How To Pull Comps On Selling Your Property?

Key Takeaways

• A  Multiple Listing Service (MLS) comp is pulled from a database of  properties that have been sold.
• For sellers, MLS comps are an essential tool used to determine property values and listing prices.
• Get to know exactly how real estate professionals pull comparable listings from the MLS.

Have you ever wondered just how sellers set list prices on their properties? The majority of them use the Multiple Listing Service (MLS) to aid in finding the perfect price point. Because ever-changing property values are relative to a local market, and thus difficult to determine, pulling MLS comps has become a respected method of setting list prices.

If you are a real estate investor, you should know how to run comps on the MLS. Knowing how to do so can help you set list prices with confidence, knowing full well that your decisions will be backed by research and data.

What Is An MLS Comp?

An MLS comp, or comparable, is a real estate term that describes data pulled from the MLS in order to compare two or more similar properties. The MLS is a database of properties that have been sold, or are currently for sale, in a given area. Licensed real estate agents can access these systems to identify similar properties in a given neighborhood to draw comparisons. When pulling MLS comps, agents typically search for listings that are similar in size, condition, features and age. These listings are ideally sold within the past six months, and within a one-mile radius. In rural areas where distances from property to property tend to increase, a five mile radius is acceptable. The MLS also provides data points such as listing prices, sale prices, and number of days on market.

What Are Comps Used For?

MLS comparables are used for a many different reasons, but perhaps the most prominent use on the seller side is in determining a property’s listing price.  By comparing the data of recently sold homes in a given market, sellers can identify which properties are the most similar to their own. Having access to current market data through the MLS allows a seller to determine a listing price that is fair, yet competitive.

Picking the correct price point is critical to having a successful deal. Subjective in nature, pricing properties is an advanced technique that requires a considerable amount of effort. An ideal price should maximize a seller’s profits without turning off potential buyers. The latter can occur if homebuyers feel that the property is overpriced, based on their perception of home values in that neighborhood.

MLS comp sales also provide listing and selling dates, which indicate the number of days properties remain on the market. This means that an investor can estimate how long it will take to sell a property before striking up an investment deal. This information also allows them to factor holding costs into their deal analysis more accurately.

Additionally, comps are a valuable tool for devising a marketing strategy. By comparing similar properties that have sold within the past few months, sellers can identify what features make their listing unique from others. These points can be highlighted on the listing, marketing materials, and in person at open houses.

How To Run Comps On MLS?

Knowing how to run comps on the MLS is undoubtedly a valuable skill for those who wish to run an accurate, up-to-date comparative market analysis. However, only licensed real estate agents and appraisers are authorized to access the MLS, making it tricky for other types of real estate professionals to run comps on their own.

Many real estate investors have found workarounds to this challenge, the main one being creating symbiotic relationships with licensed agents. For example, an investor might rely on an agent to pull MLS comps on their behalf, in exchange for referrals to clients and listings. Other investors who understand the value of pulling comps, and would rather put in the elbow grease themselves, might opt to obtain their own real estate licenses. Regardless, it is important for real estate investors to understand just how MLS comps are pulled. Having a credible method of conducting market research helps to justify one’s offers or listing prices on properties.

Below you will find an overview of how a real estate professional might run a comparative market analysis:

• Size up the neighborhood: Location is a key variable used to determine property value, as neighborhood desirability and attractiveness tend to have a strong correlation with listing prices. Google Maps and Google Street View can be great tools to make note of the neighborhood’s aesthetic appeal and proximity to amenities.
• Check estimates and forecasts: Use free tools such as Zillow and HouseCanary to determine the property’s estimated value and listing price, as well as obtain a forecast of how much values will increase or decrease in the coming years. Because so many homebuyers and sellers access free websites to check property prices and values, this information provides insight to the general public’s expectation of what property prices will look like in certain markets.
• Assess the property listing: Next, create a list of the property’s qualities, such as location within the neighborhood, size, condition, number of rooms, and any distinctive features. This information will become useful in the next step: finding comparable properties.
• Start pulling MLS comps: This is the step where you will need the help of a real estate agent. Upon logging into the MLS, the agent will look for properties that have been recently sold, or have sales pending, in the same neighborhood. They will then narrow down the search criteria to properties with features that are as close as possible to the list of features that were identified in the previous step. This can include square footage, number of bedrooms and baths, age, and lot size.
• Calculate price per square foot: Once several MLS comps have been pulled, the average price per square foot can be calculated. This can be done by dividing the sale price by the square footage for each comp, and then finding the average between all comps.  After crunching these numbers, the average price per square foot can be multiplied with the total square footage of the property in question. The resulting number provides the approximate value for your listing, based on neighborhood comparisons. You can use this example to practice estimating your average price per square foot.
• Appraise property condition: Once you have calculated the initial property value, be sure to take into consideration aspects such as any issues with the property, as well as any special features or upgrades that have been made that were difficult to compare.
• Set your listing price: Now that the extensive research has been conducted, it is time to set your listing price for your property. This step should take several factors into consideration, such as the local market, property features and value estimate. In addition, the listing price should reflect how your property sizes up to the competition. At the end of the day, sellers should feel confident about their listing price if the decision is backed up by solid research using accurate data.

Summary

MLS comps are a valuable resource used by real estate professionals to determine property values. Real estate prices are based on several factors including supply, demand, location and condition, as well as property features and amenities. Because property values are relative and ever-changing, pulling live data on comparable properties from the MLS is a respected method of setting a fair and competitive list price.