Comparative market analysis, or comps, is the most valuable tool for anyone looking to buy or sell real estate in North Texas and other markets. Here, we discuss how to properly use comps to make the best investment decisions when purchasing your North Texas property.
Comps are calculated by obtaining information on properties sold in a specific area. The sale price, age, and square footage of properties sold are compiled into a list which can be accessed through the MLS (multiple listing system) by agents and brokers. These professionals are able to use the information provided to compare a property to similar properties in the area, thereby determining the optimum valuation and recommending the price at which to list or to offer in order to maximize the benefits to the buyer or seller they represent.
There are two major points of consideration when viewing a North Texas MLS comp list. The first is how recent the information on the list is and second is how accurately the listings reflect the property in question.
Defining recent in terms of comps generally means starting with the most recent available and going back three months. Although three months is optimal, exceptions must be made for homes in markets which do not have a lot of comps either because very few homes have sold in that time-frame or because the homes that have sold are very different in size, age, condition, or other factors. In cases such as these, the time-frame can be stretched to six months and, in extremely rare cases, may reach back years (rural areas). North Texas MLS comps generally fall under the three month rule, because it is a hot market. MLS comps in North Texas are constantly updating, so it’s important to check them often during the home-buying process.
When discussing comps, accuracy does not denote that the prices listed are correct (they are, by default) rather to the relevance of the properties listed to the property they are being compared to. If the age, condition, or size of a home differs from comps, an adjustment must be made when calculating its value. North Texas MLS comps may encompass a variety of home styles so bear in mind that if a home is larger or in better shape, it is worth more than the comps, the reverse is true if the home is smaller than the comps or is in need of repairs.
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