Understanding Comparable Sales: How Homes Are Actually Priced
A home is worth what similar homes have recently sold for — not what the seller wants, and not what Zillow says. Understanding comparable sales ("comps") is the single most important skill for evaluating price.
What Makes a Good Comp
A strong comp is a recently sold home (within 3-6 months) that is similar in size (within 10-15% of square footage), has the same number of bedrooms and bathrooms, is in the same neighborhood or a very similar one, has a similar lot size and condition, and was not a distressed sale (foreclosure or short sale). The closer the match, the more reliable the comp.
How Agents Use Comps
Your agent will pull a Comparative Market Analysis (CMA) — a report showing recent sales of similar homes in the area. This helps you determine a fair offer price. Listing agents use the same data to set asking prices. When comps support a lower value than the asking price, you have data to back up a lower offer.
How Appraisers Use Comps
The appraiser your lender sends will also use comps to determine the home's value. They make adjustments — adding value for a garage the subject home has that the comp lacked, or subtracting for a smaller lot. If the appraiser's comps lead to a value below your offer price, you have an appraisal gap. Understanding comps before you offer helps you avoid this.
Key Takeaways
- ✓Comps are recently sold, similar homes — they determine fair market value
- ✓Good comps are within 3-6 months, similar size, same neighborhood
- ✓Your agent's CMA and the appraiser's report both rely on comps
- ✓Understanding comps before you offer helps you bid with confidence
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