How to Price Your Home Right by Using House Comps

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The old adage holds that the three most important factors in real estate are location, location, location. But judging by the value levied on house comps, comparable sales may actually be the most important factor in real estate pricing.

Comps help sellers price their homes right, help buyers know how much to offer, and help appraisers estimate the value of a home. Nevertheless, comps can be tricky – operating on a sliding scale according to the market at any given time – and they can be confusing.

With the guidance of Mary Jo Santistevan, who ranks in the top 1% of real estate agents in Phoenix, Arizona, and Desiree Carroll, who sells properties 13% quicker than the average agent in Bethlehem, Pennsylvania, we’ll explain what house comps are, how and where you get them, and why they’re so important when you’re pricing your home for sale.

What are comps in real estate?

In real estate, “comps” is a slang term for comparable sales, meaning the sales price of similar properties within a close distance. A similar property would have nearly identical key valuation features, such as square footage, lot size, number of bedrooms and bathrooms, school district, neighborhood, and more.

House comps generally include more than one recently sold property to measure your home against. By compiling a few similar properties, the goal is to determine your home’s current market value.

What factors are used when finding comps?

Several factors go into the computation of accurate comparables. Among them are:

  • Location: The closer the comp, the better. Home values can dramatically differ in a nearby neighborhood, or even across the street if the view is significantly better. Ideally, urban comps should be within a couple-mile radius. Even better if they’re in the same school district or near the same amenities such as parks or public transport.
  • Location features: Comps should include as many similarities as possible, such as proximity to shopping, restaurants, attractions like parks and lakes, and access to public transportation and schools.
  • Date of sale: Typically, sales within three to six months are considered comparable because the market can change rapidly, making older sales irrelevant.
  • Home and lot size: Many homes are priced per square foot, so finding one of similar size makes for an easier comparison. It’s preferable to find a house within 10% to 20% of your home’s size. If two homes have the same number of bedrooms, but one has substantially more square footage, it paints a different picture of the home’s actual size. Similarly, if two homes have vastly different lot sizes, they aren’t truly comparable properties.
  • Number of bedrooms and bathrooms: The number of bedrooms and bathrooms significantly impacts the price of a home, so it’s important to match those numbers exactly in comparable homes.
  • Age of the home: Because some buyers think older homes aren’t in as good condition as new homes, or may need more updates than newer homes, it’s important to find homes of a similar age to compare. A range of up to 10 years is generally recommended but could extend further if the property is over 50 years old.
  • Condition of the home: While you should aim to find a home near the same age and condition as your own, a comp should also take upgrades, remodels, and additions into consideration.
  • Special features or upgrades: Homes with exceptional features, upgrades, and amenities will naturally be valued higher than a similar home without them. Think commanding views, swimming pools, deluxe outdoor living spaces, pristine hardwood floors, and upgraded cabinetry.
  • Taxes: Property taxes can vary from one municipality, suburb, or subdivision to the next. That’s why it’s so important to have nearby comps.

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How do home sellers use comps?

Knowing what similar properties in the area recently sold for helps sellers determine market value and correctly price their home for sale, divorcing a seller’s unrealistic expectations based on improvements made or an emotional attachment to the property.

By relying on real-world data as a reference point for pricing a home, with adjustments made according to competitive differences such as features, finishes, size, age, or amenities, comps have become the basis for accurately setting the asking price.

Real estate agents may compile a comparative market analysis (CMA) that analyzes local comparable sales to establish a home’s value. While it’s not a formal appraisal, a CMA often accurately predicts a home’s appraised value by analyzing six to 12 comps within current market trends, such as buyer’s or seller’s market, inventory level, price per square foot, and days on market.

In addition, viewing house comps can help sellers determine which features to highlight in a listing.

How do homebuyers use comps?

Similarly, buyers use house comps to help them calculate a fair offer. Knowing what similar properties in the area have recently sold for can prevent a buyer from overpaying for a home. House comps can also be used as an effective negotiating tool.

Even before a buyer makes an offer, comparables help them zero in on their target home by defining price, features, neighborhood, and other details. Carroll says that buyers may use comps to determine the value of the area as well.

Who else uses real estate comps?

Almost everyone in the real estate business uses comps but for different reasons.

  • Agents rely on comps to help their clients. For sellers, comps offer a gauge for determining the correct listing price. Buyers consult comps when calculating a fair offer.
  • Appraisers analyze comps in the area and consult the Multiple Listing Services (MLS) as part of their calculations to determine a home’s value, usually for mortgage approval. Most lenders require an appraisal to make sure the home is worth the purchase price, but some sellers also use an appraiser to accurately price their home.
  • Lenders use valuations as a basis for home loan terms. They will assess whether the sale price aligns with current market value and whether a mortgage loan is commensurate with the home’s true value. 

Others may also rely on comps or appraisals. For example, comps might be used to resolve contested estate settlements, insurance claims, or divorces. Carroll notes that trust attorneys often use comps and appraisals.

How do I find real estate comps?

You have options when it comes to finding comps, but keep in mind that some are more accurate than others and may require a little help to get them.

  1. The MLS is the most common source of comps. It contains information about the property, including listing price, sale price, size, location, and days on market. This provides depth to gauge an accurate comparable sale. Carroll advises putting in “a range” when pulling comps from the MLS or you “might miss something” if the original information was entered wrong. For example, a four-bedroom house might have been mistakenly listed as a five-bedroom house. (Note that only real estate agents and appraisers may access the MLS.)
  2. Realtor websites may also provide comps, but Carroll warns they can be inaccurate.
  3. Appraisers, who put comparable sales data and statistical information about the appraised property, as well as sold house comps into a Uniform Residential Appraisal Report, can also be a source of house comps.
  4. Title representatives have access to the title database, which contains records of all sold properties – including FSBOs (for sale by owner listings).
  5. Public records contain information about home sale prices. “Public records is a big one,” Carroll states. Each county keeps records of property sales. These records are not likely to be as complete as the information gleaned from MLS listings; however, as Carroll explains, they can sometimes hold information that does not go into the MLS, which is why she always checks public records to make sure she’s getting accurate data.
  6. Consumer services provide partial access to property records, including sale prices.
  7. Online home value estimators (HVEs) provide general information that can be used as a jumping-off point, but all too often, they lack the level of detail needed for an accurate comp. “If you’re struggling to find comps they can provide a baseline,” Carroll adds.

How can I be certain I am finding the most accurate comps?

When checking house comps, it’s important to have relevant, current information. Follow these tips to get the best results:

  • Compare only sold homes: List price and sale price are not always the same. That’s why active listings are not included in comparables. Santistevan explains to her sellers that sold comps are what an appraiser uses and are what they should focus on for pricing. “Let’s just say I tell a seller that I think their home is worth about $300,000 and they tell me, ‘My neighbor’s listed for $375,000.’ Well, your neighbor hasn’t sold yet.”
  • Make your search hyper-local: Carroll begins her comp search in the same subdivision. If necessary, she widens that to the same township and then to the same school district.
  • Study the photos carefully: Photos may reveal updates or upgrades that can make a difference in the comp.
  • Better yet, visit the property: Photos don’t tell the whole story. Visit the property to better ascertain the level of maintenance, assess curb appeal, gauge the level of traffic, witness local attractions, and experience the neighborhood ambiance.
  • Check out the area: When you visit, take time to explore the neighborhood and its amenities, such as parks, shopping, restaurants, schools, and other services. Walkability, parking, or quiet may be important aspects of the area.
  • Be certain it’s the same type of home: Comps only work when they compare similarities. A mid-century modern won’t be a fair comparison to your brick colonial.
  • Adjust for seasonality or market conditions: Holidays and school schedules can impact the housing market. So can inventory. Know if you’re in a buyer’s or a seller’s market. If your comp is from June and you’re listing in November, you may have to make some adjustments.
  • Partner with a top agent familiar with the area: Understanding the area and its sales history can make a big difference, so it’s important to find a top agent familiar with your neighborhood.

Q&A – more expert tips for selecting comps

Some common questions about comps include:

Conclusion: Comps help sellers get the price right

Simply put, comps are a necessary part of real estate, whether you’re the seller trying to select a reasonable listing price or the buyer trying to pinpoint a fair offer.

Comps should be recent and of similar, nearby properties with as many features in common as possible. Homes should be the same style, similar age, and in comparable condition, with the same number of bedrooms and bathrooms, equal square footage, and equivalent lot size. This information will help you determine the right list or offer price.

Knowing how important comparables are, some sellers may try to scrutinize records to come up with them on their own. HomeLight’s Home Value Estimator is a good starting point that can give sellers an idea of what their home is worth. This free valuation tool analyzes key points about your home and consults top agents to deduce your home’s value.

Of course, nothing beats working with a knowledgeable, experienced real estate agent familiar with the market in your area. If you don’t have an agent, consult the HomeLight Agent Match. This free tool analyzes more than 27 million transactions and thousands of reviews to match you with a top agent in your area who can help you with pricing and more.

Our research indicates that the top 5% of real estate agents across the U.S. sell homes for as much as 10% more than the average real estate agent. If you price it right, your home will sell — probably faster and for more money.

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