Comp Tools

Last Updated: February 27, 2025

Determining accurate property values is a cornerstone of successful real estate investing, particularly when dealing with residential properties ranging from single-family homes to four-unit properties. This valuation process hinges significantly on the effective use of comparable sales, commonly known as "comps" or "comping." Accurate comping ensures investors make informed decisions, avoid overpaying, and maximize profitability in both short-term flips and long-term buy-and-hold investments.

About Comparable Sales (Comps)

Comparable sales, or comps, refer to recent sales of similar properties within the same local market. Real estate professionals use comps to establish the fair market value of a property by comparing it to similar homes that have recently sold. The accuracy and reliability of comps directly influence investment strategy and decision-making processes.

Essential Criteria for Selecting Accurate Comps

When selecting comparable sales, several critical criteria must be met:

1. Similar Floor Plan and Square Footage

Properties must share a similar layout, including the number of bedrooms and bathrooms, and comparable square footage. Even small differences in room count or total living area can significantly affect property valuation. For instance, comparing a three-bedroom home with a two-bedroom home will yield misleading results. Accurate comps typically fall within a 10-20% square footage difference to maintain reliability.

2. Architectural Design and Quality

Architectural style and build quality play crucial roles in property valuation. A Victorian-era home, for example, should ideally be compared with other Victorian homes rather than ranch-style or modern homes. Differences in architectural style influence buyer preferences and pricing significantly. Likewise, construction quality, finishes, and amenities must closely align for accurate valuation.

3. Appraisal Condition Rating

Properties compared should share a similar appraisal condition rating, which refers to the property's physical state and overall maintenance quality. The condition ratings typically range from excellent (newly renovated or constructed) to poor (requiring substantial repairs). Comparing a fully renovated property with one in average or below-average condition will produce skewed valuation outcomes. Investors must carefully select comps with similar appraisal ratings to ensure precise valuation.

4. Neighborhood Proximity

Comparable sales should be within the same neighborhood or ideally within one mile of the subject property. Real estate values vary significantly from neighborhood to neighborhood due to factors like local school quality, crime rates, infrastructure, and amenities. Comps located further than one mile may reflect entirely different market dynamics, undermining accuracy.

5. Recent Sales on the MLS

Timeliness is essential for accurate comping. Ideally, comps should have sold within the last six months, as market conditions fluctuate continuously. Sales that are older than six months may no longer reflect current market trends, potentially leading to inaccurate valuations.

Using Comp Tools Effectively

The availability of reliable and efficient "comp tools" like PropStream, Zillow, Redfin, or Realtor.com, has simplified the process of comping significantly. Comp tools aggregate vast datasets from local Multiple Listing Services (MLS), public records, and various other databases, providing investors with comprehensive market information.

Advantages of Comp Tools (e.g., Propstream)

• Time Efficiency: Comp tools expedite the valuation process by quickly generating lists of comparable sales based on predetermined criteria.
• Accuracy and Reliability: Comp tools like Propstream provide detailed property histories, accurate sales data, appraisal ratings, and market trends essential for precise comping.
• Comprehensive Data: Tools provide critical property data, including transaction histories, renovation details, ownership timelines, liens, foreclosures, and more, enabling informed investment decisions.

Step-by-Step Process for Effective Comping

1. Identify the Subject Property: Clearly define the subject property’s key characteristics, including property type (single-family, duplex, triplex, fourplex), bedrooms, bathrooms, square footage, lot size, architectural style, condition, and location.
2. Use Comp Tools to Locate Initial Comparables: Employ comp tools like Propstream to generate a preliminary list of recent comparable sales within a one-mile radius and within six months from the date of comping.
3. Refine Criteria to Enhance Accuracy: Narrow down the initial list by closely matching the criteria outlined earlier—floor plan, architectural design, appraisal condition rating, and sale date.
4. Adjust for Any Differences: Adjustments may be necessary when perfect comps are unavailable. Investors should adjust property values based on differences in square footage, property condition, or additional amenities. Adjustments are usually calculated by the estimated market value of these differences.
5. Validate Using Multiple Sources: Cross-reference comps across multiple comp tools and MLS data sources to ensure consistency and accuracy.

Common Mistakes to Avoid

1. Overlooking Condition Differences

Ignoring differences in property conditions is a common mistake. Properties requiring substantial renovation versus those recently updated have drastically different valuations.

2. Relying on Outdated Comps

Using older comps beyond the recommended six-month period can mislead investors, especially in dynamic markets experiencing rapid changes in values.

3. Geographic Errors

Selecting comps too far from the subject property risks incorporating irrelevant market dynamics. Investors must remain within neighborhood boundaries or a one-mile radius.

4. Overestimating Unique Features

Investors must avoid significantly overestimating the value added by unique features or upgrades unless clearly supported by market data.

Practical Example of Accurate Comping

Consider a subject property—a three-bedroom, two-bathroom, 1,500-square-foot ranch-style home in excellent condition located in a stable suburban neighborhood. Accurate comps for this property would:

• Be ranch-style homes sold within the last six months.
• Be located less than one mile away in the same neighborhood.
• Have similar condition ratings (excellent condition, recently renovated).
• Have comparable square footage (ideally within 1,350 to 1,650 square feet).

Using comp tools like PropStream, an investor could quickly identify four recent, highly similar property sales averaging around $350,000. Thus, $350,000 serves as a well-supported market valuation for the subject property.

The Impact of Accurate Comping on Investment Success

Accurate comping directly influences investment profitability:

• Avoiding Overpayment: Ensures the investor does not overpay, maintaining profitability margins.
• Strategic Pricing: Facilitates strategic pricing for selling or renting, maximizing investment returns.
• Risk Mitigation: Reduces investment risks associated with market fluctuations and valuation inaccuracies.
• Investment Confidence: Enhances investor confidence, enabling quicker, more decisive actions.

Comparison of Comps Tools

Demo: Running Comps with PropStream

To run comps on a subject property click on the comparables and nearby listings tab. Comparables is a collection of public record sale data and MLS data. The other tabs are included as situational information for nearby properties. They allow you to quickly see other property types and situations in the nearby area

Click on a tab to automatically view comps based on that criteria. By default, PropStream uses predefined criteria to automatically run generalized comps.

These default criteria are:

• the property must have sold within the last year
• be within half a mile radius of the subject property
• have a similar square footage of 20% more or less than the subject property

The default criteria is highly customizable and should be adjusted to fit each subject property's characteristics, location, and situation. You can choose to run comps with public record data, MLS data, or a combination of both. Public record sales provide access to all transactions even ones that were never listed on the MLS.

MLS data provides access to only what has been listed with an agent on the MLS. You can also use both data sets to combine the accuracy of public record data with the recency of MLS data.

What are the non-disclosure states that do not disclose home sale prices?

Depending on the state you are working in, your access to the actual sale price of a property as recorded in public records may differ. Most states are disclosure states meaning public record data for property sales prices are fully disclosed or made available to the public. There are 12 states that are considered to be non-disclosure states:

• Alaska
• Idaho
• Kansas
• Louisiana
• Mississippi
• Missouri (partial disclosure; varies by county)
• Montana
• New Mexico
• North Dakota
• Texas
• Utah
• Wyoming

In these states, home sale prices are not publicly available through government records. Typically, information is available only through private sources, such as MLS (Multiple Listing Service) or real estate brokers. Since the actual sales prices are not published on recorded documents, and therefore are not available to the general public due to state laws, PropStream provides estimates for public record sales prices in non-disclosure states.

In disclosure states, public record comps identify the actual sale price as reported in the county assessor's office. MLS data will allow you to utilize a more recent window of property sales and listings in the area. You have the ability to control the public record sale situations to include cash transactions, properties financed by a bank, and more.

Active, contingent and pending listings will provide you with the actual price listed on the MLS but sold prices will be estimated in non-disclosure states.

Public record comps are estimated just like in disclosure states. You'll have the ability to control the public record sale situation to include cash transactions, properties financed by a bank, and more. MLS data gives you access to the actual prices for active contingent and pending listings as well as estimated sold prices.

Add and adjust search filters to create the most accurate comps possible. For comps that rely heavily on location, determine a search area with the draw tool. Once you've applied your search filters your results will narrow down. Use the scroll bar at the bottom of your screen to view more information.

Your comps are now complete. You can now view the average sale price price per square foot and average days on market. Make sure to save your comps so you can view and edit later if needed!

Conclusion

The art and science of comping residential properties effectively leverage tools like PropStream, combined with careful consideration of essential criteria such as similar floor plans, architectural styles, appraisal conditions, neighborhood proximity, and recent MLS sales. Mastery of this process empowers real estate investors with precise valuations, improving decision-making accuracy and overall profitability. By avoiding common pitfalls and continuously refining comping skills, investors position themselves to thrive consistently in residential real estate markets.

Related reading

• PropStream Pricing & Free Trial
• PropStream Webinar (Recorded)

---

Grow your rental portfolio with OfferMarket

Our mission is to help you build wealth through real estate. Month-in and month-out, thousands of real estate investors leverage our platform in the following ways:

🏚️ Off market properties
💰 Private lending
☂️ Insurance rate shopping
💡 Market insights

---