{"id":47239,"date":"2013-08-26T10:59:35","date_gmt":"2013-08-26T16:59:35","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=47239"},"modified":"2024-06-09T06:12:40","modified_gmt":"2024-06-09T12:12:40","slug":"2013-08-26-comp","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2013-08-26-comp","title":{"rendered":"What is a \u201cComp?\u201d"},"content":{"rendered":"

My recent post on appraisals<\/a> generated some thoughtful and insightful comments.\u00a0 One noted some folks may not really know what a \u201cgood comp\u201d is.\u00a0 That got me thinking.<\/p>\n

Sometimes we “more experienced” investors forget that people new to the real estate investing world are hearing many of the terms that we widely use for the first time.\u00a0 \u201cComp\u201d is definitely one example.<\/p>\n

So let\u2019s start at the beginning.<\/p>\n

What is a \u201cComp?\u201d<\/h2>\n

Comp is short for comp<\/span>arables.\u00a0 Comparables are certain properties that are used to evaluate another property.\u00a0 Comps are often used by appraisers to estimate market value, by realtors to determine a probable sales and\/or asking price and by governments for property tax purposes.<\/p>\n

So, what is a \u201cgood comp?\u201d<\/p>\n

Let’s take a look.<\/p>\n

What to Look for in a Good Comp?<\/h2>\n

A \u201cgood comp\u201d will have several characteristics.<\/p>\n

    \n
  1. The comp should be in the same general area.\u00a0 Remember, location, location, location are the three most important things driving value in real estate.\u00a0 In my part of the world, for example, similar homes only a few blocks apart can vary widely in value.<\/li>\n
  2. It will be a similar property.\u00a0 If you are trying to determine the value of a three bedroom two bath home you do not want to look at commercial properties.\u00a0 Rather, you want to find other three bedroom, two bath homes.<\/li>\n
  3. The comp shoud be similar in size.\u00a0 If your property has 1,500 square feet of heated space, you should look for properties with similar sizes.\u00a0 800 and 3,000 square foot homes are generally not the best comps.<\/li>\n
  4. The comp should have other similar features if possible.\u00a0 These could include items like a two car garage, a similar sized lot, fireplaces, central heat and air, etc.<\/li>\n
  5. The comps should be similar in age and condition.\u00a0 New \u201cinfill\u201d homes in an older neighborhood may not compare well with the older homes.\u00a0 Further, the property\u2019s condition will also make a difference.\u00a0 Look for comp properties that are in a similar condition.<\/li>\n
  6. The comps should have been sold fairly recently.\u00a0 Within the past 90 days is best but really no more than 6 months.\u00a0 The market can just change too much in that short period of time.<\/li>\n
  7. The best comps are those which are so called \u201cnormal sales.\u201d\u00a0 That is a sale between a willing seller and a willing buyer.\u00a0 The seller should be non-distressed, that is, the seller should not be a bank, estate, tax sale, etc.\u00a0 The best comps are those that are between a non-distressed buyer and seller on the open market.<\/li>\n<\/ol>\n

    So there you go – those are the basics.\u00a0 There are many other variables that can go into determining a property\u2019s probable market value.\u00a0 But if you can find at least three or four properties (comps) that meet the above criteria, you will have a pretty good idea of the market value for your property.<\/p>\n

    Related<\/strong>: What is Market Value?<\/a><\/em><\/p>\n

    Comp Difficulties<\/h2>\n

    Sometimes however you will not be able to find any good comps.\u00a0 The only sales may be foreclosure sales, your property may be very unique or there may not be any recent sales at all.\u00a0 These situations make valuations much more difficult but not impossible.\u00a0 It is situations such as these when a good appraiser maybe well worth the expense.<\/p>\n

    What are your experiences these days finding and working with comps?\u00a0 Are they easy or difficult to find? \u00a0Any unique experiences you want to share?\u00a0 Please let us know in the comments.<\/p>\n

    Photo: jimmywayne<\/a> <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    My recent post on appraisals generated some thoughtful and insightful comments.\u00a0 One noted some folks may not really know what a \u201cgood comp\u201d is.\u00a0 That got me thinking. Sometimes we […]<\/p>\n","protected":false},"author":726,"featured_media":169972,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5528],"tags":[1300,1824,377,376,58,59],"class_list":["post-47239","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-news","tag-appraisal","tag-appraisals","tag-comparables","tag-comps","tag-real-estate","tag-real-estate-investing"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/47239","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/726"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=47239"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/47239\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/169972"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=47239"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=47239"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=47239"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}