"A home is only worth what someone will pay for it"
When determining the value of a house -- or any property for that matter -- knowing the price that a recently closed, almost indentical property sold for is crucial.
So, What Are Real Estate Comparables?
Comparables -- or comps, for short -- are properties that posses similar traits and characteristics to the property whose market value is being estimated.
Listing agents use the price of actively listed and recently sold comps as a benchmark to determine the true value of a piece of property they are representing -- this way they can help their client calculate a fair listing price. Additionally, a buyer's agent can use them to inform themselves when figuring out what kind of an offer to submit.
Where do you go to find these comparables? There are a number of different sources you can check, so we compiled a list of the best sources, and also included their individual strengths and weaknesses.
1. Multiple Listing Services (MLS)
Pros:
MLS is not only the most comprehensive database of residential real estate listings in the United States, but also a great source of information on recently sold properties, and updates to the market at large. At the end of the day, it is probably the best record to reference when finding real estate comparables.
As a matter of fact, in non-disclosure states, one key benefit to using MLS is that it is often the only way to find out the sale price of homes, or information on new additions, repairs and so on.
Here is a help video you can reference to see how you can use the Multiple Listing Service's interface to find comps:
Cons:
Rushing to the website right now? You may want to slow down: only Realtors -- that is, a licensed individual who pays dues to the National Association of Realtors (fun fact: the NAR is the largest trade organization in the country) can access MLS, and even they have to pay a recurring fee to do so.
But wait, agents and everyday buyers and sellers should not despair just yet: as you will see in the following sections, there are ways to obtain at least part of this information without being a card carrying NAR member.
2. Zillow, Trulia, Realtor.com and Other Real Estate Third Party Data Aggregators
Pros:
Third party data aggregators are typically easy to use, and accessible to everyone.
Designed for the consumer -- not just agents -- they tend to present information in a way that is appealing to those who are not professionals, as well as offering features -- like forums, mortgage calculators, and neighborhood guides -- that can help the inexperienced.
Additionally, they also tend to have information that -- due to its origin or nature -- might not always show up in MLS. For example, rentals, FSBO (For Sale By Owner) homes, or property that is off-market.
Making the lion's share of their profit selling advertising to Brokers and Agents -- not servicing the end user -- means that you can safely assume the actual property information presented to you is impartial.
Cons:
While sites like Zillow, Trulia, and Homesnap tend to have information for a wide range of properties, the data they display is often obtained through a third party -- for example, ListHub, or public records -- and tends to not always be as current, or in depth, as the info you would get from MLS.
Often times proactive buyers will find listings on these sites and bring them to their Realtor, only to find out that the house has been off the market for months, and sometimes even years!
In turn, tools like Zillow's Zestimate appraisal tool always need to be taken with a grain of salt, as they may be missing key data points like a redone roof, or an addition to the structure of the property.
Even when these sites do get their comp information from the MLS, it is seldom as thorough as the real deal, or may be unavailable altogether in certain areas where the region's NAR board has resisted passing over the data.
3. Certain Brokerages' and Realtors' Websites
Pros:
Many brokers are realizing that consumers want to self service and do research independent from their agent/broker on their own time.
In order to meet their customers on their own terms, many firms are starting to provide listings on their websites. Being Realtors, they can source data directly from MLS without having to augment their records from third party sources. They then use solutions like IDX technology to provide MLS data on their websites-- this also helps them avoid losing leads by keeping them on their sites and not searching elsewhere
Redfin, for example, even provides recently sold nearby homes when you look up a particular address:
Cons:
While being "closer to the source" than some third party data aggregators, these sites are also limited by many of the same obstacles.
Their ability to display information from MLS is not unmitigated: certain aspects are filtered out, and it typically does not refresh constantly enough to reflect what you would see if you were in the database itself. Additionally, there is no "national" MLS database, and as a result, their ability to source information is dependent on working out agreements with regional boards -- something which results in spotty coverage in certain areas.
4. Checking Public Records For Recently Sold Homes
Pros:
Many United States counties make information regarding sold property, new additions, etc available to the public at large. This information is almost always accurate and reliable.
Cons:
Unlike for profit businesses, local governments do not have the same incentives to provide user friendly features, and sometimes even have zero online presence altogether. Also, these records do not tend to have as much information on currently listed properties, or if they do, they are not organized effectively.
5. Build a Relationship With a Local Trusted Real Estate Professional
Pros:
"The only source of knowledge is experience" - Albert Einstein
At the end of the day, the other solutions to the problem of estimating your home's market value we have discussed are work-arounds. As many who have worked in the real estate industry will tell you, there is typically no substitute for unbridled access to an MLS database (New York City might be one of the few exceptions to that rule, due to the dominance of large firms like the Corcoran Group, but that is a story for another day).
Putting the MLS aside for a moment, a tenured professional has an invaluable resource that you cannot find in a database: relevant experience.
An agent who has been working, and maybe even living in, a particular neighborhood for years on end will have an unparalleled understanding of its details and nuances. There is no field in MLS that will tell you that the local town hall just approved a permit for a night club across the street from the home you want to submit an offer on, or that a property near yours is on the verge of going for 20% above asking price.
While many of the methods we have discussed today are totally sufficient at helping you get a general lay of the land, ultimately, there is no substitute for someone with this sort of domain expertise.
Cons:
There is a key word in the title of this section: trusted.
Realtors, agents, and others in the field are all humans. Humans are motivated by incentives -- in this particular context these tend to be financial ones.
In turn, there are situations where an agent might selectively withhold information that goes against their agenda: making commission with the least amount of effort possible. Sadly, there is a reason why Realtors in general have the reputation they do. After all, why do you think their bio pages usually contain the words "Trusted", "Hard Working" and "Integrity" every two sentences? The stigma is real.
But do not let a couple of bad apples spoil the barrel: there are lots of professionals out there who are worth every penny and more, you just have to be discerning.
The key is to research and do your homework; get neutral references, ideally from repeat customers. Agents who build relationships with their clients are far more credible, as it proves they are in it for the long haul -- not making a quick buck by pulling the wool over your eyes and disappearing.
What is your favorite source for accurate comparables? Think we missed any important resources? Share below!
