One of the most important parts of the process of buying a home is determining home value. This is done by finding comps. As a buyer, you or your real estate agent will look for comps in order to determine what you feel is a fair asking price. So what exactly are comps? And how do they factor in to determining home value? Keep on reading to learn more.
Comps 101: How to Determine Home Value
What are comps?
Comps (short for comparables) are homes in the area that have recently been sold and are similar to the one you’re looking at buying. Because these homes are similar to the one you want to buy, their values are considered a good indicator of the value of the home you’re looking at.
Usually, any house sold within the past 6 months can be considered a comp, though some lenders may only accept homes sold within an even shorter time frame.
What are they used for?
- As a buyer, you’ll get a list of comps together in order to determine what you feel is a fair asking price for the home.
- Comps will also be used by your mortgage lender when they hire an appraiser, who will determine if the home is worth the loan you’re seeking.
What criteria are used to find a comp?
Location may be the most important factor when it comes to comps. The best comps are homes that are in the same neighborhood or immediate area you’re looking in. But if there are no homes in the immediate vicinity that are similar enough to the home you want to buy, you may have to expand your search. Ideally, you’ll find a neighborhood with a similar housing market to get the best comparison.
This includes factors like:
- Square footage
- Number of rooms (bedrooms, bathrooms)
- Size of the lot
Houses that were built around the same time usually have similar features, which makes them good comps.
This includes extra features like a nice view, bonus room, or a pool.
Looking at sale prices.
It’s important to remember that there can be discrepencies in sale prices between homes that otherwise appear to be fairly similar. The seller’s motivations can shift the price lower or higher than you would expect. A good real estate agent should be able to provide you with more information in this regard.
Ask Us Your Questions
Do you have questions about buying a new home in Maryland? Grays Home Solutions has answers! Contact us today at 240-347-3141 to get your questions answered!