UPDATED: Monday, December 10, 2012 - 11:41am
Comparable properties or “comps” are a key tool for real estate agents and property owners preparing to list a structure for sale. These data help by showing what similar properties are worth, allowing for the development of a fair listing price that is likely to appeal to potential buyers. Historically, real estate agents researched comps on their own and took the information back to clients, and the process was sometimes rather opaque. Today, that process has been made much more simple, and transparent, with the aid of the Internet, allowing people to investigate comps on their own.
A number of factors go into the evaluation of a home to identify comparable properties. When looking for a basis of comparison, property type is obviously key; it needs to be defined as commercial, residential, or industrial, with a consideration of subtype. A duplex is very different from a single family home, for instance, while a standalone business with a residential apartment above is not the same thing as a strip mall.
Another consideration is location; a home in the fashionable Pacific Heights district of San Franciso cannot be compared to another in the down-at-hell Tenderloin, because the two neighborhoods are so different. While both homes may be similar in terms of square footage, number of bedrooms, and other factors, their locations have an impact on their value. Simply being located in San Francisco is not enough.
Features are also important. Factors like having a top-of-the-line, efficient healting system installed by a top San Francisco HVAC contractor will effect the price of the house, in addition to the location. In the case of residential real estate, things like hardwood floors, decorative accents, type of architecture, appliances, recent remodeling, and other extras can make the value of a home much higher. A teardown, in other words, doesn’t make a great comp for new construction, or for a home that just received a kitchen remodel to put in state-of-the-art equipment. Considerations for commercial real estate can include equipment and fittings, the presence of a larger power drop to run industrial equipment, and so forth.
Describing a property as fully as possible allows for the development of an accurate list of comps. These can be pulled together from a number of different sources. One is the current market; you can look at listings for similar properties and see how much people are asking for them. You should evaluate how long they have been on the market when doing this, and take note of any factors that might be affecting the sale. If you notice that an apparently comparable property is much higher than you would expect, dig a little deeper to find out why; maybe the property has some extra features, like green features for example, or maybe the owners are simply expecting too much.
You can also look up recent property sales, which are a matter of public record. Historically, this required going to a records office to look them up, but today you can often do it online. Records offices sometimes host this data online, or you can find it on private websites, which allow you to narrow results by type of property, location, and features. This can allow you to generate a useful list of sold property to see what sold, when, and for how much. These data are crucial for tracking market trends and identifying more comparable properties.
With this information in hand, you can make a better assessment of how much you should ask for your own property, though it can help to consult a real estate agent and a skilled property assessor. You can also use comps in your own house search and price negotiations. If you are interested in a home but feel the owners are asking too much, don’t be afraid to furnish your research data as part of your argument when you make an offer below the listing price.
s.e. smith writes for Networx.com. View original post.