Find the BEST “COMPS” for your Analysis

As a real estate investor using “COMPS” (comparables) is very important. This is our way of finding out what can we sell our property for (what the market is saying, not what one thinks the property should sell for).

Your goal in using COMPS is to try to get all the solds in your area that is very close to the features, parameters of your property. Keep in mind, there are NO TWO PROPERTIES that are EXACTLY THE SAME. There is no carbon copy house. I have not encountered one so if you have found this phenomenon then you are very lucky. It is UNLIKELY that this will happen.

Let’s assume you have access the MLS (multiple listing service). Generally you can add more parameters to search for to compare to your property when you are starting your search for COMPS.Here are some parameters for you to use in your search.

• a) Size in square feet (try to give a range like 1300 – 1500 sf).
• b) Distance from subject property. (you can start with a .5 mile radius from the property)
• c) Active listings (you want to know what is on the market)
• d) Solds (what has sold. TIP = you want to be as current and relevant as possible. Solds within 6 months is ideal. Try to avoid going over 1 year.)
• e) Same subdivision (this is IDEAL. However if there are no sales within 6 months extend the range to 1 mile or more and the time sold to 1 year)
• f) Age of home (it is IDEAL if you can find the same age house in the solds)
• g) Baths (how many?)
• h) Bedrooms (how many? Try first to use the exact number of bedrooms as the MAXIMUM number of bathrooms as well as the MINIMUM number. You will have to play with this some if needed)
• i) Lot size (this is very important when dealing with acreage)
• j) Number of stories (one story, 2 or 3 stories?)
• k) Construction (brick or siding?)
• l) Slab foundation (or otherwise?)
• m) FORECLOSURE (do not include any foreclosure)

You can get as detailed as you want. HOWEVER…be careful with trying so hard to find PERFECT COMPS. Get the best “apples to apples” comparison as you can get. Appraisers will get deeper than what you will be doing HOWEVER, keep in mind that even the report from the appraisers in NOT an exact science. It is THEIR opinion and THEIR choice as to which COMP will they use in the report.

Have a reason why you chose certain solds to be a part of your COMPS collection for analysis. If there are 10 to choose from, pick the BEST 3 or 4 that comes close to your property so that you will have the BEST result. Doing a Comparable Market Analysis (CMA) is NOT SCIENTIFIC but choosing the BEST COMPS that closely resembles your property will give you the BEST result.

One thing that is VERY hard to factor in is what you do to the property (assuming it is a rehab). The materials you use, the design, the labor, etc play a huge role here. You cannot compare that exactly to every comparable.

In closing, establish the most common parameters when doing your COMPS then choose the BEST COMPS to get the BEST result. Keep in mind, doing a CMA is NOT SCIENTIFIC. It is subjective and based on ones’ opinion as to which COMP is the best COMP to use.

Happy investing and more power to you. To your success.