A comp is a "comparable" home of similar size, number of bedrooms, quality and sq. footage that has recently sold. If you have a custom home its hard to find direct comps but if you live in a tract development its much easier. I sold a rambler in a popular neighborhood last year that has mostly 2 stories and very few sales/year. The comp process was hard to say the least and not as valuable as it could have been. A comp is a comp so it doesn't matter what you are using it for. You can manipulate the comps but it isn't usually to your advantage. Your realtor can help you with all that.

A comp is a SOLD home in the same or similar neighborhood that is similar in square footage, amenities, age, and condition. Location is the primary determiner for price, followed by square footage and amenities. Age and condition factors in, but not as much as the first two. Unless you are an older home competing against new construction. That will not work. New construction is always valued more than a "used" home. Lot size or acreage with the home has little to do with valuation either unless it has an agricultural value or the home is an estate.

The comp (to the surprise of many people) has pretty much nothing to do with what other people are asking, i.e. the listed prices, for other houses.

So if your neighbor is has their house listed $250K for and even if it's next door and is identical to yours, it is not a comp. If they sell it for $250K, then it is a comp, for awhile. Every day that goes by between their sale date and your listing or sale reduces the predictive value of the comp - either up or down, depending on local market trends.

What you paid has nothing to do with a comp (you could have overpaid, or gotten a screamin' deal.)

What you spent to upgrade your house ("what you've got in it") has nothing to do with a comp, unless you added sq. ft, etc.

And even with real, completed sales, tread carefully in evaluating a price because the amount may have included stuff that wouldn't be considered a part of the property. For instance say the house was sold and included a honking great RV, the silk and velvet drapes and the late owner's Mercedes Benz. Appraisers often contact realtors to make sure the house was just the house and there weren't other things like owner-financing that would skew the reported sale price.

Functionally though, to answer your question, the "comp" an owner uses to decide on an an asking price and what ever numbers a prospective buyer might be "using" to negotiate with are prettty much the same number. If the seller is ordinarily motivated and ready to sell, of course. Some sellers aren't, even though their properties are listed and being shown. Thye've decided they want to get what they want and they don't care if it takes forever to do so. Eventually they get tired of the rigamarole and lower the price, or retire from the market in high dudgeon.

The other place a comp comes into play is when the property is appraised for a mortgage (or a refi). In this case, because of current restored-to-sanity lending practices, the property must appraise high enough that the amount borrowed fits into the scope of what the lender is willing to offer. For instance if the lender requires 20% down, and the property appraises for $100K, they will only lend $80K. If the buyer has agreed to pay $120K, then the buyer will have to come up with $20K + $20K, or $40K, to close on the property. The banks don't care if you overpay - i.e. pay above the appraised amount - but they aren't lending money on the over-valuation. At least not any more they aren't.

Some buyers feel that sellers should lower their prices if a property doesn't appraise for at least what they have agreed to pay, but it is not required. If the buyer can't come up with additional money, and can't get a loan, then the contract will simply fail and the property will go back on the market.

And that illustrates where the pressure on comps does pinch the seller: If they insist on a contract price higher than a property will appraise (with typical underwriting parameters) and even if they find someone to buy it at a price that's over the odds, they risk wasting a lot of their time under contract(s) that eventually fall apart when the buyer(s) can't get financing. This happens because a large share of buyers are looking at properties at the max they can "qualify for", with the minimum required down payment.

Regarding land: the basic amount of land that is typical for the neighborhood is a single unit. But even two or three times that much land doesn't make much difference in the valuation. If it's quarter-acre lots, then a half or three-quarter acre lot isn't two or three times the price. A couple of acres in a quarter-acre neighborhood might be worth more more, but not by the arithemeticly increased percentage.

Once you get to larger parcels in a given area, i.e.1 acre vs 10 acres; or 5 acres vs 25 acres, there is a bump, but not at the same per-acre cost as the first acre. And on even larger parcels the inherent value of the land comes into play in determining price, but that's usually its productive capacity and beyond typical homeowner purchases. On farms the amount of animals or crops that can be raised or grown and the soil types and the long-standing Federal agricultural support payments attached to the land are what determines price.

There is much mumbo-jumbo attached to the concept of comps and appraisals. This serves to protect the real estate industry and befuddle buyers and sellers, many of whom don't buy and sell very often so they don't have a good feeling for valuing real estate.

If you're feeling pressured, or confused by people waving "comps" numbers around, you can always ask to sit down and have the figures, and how the calculations and comparisons between properties were made, explained to you. It is very enlightening. (And empowering, but, sshh, don't spread it around.)

HTH

L.

I've got a couple posts where I did detailed comp analysis. Feel free to search if you want to see the nuts and bolts of how I approached it.

The analysis works the same way whether you're buying or selling. The house isn't "worth" more or less depending on who you are. In a nutshell, you need to find recently sold houses in your neighborhood. Zip code is too broad. And 2 streets over may be a neighborhood that's 20 years older than yours, so not a comp. Then within your neighborhood comps, find the ones most similar in size, bed/baths and other pertinent things (e.g., basement/no basement, or split level vs. ranch). Then adjust them against yours for square footage and number of bathrooms. They will likely be wide-ranging, but take an average and that will get you close. If you know stuff like a certain house on the low end was trashed on the inside, then you might discard it. Or a house on the high end was brand new, you might discard it as well.

To validate which of my comps were meaningful, I actually "comped the comps." Those that sold close to the comp-predicted price I kept; those that were far off I threw out as outliers.

Realize that no comp analysis is perfect, because in the end every home is unique and has a differently motivated buyer and seller. The more motivated the buyer relative to the seller, the higher the expected price and vice versa. So have fun with the numbers but don't get too caught up in them.

Thanks everyone. This is very helpful. I live in a neighborhood that is very stable so not a lot of sales. Different realtors have shown me a bunch of different "comps". Based on the above I think my home is priced correctly, but I wonder what others think. Home is on the market for $570,000 is 4bed/2.5 bath, 3226 sq/feet and another 1400 sq/feet in finished basement which is not a walkout.

Sold in my neighborhood:

July 2012: $ 539,900; 5bed (1 in basement)/3.5 bath(1 in basement); same sq/feet as my home; walk out basement but no backyard.

October 2012: 585,000; 5bed (1 in basement)/3.5 bath(1 in basement); 300 sq/feet bigger than my home; walkout basement

March 2013: $600,000; 5bed (1 in basement)/3.5 bath(1 in basement); 300 sq/feet bigger than my home; walkout basement

March 2013: $610,000; 5bed (1 in basement)/3.5 bath(1 in basement); 300 sq/feet bigger than my home; walkout basement

These all have extra bed and walkout because they were the model homes when the development was built 25 years ago. My home backs to woods and the woods back to a major street (can't see street or hear it from my home but some lookers have commented on it negatively while others haven't been bothered by it and have positively commented that the location is an easy 1 block to public transportation).

I think I'm priced right and have compensated for the differences/negatives of the house. Opinions?

I think you are close, but a bit on the higher side. Just look at the price per sq ft and then you see that you are priced higher with less amenities- ie missing 1 bath, 1 bedroom, and the walkout.

In my area a bath is worth about $10k and a bedroom about $5K - I think it is higher in yours due to the cost of the house for the size as here it is about half that price.

If you used the highest $/sq ft of the comp and adjusted using bath/bed using my areas appraisal values and then ignore the walk out basement (no basements here) then your listing price would be $543100 with just simple math.

I think showings and offers will tell a better story than just numbers. Do you have a lot of showings compared to others for sale, but no offers - if so that often means you are a bit overpriced. Not enough to make a difference in going to see the home, but when they see it they don't see the value for the price.

I agree you are priced at the top of the range. If you are hoping for a quick sale or bidding war type thing starting you may want to drop it a bit. What was the range your realtor gave you for the low and high end for your home? Mine was right on and I chose to go at the upper end and had a ton of traffic, showings daily, and no sale until I dropped. I should've listened to her and listed low and gotten multiple offers going. Hindsight and all.....

Liriodendron, this may confuse the OP "What you paid has nothing to do with a comp (you could have overpaid, or gotten a screamin' deal.)" ... since everyone is telling her that a recent purchase/sale price IS important in determining comps. If OP (or a neighbour with a similar house) recently paid x, even if they overpaid, then would that not be relevant?

Thanks for the feedback. I wrote the sizes of the comp homes from memory and it turns out that I overestimated home much bigger they were than our house. From the listing sheets my realtor left with me the comp that sold for $610k was only 192 sq./ft bigger than my house (not 300 sq./feet) and the comp that sold for $600k was only 82 sq/ft bigger. Doing the math that put them at $178.46 and $181.38 sq/ft respectively. We are at $176.68 so I think we should be in a pretty good position to at least get an offer to work with. Things have slowed down in my area but there isn't much on the market either so hopefully something will happen sooner rather than later.

Thanks again. This has been helpful to understanding this whole process.

Your # of showings and feedback will tell you about your price--If you are priced right by looks, you will have a lot of traffic. No offers, you are priced too high (probably). No or little traffic, priced too high, even on paper.

Around here comps are only 90 days old. If there are just not enough sales, they will go back 6 months, but no older than that.
Those 2012 sales aren't comps at all.

Google is your friend.

AP - I think the OP was wanting to have a discussion about it, not a dictionary definition. Get over yourself.

My question - where,do intangibles like esthetics/ coolness factor play into the selling price - if they do. I know it when I see it - both may have new kitchens for example and on paper may be comparable- but one just has a much better layout, design, color choices, garden view done very artistically and attractively, etc. And not surprisingly that's the one that buyers would be more attracted to, which translates into them assigning a higher monetary value.

kashka: you might have better luck posting your question as a separate thread.

your question is hard to answer. there are certain things you know that most buyers are going to prefer (hardwoods, granite countertops, stainless steel appliances) but things like colors, views, choice of tiles ect are harder to quantify (assuming we're not talking about off the wall choices in these areas). i think that the more it looks like something you'd see in one of the home magazines the more likely you are to sell fast and for a higher dollar because those magazines are designed to appeal to the masses. and for buyers that want move in ready homes they are likely to make an offer in the higher range of what your home is worth than in the lower range.

You may add appeal with intangibles, but it's not going to do you any good on the comps. Someone may be willing to pay the extra 25K in a 400K neighborhood because they like the style you've done you home in, but it won't be reflected come appraisal time. That 25K will either have to come out of the buyers pocket and they'll have to finance less, or you'll have to adjust your 425K sale price down to the 400K that everyone else in the neighborhood shows the home to be "worth". Banks are back to looking at hard numbers, not intangibles.