Location

"Location, location, location!" is an old real estate adage for a reason. A 500 square foot apartment in highly sought after parts of New York City could be 10 times as expensive as a 5,000 square foot property in the middle of the country. While the differences may not always be as stark as that example, location can greatly impact a property's value.

Optimal comps should be pulled no further than one mile away from the subject property. However, it  depends on how urban your area is. In a densely populated city, a mile may be too far to consider a property a comp. In a rural area, a mile may not be close enough. Typically, the closer the comp, the more accurate the estimate will be.

Condition

A leaking roof versus a brand new roof will surely cause a significant price difference between two homes, although the condition of the roof is not the only factor you have to take into account. The roof, windows, floors, walls, and appliances are all included when running comps. Note any renovations or updates that have been made to the homes as well, as these can also affect the value of the homes you're comparing.

Age

The simple truth is, newer homes tend to have higher values than older homes. A home built in 1950 and one built in 2010 may not have similar values, despite having the same number of bathrooms and bedrooms. It comes down to modern amenities, lower maintenance costs, and the fact that newer homes are built to the latest building codes and regulations. That's not to say that an older home with unique architecture or historical characteristics won't be of great value, just that generally the benefits of a newer home outweigh older homes.

Number of Rooms and Size

Suppose two houses being compared have the same number of bathrooms. An extra bedroom could still mean a price difference of $100,000 or more. In addition to the number of rooms, it's important to consider the size or square footage of the homes you're comparing. In many cases: the larger the home, the more it will be worth.

Lot Size

Acreage value varies by location, but that doesn't mean lot size isn't essential to a property's value. Even if the houses are pretty comparable in the other departments, more land means more value. This is especially true based on location. A large lot near a densely populated urban center could be countless times more valuable than a rural plot of land the exact same size, due to the limited availability of land in urban areas. When pulling comps, don't just consider how many acres there are, but also the value of land in relation to the location of the lot.

Time Frame

When looking at recent sales in the area to determine the value of the home, recency is a big factor. Comparing your subject home with a house that sold a month ago is going to be much more accurate than if you’re looking at one that sold 2 years ago. The real estate market is constantly changing and home values can fluctuate even over shorter periods of time. Finding comps that have been sold within the last 6 months will give you a better estimate that reflects the current value of the home.

Conclusion

Comps are a critical tool for anyone in the real estate business or anyone eager to buy or sell their own home. There's a lot to learn, but these are the first steps to deciding what makes an appropriate comparable property. Unreal Estate strives to make information accessible to future home buyers and sellers, to simplify the complex, because we believe the real estate process doesn't really need to be so complicated.

Looking for a comp? Explore homes near you at unrealestate.com/search.

Ready to sell? Start a listing for free today at unrealestate.com/sell.

We'd love to hear your thoughts about this article and our blog. Let us know how we did by completing the Unreal Estate Blog Feedback Survey.