The real estate market is such that it involves huge investments and numerous players when it comes to buying and selling of properties. There are also several industry-related terminologies that players should be familiar with. ‘Comps’ is one of the important terminologies that players in the Utah real estate market should know. With the complex and complicated nature of real estate transactions, it is advisable that players in this industry identify the best strategies and tools for getting a fair deal.
What are Comps in Real Estate?
Anyone entering a real estate transaction in Utah should be familiar with and understand the term ‘Comps’ well.‘Comps’ is short for Comparable Sales. Real estate players use the term to refer to homes within the same location that are similar in size, are in the same condition, have similar features and share characteristics with the home you want to buy or sell and whose value you are seeking.
For buyers, comps can help to establish the best price to put as an offer without overpaying.
Sellers will benefit from knowing the best price at which to put the home in the market without undervaluing.
The agents make sure that all comps are updated, accurate and true. In the end, comps will determine the price that a home sells for.
Appraisal Comps Guidelines
Appraisers will generally consider comps that follow certain guidelines when performing an appraisal for a mortgage company or lender. In case the comps used fall outside the specific parameters or requirements, the appraiser will be required to explain why.
While comps can be up to one mile away from suburban neighborhoods, rural neighborhoods will allow comps to a maximum of five miles away.
The appraiser will require a minimum of three closed comps, with two having been sold within six months and none sold more than 12 months before the current date. Some lenders require a minimum of 2 active or pending comparative listings.
What do Appraisers Look for in Comps
There are several factors that appraisers look for in comps when looking to determine the value of a home or property. These include:
- Time and timeframes
- Home features
- Amenities and facilities such as parking
How to Use Comps to Determine House Value
There is a simple explanation to how appraisers use comps to estimate the value of a home. Every home is different and the varied features of the homes determine their relative prices. For instance, a home with more bedrooms is likely to have a higher value than a home with comparatively fewer bedrooms. Similarly, a home with a garage or swimming pool will be worth more than a home without the facilities. To arrive at the figure that is closest to the real value of the home, an appraiser will compare it to at least three similar properties in the same location and that were sold within a period of six months. The appraiser will then adjust the differences by subtracting or adding the value of the missing and present facilities.
Location is the Highest Priority
Just like other places, the Utah real estate market is based on location. This means that the most effective approach will keep the subject property as close as possible. One can expand out if they do not find comps within the given neighborhood.
Pending homes are likely to make the best comps since they are reflective of live market data. When a buyer and seller have made a deal, the home is referred to as a pending home. For accurate prices that represent up-to-date market statistics, it is advisable to use sales within a period of three months.
Home Features Matter
The next step would be to consider the key features in the home and compare it to homes with similar characteristics. While the price per square feet may be important, it does not consider features like finished basements, improved kitchens or remodeled bathrooms. Once similar homes have been found, adjustments should be made based on the features available in the subject property.
Don’t Over Analyze the Comps
Rather that over analyzing comps, it is better to work with a trusted local agent. The agent has a better understanding of the real estate market and is likely to notice features and identify factors that will affect the value of the home.
Here are some factors that should be taken into account when pulling comps:
- Year of construction
- Square footage
- Number of bathrooms, bedrooms and other rooms
- Time of sale
- Condition of property
Knowledgeable Real Estate Agents at Call It Home
Real estate agents spend a good amount of time looking at and analyzing comps. When looking to buy, sell or rent a home in Utah, Call It Home can help you to get the best deal possible. Our friendly agents are experienced and will do anything to meet your needs whether you are buying, selling, or renting. You can email us through our "quick contact" link at the bottom of our homepage or call us at 801-532-7000.