Whether you’re a first-time homebuyer, a seasoned investor, or someone who just binge-watched a little too much HGTV, you’ve probably heard the term “comps” tossed around like confetti at a closing party. But what are comps, really? And why do they matter so much in real estate? At KMF Property Solutions, LLC, we believe that understanding comps isn’t just for appraisers and agents—it’s the secret sauce for anyone who wants to make smart moves in the property game. Let’s pull back the curtain on comparable sales and show you how to use them to your advantage—no crystal ball required.
What Are Comparable Sales (Comps)?
Imagine you’re shopping for a new car. You wouldn’t pay luxury prices for a sedan if similar models down the street are selling for half as much. The same logic applies to real estate. Comparable sales, affectionately known as “comps,” are recently sold properties that are similar in key ways to the property you’re buying, selling, or investing in. They serve as real-world benchmarks for what buyers are actually willing to pay in your market.
But here’s the twist: not all comps are created equal. The best comps are as close as possible—in location, size, age, and condition—to the property you’re evaluating. Think of them as the property’s doppelgängers, not distant cousins.
Why Are Comps Important?
Let’s be honest: in real estate, guessing is a terrible strategy. Whether you’re setting a listing price, making an offer, or evaluating a potential investment, comps give you the hard data you need to make confident, informed decisions.
Here’s why comps are a big deal:
Accurate Valuation: Comps help you determine a property’s fair market value, so you don’t overpay or leave money on the table.
Negotiation Power: Armed with solid comps, you can negotiate from a position of strength—no more crossing your fingers and hoping for the best.
Risk Reduction: By basing your decisions on actual sales, you minimize the risk of surprises (and regrets) down the line.
Appraisals and Loans: Lenders and appraisers rely heavily on comps to approve mortgages and set loan amounts. If your numbers are off, your deal could stall.
In short, comps are your GPS in the sometimes confusing world of real estate pricing.
Key Criteria for Selecting Good Comps
Not every recent sale in the neighborhood makes the cut. Here’s what separates a great comp from a mediocre one:
Location, Location, Location
The golden rule of real estate applies here, too. The best comps are within the same neighborhood—ideally within a quarter- to half-mile radius. Why? Because market conditions can change dramatically from one block to the next, especially in larger cities.
Sale Date
Markets move fast. A comp from two years ago might as well be ancient history. Stick to sales within the last three to six months to get the most accurate snapshot of current values.
Property Features
Look for comps that match your property in:
Square footage (within 10-20% is ideal)
Number of bedrooms and bathrooms
Lot size
Year built
Style (single-family, townhouse, condo, etc.)
Condition and Upgrades
A recently renovated kitchen or a sparkling new roof can make a big difference. Adjust your analysis for major upgrades or, conversely, for properties that need a little TLC.
Other Factors
Don’t overlook things like school districts, access to amenities, and even curb appeal. These intangibles can sway buyers—and prices—more than you might think.
How to Find and Analyze Comps
Ready to roll up your sleeves? Here’s how to become a comps detective:
Step 1: Identify Your Subject Property’s Key Features
Make a list of what makes your property tick: size, age, condition, unique features, and location.
Step 2: Gather Recent Sales Data
You can find comps through:
The Multiple Listing Service (MLS)
Public property records
Online platforms like Zillow, Redfin, and Realtor.com
Local real estate agents. Aim for at least three solid comps to get a reliable average.
Step 3: Compare and Contrast
Lay out your comps side by side. Where do they match up? Where do they differ? Adjust for differences—if your comp has a pool and your property doesn’t, subtract value accordingly.
Step 4: Crunch the Numbers
Calculate the average price per square foot among your comps, then multiply by your property’s size. This gives you a ballpark value. But remember, pricing is as much art as science—use your judgment for unique features.
Step 5: Put It All Together
Let’s say your target property is a 1,800 sq ft, 3-bed, 2-bath home built in 2005. You find three comps:
Comp A: 1,750 sq ft, sold for $360,000
Comp B: 1,820 sq ft, sold for $370,000
Comp C: 1,900 sq ft, sold for $380,000
Average price per sq ft = ($360,000 + $370,000 + $380,000) ÷ (1,750 + 1,820 + 1,900) ≈ $204/sq ft
Estimated value for your property: 1,800 x $204 = $367,200
Adjust up or down for any major differences, and voilà—you’ve got a data-driven estimate.
Common Mistakes and How to Avoid Them
Even the pros slip up sometimes. Here are the most common comps blunders (and how to dodge them):
Using Outdated Sales: The market can shift quickly. Stick to recent data.
Ignoring Big Differences: Don’t compare apples to oranges—or condos to castles.
Overlooking Market Trends: Rising or falling markets can skew your numbers if you’re not careful.
Forgetting Unique Features: A home with a killer view or a finished basement isn’t directly comparable to one without.
When in doubt, consult a local expert.
Tips for Real Estate Investors
If you’re in the investment game, mastering comps is your not-so-secret weapon. Here’s how to use them to your advantage:
Double-Check Everything: Online data is a great start, but always verify with local sources.
Spot the Deals: Use comps to find undervalued properties that others might overlook.
Negotiate Like a Pro: Bring your comps to the table and back up your offers with hard data.
Build a Comparative Market Analysis (CMA): For a deeper dive, create a CMA with detailed adjustments for each comp. This is especially useful for flips and rentals.
Remember, the best investors don’t just follow the market—they understand it. A comparable sales analysis is the process of evaluating similar sold properties to estimate value, while a CMA is a comprehensive report that uses this analysis, along with additional market data, to recommend a property’s price or value in the current market.
A Comparative Market Analysis (CMA) is a cornerstone tool in real estate, used to estimate a property’s value by comparing it to similar properties that have recently sold in the same area. Here’s a detailed, step-by-step guide to building a CMA that’s both professional and persuasive.
Building a Comparative Market Analysis (CMA) begins with gathering detailed information about your subject property, including its size, features, condition, and location. Next, you research and select at least three recently sold properties—known as comparables or “comps”—that closely match your property in terms of location, size, age, and amenities. By analyzing these comps, you make value adjustments for differences such as renovations, lot size, or unique features, ensuring your comparisons reflect the true market landscape.
After adjusting for these differences, you calculate an estimated value for your property, often using the average price per square foot from the comps as a benchmark. The final step is compiling your findings into a clear report that summarizes the subject property, details the selected comps and adjustments, and provides a recommended value range. A well-prepared CMA not only reflects current market conditions but also equips you with the data and confidence needed for effective pricing and negotiation.
Wrapping It Up: Your Competitive Edge with Comps
Understanding comps isn’t just for the pros—it’s for anyone who wants to make smarter, more confident real estate decisions. By learning how to find, analyze, and use comps, you’ll be way ahead of the crowd (and maybe even a few seasoned agents).
Real Estate Disclosure
This blog post is provided for informational purposes only and does not constitute legal advice. Readers are encouraged to consult a qualified real estate professional or attorney to ensure full compliance with all applicable disclosure laws before buying or selling property.
