Comparative Market Analysis (Comps)
Definition - What does Comparative Market Analysis (Comps) mean?
Comparative market analysis is the process of comparing the price of similar homes or real estate properties which have sold in the same area. If recently sold comparable homes are not available, a comparative market analysis could also be performed with current listed properties, although this method is considered less accurate because it only reflects the asking price and not the actual value of the home or property.
Justipedia explains Comparative Market Analysis (Comps)
Comparative market analysis is generally done by real estate agents who are providing the information to their clients who are buying or selling a home. If a real estate agent is doing the analysis, they will use their local market knowledge, intuition, recent sales of homes, and listed homes which were listed but have recently expired.
Comparable homes used for the comparative market analysis will include those of similar size, those with the same number of bedroom and bathrooms, those in a similar condition, and those in a similar neighborhood with common amenities.
Although real estate agents generally perform comparative market analysis, any home buyer or home seller can perform the calculation on their own. Information for this calculation can be found on specified websites for free or for a small fee, buy hiring a professional real estate appraiser, or by visiting open houses.
Comparative market analysis is an important step in the home buying and selling process. Comparative market analysis is critical to setting the right sell price for a home. Not only can it tell the home seller what comparable homes in the area have sold for, it can also provide data on the amount of time it took to sell a house, and how the sale price compared to other listed prices.
With this calculation, a home seller can list and market their home appropriately, ensuring their home sells quickly. The home buyer can also use their calculation to determine if their potential home purchase is competitively priced with other homes which have recently sold, increasing the chance they are making a sound investment.