Real Estate Comps: What are we talking about?
When searching for real estate in Dallas and Ft. Worth it is vital to understand Comparative Market Analysis and how it is used to aid real estate investors. In this article we take a look at MLS Comps in Dallas and Fort Worth.
Understanding Comparative Market Analysis
Investopedia defines Comparative market analysis as an “examination of the prices at which similar properties in the same area recently sold”. More simply put, it is a map of prices at which actual properties sold which are similar to the property a buyer is interested in purchasing. Buyers and agents use comparative market analysis or ‘comps’ to gather information used when deciding how much to reasonably list a property for as well as how much to offer to the seller.
Why Comps are Important
Without comps, real estate investment would be a world of chaos for sellers and buyers alike. The agent, seller, and buyer would have little to no information on which to base their prices and offers. Any information they would have would be, at best, outdated. With access to Dallas/Ft. Worth comps, you can make the most of your real estate transaction.
Let’s look at an example of how the absence of comparative market analysis might adversely affect a homeowner looking to sell. Consider that the average price of a home in Texas was $82,500 in 2000. If you were the owner of a home in Dallas/Ft. Worth you purchased for $82,500, without Dallas/Ft. Worth MLS comps you might consider selling it for $100,000 and banking the profit. Likewise, if a savvy buyer who utilized those same Dallas/Ft. Worth MLS comps were to offer you $125,000 you might jump at the chance to sell for such a high rate of return on investment. In both cases, you would find yourself at a loss, because the actual average price of a home in today’s market is $146,000.
If you’re looking to buy property in Dallas/Ft. Worth, comps are just as important, perhaps more so. The average price of a home in Dallas is $143,800. Now, let’s imagine that you find a beautiful home listed at $100,000 in a neighborhood you desire. Your instinct might be to immediately make an offer at list, because it’s such a great deal and you do not want to risk being beat out by a better offer. However, if you had a comparative market analysis available which listed Dallas/Ft. Worth comps, you would discover that homes in that particular neighborhood were regularly selling well below the average, closer to $85,000, which means that, if your generous offer is accepted, you just overpaid by $15,000.
Education is Power
From the two examples provided, you should now understand how important a comparative market analysis is to both selling and purchasing real estate. An informed decision is always better than an uninformed decision, so arm yourself with the necessary knowledge by taking a look at comps when making real estate decisions.
Propelio is a new Real Estate Software Tool that lets you get near real-time MLS Comps for the DFW metroplex, and beyond. Start a 7-day free trial today.
