Gone are the days of calling local realtors or expensive appraisers to help you determine the value of your property. Real estate agents and appraisers normally determine the value of properties by researching others of the same caliber that were sold in the same area. It implies that if you can also research and find the similar properties to your in your location sold in the recent past, then you may not need to use their services to know what your home worth is, and this is the basis of comparables in real estate.
Comparables or comps as they are commonly known in the industry refer to the prices which were paid recently for homes or properties that are comparable in style, size and location. To determine the value of a home, a real estate agent or an appraiser will typically consider three comparable sales in the recent past.
Appraisers and agents have access to Multiple Listing Services where they get information about all the properties in a given area which were listed “for sale”, the properties which have already been sold or those whose sale is still pending. As an individual who is not an appraiser or a real estate agent, accessing such services may not be a walk in the park.
However, there are other tools which independent guys like you and I can use to find comparables which can then give you an idea about the worth of your property.
How to use comparables to determine the value of your home
To know the value of your house, you need to find similar homes in condition and size and are in the same location as yours. The reasoning behind this approach is that your home is worth what the other people would be willing to pay for it and the best and the simplest way to determine what someone would be willing to pay for it is to simply discover how much the similar homes were paid for in the recent past.
However, every home will have its own unique aspects which will make it more or less desirable. For example, a five bedroom house would be worth more than a similar two bedroom house in the same neighborhood. To determine the value of your property through comparables, you will have to consider at least three similar homes to yours that sold in the last six months then compensate for the unique differences.
Remember that this is a simplistic approach of how appraisers usually determine the value of properties and you may not find the same value as the appraiser, though your estimates will still be very close to the fair market value of your home.