Homebuyers

What Are Comps in Real Estate? You Can’t Afford to Ignore Them

There is a lot of terminology to learn when you buy a home, including loan-to-value ratios, 2-1 buydowns,—and comps.

Short for “comparable sales,” comps are vital to understanding the market whether you’re selling, buying, or just keeping tabs on real estate activity. They show what similar homes in the same area have sold for recently. This helps buyers understand what to offer for a home and gives sellers an idea of what a good price may be instead of relying on guesswork.

In other words, “comps are one of the most important things to consider when buying or selling real estate,” said Jarrod Duncan of New York’s Coldwell Banker Warburg. 

Comps shape appraisals. And they can make or break a negotiation.

Still, not all comps are equal. A home with the same square footage doesn’t automatically make for a strong comparison, especially if one is in a more desirable area or has been recently updated.

Knowing how comps work, what they reveal, and when to be cautious is crucial for making an informed decision as a buyer or seller. Here’s what you need to know.

What are real estate comps, exactly?

A comp is a recently sold home, usually nearby, that’s similar to the one you’re trying to price or buy.

“Recent” is the key word here. A sale from a year ago may no longer reflect current market conditions. Most agents and appraisers use data from the last three to six months. Sometimes, they look at even more recent sales in fast-moving markets where demand changes quickly.

“A prime example of this currently is recent [mortgage] interest rate changes and seasonal pricing shifts, making a huge impact on a home’s recommended listing price,” said Elyse Sarnecky-Taber of MarketPlaceHomes.com.

To count as a comp, a home should have approximate square footage, bedroom and bathroom count, lot size, condition, age, and location. For instance, a renovated three-bedroom Cape Cod on a tree-lined block may not compare to a fixer-upper across from a busy street, even if both are in the same ZIP code.

“It’s also important to consider active [housing] inventory as well as inventory that was on the market and is no longer for sale,” said Nikki Beauchamp, an associate broker at Sotheby’s in New York City.

How home sellers use comps when pricing a home

If you’re getting ready to list your home, comps help set a price that reflects today’s market—not just what you hope your home is worth.

If you set the price too high, you may discourage buyers. If it’s priced too low, you risk losing money or signaling that something is wrong with your home.

To combat this, most agents will show you three to five carefully chosen comps. They will go through the features that support a recommended price—whether it’s a newer kitchen, an added half-bath, or a less desirable location.

“When comparing two homes, you need to adjust for differences,” said Cara Ameer, a bi-coastal agent with Coldwell Banker in Florida and California. “If one has a great view, of a golf course, the ocean, the mountains, you subtract value when comparing it to a home without that view. You make the nicer home more like the subject property by adjusting down.”

Sellers in hot markets sometimes push pricing above the comps, hoping a lack of homes on the market and a lot of demand from buyers will justify a stretch. Sometimes it works.

But if the home lingers and gets passed over, the price may need a rethink.

How homebuyers use comps to make offers

Comps often help buyers stay grounded. Emotions can run high during a home search, but seeing what similar properties have sold for—recently and nearby—can offer clarity.

An agent should walk buyers through relevant comps, pointing out how the home you’re eyeing stacks up.

Even in a bidding war, it helps to understand how far you’re going above recent sales. If the price is significantly above the comps, that difference may be reflected in the appraisal.

And if the appraisal falls short, financing the home can get complicated. You may need to renegotiate the price or put down more than you had hoped if you can’t get a mortgage for the amount that you offered.

What makes a good real estate comp

Online tools may surface dozens of similar sales to a home you are looking at or trying to sell, but they don’t always capture nuance. Algorithms can’t tell if a home has dated finishes, an awkward layout, or overlooked issues like a cracked foundation. It also won’t always factor in location, such as if a home is located near a busy business or an adorable Main St.

That’s why buyers and sellers should go beyond surface data. A nearly identical home might have sold for less because it needed a new roof. A higher sale price could reflect a finished basement, a pool, or a legal rental unit that adds income potential.

When reading comps, context matters. Look at how long the home sat on the market. Was it priced to move, or did it go through multiple reductions before finally selling?

The more you understand what went into a sale price—not just the number—the better your next move will be.

When real estate comps may not apply

Sometimes, comps can only take you so far. This usually happens with unique properties—historic homes, new construction in a quiet neighborhood, or high-end listings with no close parallels nearby.

In those cases, pricing becomes more interpretive. You might look beyond the immediate neighborhood. Rely more on price-per-square-foot metrics. Adjust older data to reflect current conditions.

No single method is perfect but together, they can help bring a reasonable price into focus.