Everything a Newbie needs to know about running 'Comps'

Everything a Newbie needs to know about running 'Comps'

What are comps?

“Comps” is short for Comparable Market Analysis or CMA. The analysis is conducted by reviewing and comparing recently sold properties that closely match the subject property. Running a CMA is one of the first steps when its time for you to submit an offer. The same process will help you accurately price your property for sale when its time to put that flip on the market for resale.

Why are comps important?

The CMA will help learn you about your market. While properties that are currently listed on the market give you a sense of what sellers WANT for their property, comps will show you what buyers actually PAID for properties in the area.

When it comes to selling a property, pricing is arguably the most important factor - not high-quality photos, kitchen countertops, or a well-attended open house. If you accurately price your property, you'll generate more interest than overpriced homes in your market. Running comps will help you determine the best asking price for a property you're looking to sell. On the other hand, using the wrong comps and pricing your property too high will get your property less exposure, less offers (or none), increased days on market, increased holding costs and cringe-worthy sales contract.

One of the most common requests I get from perspective homebuyers and investors is to help find them a 'good deal'. Running comps help us determine property values which are used to make competitive offers. If you're not sure what a good deal is, the CMA will reassure you.

What information is used to conduct a CMA?

Location - Perhaps the most critical category taken into account when running a CMA, there are multiple ways to tackle location. 

You can narrow your search for comps by looking at certain zip codes near the target property. You can also target a specific radius, i.e. 2, 5, or 10 miles. How wide a radius you use will depend on the density of the area. For example, a 5 mile radius in our market of Queens, New York can put you in Long Island if you're in Eastern Queens or it can land you in Manhattan or even New Jersey if you're in Western Queens. If you are in a densely populated market, you may have to search within a .5-2 mile radius to keep your comps relevant. By contrast, a 5 or 10 miles radius may be too small for Suburban or Rural areas. 

School districts are also carefully looked at especially when the subject property is in a single-family dwelling area with little to no multi-family residences.

Property size - Once you've narrowed your list to recently sold properties within a specific distance from the subject property, you'll shift your focus to the size of the property. Exterior square footage, acreage, building size and interior square footage are factors that you'll use to compare properties. In New York City, there are about 90,000 apartment buildings with 4+ units. This includes co-op and condo apartments which are compared to one another by the interior square footage of the unit. 

Property type is another key factor to take into account in your CMA. For example- if your subject property is a Single Family 4,000 sq. ft. property in Queens, NY, you should not compare it to a Mixed-Use or Commercial 4,000 sq. ft. property in Queens, NY. While the location, property size and other factors may match up, the property type still needs to be identical. Residential and commercial properties are evaluated differently.

While your criteria may match up, properties that were sold too far in the past will not be good comps to use. Date of sale is a key data point to use. I recommend using comps that sold within the last 6 months. 

Miscellaneous factors to take into account are amenities and features such as - pools, terraces, attics, basements, tennis/basketball courts, number of bedrooms/bathrooms, etc.

Keep in mind, the more specific your criteria when running comps, the higher the quality of your results. Unfortunately, if you get too specific and try to find a property identical to your subject property, you may be forced to go back a few years in recent sales.

Resources to use for running comps

The Multiple Listing Service (MLS) is arguably the best place to find the data for your CMA. There are several platforms that allow non-Realtors to access the MLS. These platforms and their fees differ depending on your market. I'd recommend checking in with your market's MLS office or try searching online for 3rd party sites that can give you access.

Zillow is the most popular resource for free Real Estate data. This is not the most accurate place to collect data for your CMA but it may be the easiest platform for you to navigate as you begin. Simply, check out homes for sale and you'll be able to narrow down the search based on the subject property's criteria.

Realtor.com is a less user-friendly version of Zillow. However, I'd prefer Realtor.com over Zillow 9 times out of 10. Listings on this site have more complete data sections than Zillow, Trulia and many other Real Estate search sites. Since Realtor.com is run by the National Association of Realtors (NAR), it has more up-to-date MLS information than any other site.

Property Shark and GeoData are excellent resources for information on properties. You'll even get detailed information on taxes, zoning, violations, property owners, property dimensions, and much more. Unlike Zillow and Realtor.com, these services require a fee.

Use these this information to get educated on your market, make competitive offers for your deals and/or price your property accurately to insure you get top dollar!

If you're looking for a FREE and reliable resource to run comps, contact an investor-friendly agent in your market. You can begin your search right here on BP by checking out the members section.