April 15, 2024


Mad about real estate

Five Factors In Determining Comps

Five Factors In Determining Comps

Comps are what a real estate agent, an appraiser or a surveyor use to determine the value of a certain property by making use of market analysis. Most real estate investing websites also make use of comps to do their own property value analysis. What happens is that properties with similar characteristics are used to compare the specific property in scrutiny in order to determine the value of the latter.

Comps or comparables make use of five factors. First is the condition of sale which has something to do with the conditions persistent where and when the appraisal is being done. This involves the inclusion of estate settlement, arms length, distress sale, and the likes.

Second is the financing condition. In this case, the property is related to any financial terms that could affect the selling and the buying. Let us say the seller of the comparable has sold it with an interest rate that is below-market and the market value does not encounter such abnormal findings. In this case, the appraiser would need to make changes with the price of the comparable to make the price equal whatever estimated impact that such favorable financing would incur.

Third is market condition. In most cases, other people term this condition as time adjustment. This is also the reason why prices as time pass by. Prices are not fixed and as time change, also do the prices of property.

Fourth is the local comparability. A certain location of a property would affect how much it should cost. Two lots, in the same subdivision would get different pricing even if they are placed adjacent to each other. One might be closer to a better view or any other advantages that most buyers look for. Thus, one would be much pricy than the other.

The last factor is the physical comparability. This has something to do with the size of the property, the condition of the property, the quality of the property and the age of the property.

Comps are market comparable analysis. It is just like any of your statistical sampling process where you draw and measure comparables and then, using the result of your comparison, you estimate the value of a certain property. Opinion of value is how this value is called in the language of real estate appraisers. There are, however, a lot of value that could be generated out of sampling of the comparable gathered. Yet, only the best of these values is used. As part of property marketing and education, you should know how to make use of comps for your marketing edge.