COMPS (Comparables)

What Are COMPS (Comparables)?

COMPS, short for “comparables,” are recently sold properties that are similar in various attributes such as location, size, condition, and features to the property being appraised or evaluated. COMPS play a pivotal role in real estate market analysis and appraisal by serving as a benchmark to determine a property’s market value. They help buyers, sellers, brokers, and appraisers get an accurate estimate of what a property might sell for in a reasonable market.

Key Characteristics

• Location: Proximity to the subject property is crucial for COMPS. They should ideally be in the same neighborhood or comparable area.
• Size: The square footage of the property, both lot size and living area, should be similar.
• Condition: The structural and aesthetic condition should be similar, including age, maintenance, and upgrades.
• Features: Number of bedrooms, bathrooms, special amenities like pools, garages, or unique architectural elements should match closely.
• Sale Date: COMPS should be recent, typically within 3-6 months, to account for current market conditions.

Examples of COMPS

1. Subject Property: A 3-bedroom, 2-bathroom single-family home of 2,000 square feet with a renovated kitchen and a 2-car garage, located in a suburban neighborhood.

   • Comparable 1: A 3-bedroom, 2-bathroom single-family home of 2,100 square feet with a partially renovated kitchen and a 1-car garage, sold three months ago.
   • Comparable 2: A 3-bedroom, 2-bathroom single-family home of 1,950 square feet with a fully renovated kitchen and a 2-car garage, sold two months ago.

2. Subject Property: A 1-bedroom, 1-bathroom condominium of 850 square feet in an urban area, with a shared pool and gym in the building.

   • Comparable 1: A 1-bedroom, 1-bathroom condominium of 800 square feet in the same building with similar amenities, sold one month ago.
   • Comparable 2: A 1-bedroom, 1-bathroom condominium of 900 square feet in a neighboring building with comparable amenities, sold two months ago.

Frequently Asked Questions (FAQs)

1. How are COMPS selected?

• COMPS should be selected based on various factors, including proximity to the subject property, size, condition, features, and the sale date. They must be as similar as possible to ensure an accurate market value estimate.

2. Why are recent sales important in selecting COMPS?

• Recent sales reflect the current market conditions, which helps provide a more accurate and up-to-date estimation of the subject property’s value.

3. Can active listings be used as COMPS?

• While active listings can provide insights into the current market, sold properties are preferred as COMPS because they represent transactions where buyers agreed to pay a specific price.

4. How many COMPS are typically used?

• Usually, 3-5 COMPS are used to balance between having enough data for an accurate comparison and not overwhelming the analysis with too many variables.

5. Can COMPS change over time?

• Yes, as new properties are sold, they can become more relevant COMPS than older ones, ensuring the most current market conditions are reflected.

Related Terms

• Appraisal: An unbiased estimate of the value of a property conducted by a certified professional.
• Market Value: The price at which a property would sell under normal conditions in an open market.
• CMA (Comparative Market Analysis): A real estate professional’s evaluation of a property’s value based on similar sales in the area.
• Fair Market Value: The price that a willing buyer would pay to a willing seller in the market.
• Assessment: A valuation of property for the purpose of calculating property tax levied by the local government.

Online Resources

• Zillow: Provides property listings and estimates of home values.
  • Zillow
• Redfin: Real estate brokerage that offers estimation tools and buyer/seller guides.
  • Redfin
• Realtor.com: Offers comprehensive property data and resources for buying, selling, and market trends.
  • Realtor

References

1. Appraisal Institute. (2008). The Appraisal of Real Estate. Chicago, IL: Appraisal Institute.
2. Fischer, R. (2020). The Complete Guide to Real Estate Appraisal. NYC, NY: McGraw-Hill.

Suggested Books for Further Studies

• Millsap, R. (2019). Real Estate Valuation: The Basics.
• Eldred, G. (2012). Understanding the Value of Real Estate: A Complete Guide.
• ANSI: Z765-2021 Standard Measurement Methods for Real Estate.

Real Estate Basics: COMPS (Comparables) Fundamentals Quiz