q2 2020 to Q2 2022. <\/p>\n

\n Learn more:<\/p>\n