What is a ‘Comp’?

Posted by admin on October 24, 2013

The word ‘comp’ is short for comparables, which are properties that are used to help determine the value and asking price of a nearby similar property. Local governments may also use comps for the purpose of setting up property taxes. In order for a comp to be beneficial, it must:

- Be in the same general area as the property being evaluated

- Have similar features and layouts: if determining the value of a 3-bedroom home, the comp must also have 3 bedrooms, and so on

- Have approximately the same square footage

- Be close in age and condition

- Have been sold within the last 3-6 months: the market changes quickly and drastically, so the more current the sale, the more accurate the comp

- Be the product of a “normal sale,” which is a sale on the open market between a willing buyer and a willing seller that is not a bank, estate, or tax sale

There are, of course, any number of variables that affect the determination of a property’s real value. The general rule, though, is if there are three or four comps that meet the above criteria you will get a fairly clear picture of what the property or land for sale is worth in the relevant market.

There is also the chance that you will not be able to find any good comps in your area. This happens when properties are in markets with few or no recent sales, when recent sales are predominantly foreclosures, or when the property being evaluated is unique to the point of being exceptional. In these instances, it may be worth hiring a professional appraiser.

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