In real estate parlance, the term "comps" stands for comparable. It's a way to find out what similar homes in a given area have sold for recently. Buyers, sellers, and real estate agents depend on the results of the research that goes into a comp price so read on to better understand what is being compared when a comp is performed.

How Comps Are Used

If you are selling your home, contact a real estate agent and they will provide you with a comp once they do a bit of research. In most cases, that involves your agent touring your home and making notes about its features. For instance, they will make a note of features like a remodeled kitchen, a large lot, or a garage for the golf cart and then they will take to the internet and do a deep dive into recent home sales in your area using the multiple listing service (MLS). The features (listed below) are then compared to your home. Each feature may represent a price point. For instance, a remodeled kitchen may increase a price by a certain amount.

Timing Matters

Homes sold a year or so ago offer little information when comps are done. It's recent sales that the real estate agent is looking at to compare. Real estate prices can change every few months, some trending upward and some going in the other direction. Though it can vary, only the most recent month's sales go into the comparison. In some cases, however, home sales in rural or sparsely populated areas don't happen often enough to perform an accurate comparison. In that cases, other factors are given more weight.

Location, Location, Location

You probably already know that homes in certain hot areas like Austin TX or the Bay area in California are experiencing extremely high home sale prices lately. However, prices can vary a lot within a state, city, area of the city, a neighborhood, or certain areas of the neighborhood. For instance, homes within the same neighborhood will vary in price if some homes have a water view, are near the golf course, or are in a quiet area near the back of the neighborhood.

Sizes and Rooms

Each room and its sizes count as does the overall square footage of the home. The lot size or acreage is also considered.

Features and Condition

Finally, the unique features of a home are considered along with its condition. A home that needs a lot of repair work will, naturally, go for less than a home in move-in condition. Sought-after features vary from location to location so speak to your residential realtor and learn more about what buyers want in your location.