Often times I’m talking with someone who is an expert in their field and they are using jargon from their world that I get stuck trying to figure out mid-conversation. I roll around the context of how they used it. My brain goes into “spelling bee” mode, asking the derivative, trying to spell it out, and I get stuck on it. And now that we use acronyms so often… lol, tbh, idk. Smh. (Interpretation: Laugh out loud, to be honest, I don’t know. Smack my head.) And I won’t even start getting into the slang from Gen Z and now Gen Alpha, because, frankly, I don’t have enough waking hours to research and keep up with all of that. But today, I want to go over a term (or jargon) that is used in the real estate world.
“Comps”. A word real estate professionals throw out in just about every conversation. It is short for “comparables”, which rolls off the tongue like a flat tire on a gravel road. Often used when discussing a comparative market analysis (CMA) or looking at the estimated value of a home. Comps come up with both sellers and buyers.
When sellers are looking to put their home on the market, are interested in property value, or improving on their homes, an option they have is asking a real estate professional provide a CMA for them. When buyers are looking to purchase a home, they should look at the comps to see what is a fair offer to put in on a home. Remember that all real estate deals are a negotiation. The list price is the starting point.
Recently, I was talking with a potential seller about selling their home and we started discussing the comps. There are two types of comps that I look at, and advise sellers to look at. The first is the homes that have sold recently. Properties that are nearby yours that recently sold that are similar in size, age, land, etc.
The second group is homes that are currently on the market, with similar perimeters. If someone is looking to sell their home, these are their competition. The potential seller I was talking to had seen all of these homes that were priced, let’s say $600,000. When we looked at the comps, the homes on the market were all over $600K. But when we looked at the homes that had actually sold in the last few months were all below $600K. This was eye opening for them.
For buyers, especially in this balanced or buyer’s market (depending on location), looking through the comps is a way to make an educated offer, understand what they can truly afford,and hopefully set them up for long term success.
Now, the next time you are talking with their neighbor, and they start talking about the local rumors about so-and-so selling their house, you can throw out, “I wonder what the comps look like,” and sound like a pro.
