Whenever you hear a real estate agent talk about the listing price of a home the term comparables will be mentioned.  Agents working with sellers will complete a CMA using comparables to suggest a listing price to the sellers. REALTORS® working with buyers will use comparables to help buyers decide what to offer for a home. But, what exactly are comparables?  How do comparables impact the listing price of a home you want to buy or sell? What home qualifies to be a comparable? Let’s find out!

What are comparables?

Comparables are recently sold homes that are similar in size, location, and condition to another home.  Comparables, sometimes referred to as comps, are used by REALTORS® to determine the market value of a home. 

What factors go into selecting a comparable?

Real estate agents want to select homes that are the most similar to your home in order to determine pricing.  Some similar factors REALTORS® are looking for include:

  • Square footage of livable space
  • Number of bedrooms
  • Number of bathrooms
  • Lot size
  • Special features (garages, pools, workshops, ect.)
  • Age and condition of home
  • Recently sold
  • Location

Since the real estate market is fluid, it is important to compare your home to one that has recently sold and not one from a previous year.  Location is also important because homes may have different values based on the location.

What do REALTORS® do with comparables?

With comparables, agents can determine a market value list price for a home.  They may add or subtract value based on the similarities or differences in a comparable.  For example, a home with the same floor plan as yours with an unfinished basement in your neighborhood is a comparable property.  However, your home has a finished basement, so the real estate agent will add some value to your list price for the basement.  When using comparables for pricing, REALTORS® will find more than one similar property.

It is important to remember that not every change in a home will add value to it. Some changes, like cosmetic alterations, may make the home more pleasant to the owners but don’t make it more valuable.

REALTORS® can determine if a home that you are interested in purchasing is listed above, at or below market value using comparables.  This may help to determine what you offer for the home.

Home appraisers, though independent of any real estate agent, also use comparables when completing an appraisal which determines the value of a home for a mortgage.  Appraisers are a third party company hired by a bank to ensure that the bank is not loaning more money to a buyer than  market value.

As you can tell, comparables are an important piece of information for sellers, buyers, and real estate agents.