Homebuyer Hack- Know Your Comps

Are you a house hunter looking for a great deal? Unless you know your market, sorry; you’re shit out of luck.

So let’s fix it.

My biggest house hunting tip is to know your market. And you Can’t know your market without learning all about comps.

When you’re buying or selling a home, comps are the base-point for determining market value.

Comps are equally important for buyers and sellers. Luckily, learning your comps is easy and fun. Just spend a little time every day (or week), scrolling through active and sold listings. You’ll see!

The longer you’ve been looking at your local real estate listings, the better. You don’t want to get ripped off and you don’t want to lose out on a fantastic house over an unrealistically low offer.

Comps are your comparable SOLD homes. Repeat!- comps are the recently sold homes which are comparable to what you’re looking to buy.

If you don’t live in a huge city, you should know these like the back of your hand. If you’re looking in a very specific neighborhood of a larger city, same goes.

The most relevant comps will have sold in your neighborhood (they’re location-specific). They should have a similar build year, similar square footage, similar lot size, and (ideally), similar condition. A little variation is expected because homes usually aren’t exactly the same. Older neighborhoods will have more variation than newer or tract-style neighborhoods. This is normal.

You may be wondering, doesn’t my real estate agent take care of this? Shouldn’t they know the comps and tell me about them?

Yes! They should!

Part of your real estate agent’s job is to create a comp “list” to assist in determining a home’s reasonable market value.

Unfortunately, sold comp lists are only able to be compiled through a closed multiple listing service (MLS) by licensed real estate agents who are members of the National Association of Realtors (NAR).

Realtor control of who sees comp data leads to gatekeeping.

Essentially, the NAR is a gatekeeper of all sold housing data. This is infuriating. Sold home prices (“comps”) should be accessible to anyone.

The true winner of “real estate disruption” will make comp data available to the consumer. Currently there is a new MLS underway, Nestfully. Maybe they’ll make a better consumer experience? We’ll see… Read more about their new platform here and here. And if you’ve got an idea how to improve the system, I’d love to hear all about it.

Anyway,

Gatekeeping enables information asymmetry. I learned about this term in Levitt and Dubner’s book, Freakanomics[1]. Applied to real estate-  some agents may cherry-pick information to either secure the listing or to encourage an offer at a particular price point. Others may not tell you about comps at all! Or maybe the comps they present to you are “active” listings. This isn’t always the case; there are some great agents out there who will be honest with you.

But even if you trust your agent, you should still research comps before and during your househunting process.

Researching your own comps will give you a huge leg up. Here’s why:

“Comp” knowledge gives you confidence and enables you to make speedier, more informed decisions. This is especially important in a hot market or when a house is priced appropriately. A house that’s priced appropriately (or low) is going to sell faster than others.

Informed decisions are your best weapon in any housing market and often, those decisions need to be made very quickly.

Knowledge + Confidence = Better Outcomes/Less Regret.

(Additionally, when you’re armed with this knowledge, you’ll know if you should be trusting your agent in the first place…)

So how do you get to know your comps?

First, every week, look at the sold listings. Go to Realtor.com or Zillow.com and click the “sold” status bar and search your neighborhoods of interest. Print out the homes that are closest to what you’re looking to buy or sell. These are your comps! Look at the photos. Read the descriptions. Get to “know” them. Collect them.

While it is important to know comparable active homes’ listing prices, listing prices are asking prices– a seller’s hope. No one knows what the final sale price will be. In a hot market, the home will probably sell for close to or more than the asking price. But in a balanced market, or a buyer’s market, the final sale price could be much lower than the initial listing price.

You do want to watch all those active listings in your area. Keep an eye on them every day (or at least every week). See how quickly they get offers on them. When they get an offer, usually the home’s status turns to “contingent”. Look at the photos and compare the homes at different price points. When they finally sell, make sure to check what they sold for. After you do this for an extended period, you will gain market knowledge.

Let’s talk about listing status for a moment.

What is the difference between active, contingent, and pending status?

“Active” status should mean that the home is available and is not under contract, meaning the seller has not accepted an offer.

“Contingent” means the home has received an offer and is under contract, but there are active contingencies in place. Most likely, the home hasn’t been inspected yet.

Once the contingencies are signed off on, the status changes to “pending”. “Contingent” homes are more likely to fall out of contract than “pending” homes.

If you’re trying to follow listing statuses to gauge how fast a home receives an offer, Realtor.com is a better platform than Zillow. That’s because several years ago Zillow changed their website so that you can no longer tell when a home’s status is “contingent”. This change likely occurred from my regional MLS level because it’s specific to my local area (I’ve seen Zillow’s contingent status in other states so this may not apply to you).

Note- real estate agents may intentionally neglect to update a home’s status. It’s a ploy and here’s their reasoning- if agents update a home’s status to “contingent”, you won’t call them. However, if they leave the status as “active”, they’re rewarded with phone calls about the home. Those phone calls become the agent’s “lead”. It’s a sales hook.

Agents, please stop trying to turn me into a “lead” by not updating a home’s status. It sends the wrong message. It tells me you’re super lazy or you’re technologically challenged. If I sit there and crunch numbers about an “active” (available) home, go through the motions of discussing it with my family, etc., I’m going to be really irritated when I finally take the next step only to hear it’s already “contingent”. You’ve wasted my time and made yourself look bad. So stop it!

Zillow does show “pending” status, but they’re filtered out in a standard search. This makes Realtor.com a better platform for learning how hot/cold your market is, because you can see how fast a home got an offer on it (usually). The speed at which homes receive offers is important.

Now, say you’ve been following your market’s active listings and their sold prices for months. Congratulations, now you’re an informed buyer or seller! Now test yourself. Make it a game. “I think this home will sell quickly for xxx”. Watch it and see how close you are. There’s a new real estate app called Playhouse where you do this with real listings. It isn’t available in the Midwest so I’ve never played around on it but you may want to check it out.

Let’s say you haven’t done any of this or you’re in a rush.

There’s a very easy hack for finding your comps quickly and on your own. Here it is:

This time, go to Zillow.com. Click on the house you’re interested in. Scroll down to the map view. You’ll see a little square on the top right orner of that map. Now, click on the little square. See example below (the square you want to click on is circled in red).

After you click the square, your map will look like this (below). Next, click on the “lot lines” tab (circled).

Now, your map will look like this (below). This is what you want.

The house I’m interested in is the house with the photo. The red dots are the active listings and the yellow dots are the homes that have recently sold. What do the yellow dots tell you? Here, I can see that homes in this neighborhood have sold from 153-230k, yet the house I’m looking at is listed at 374k. The lot is much larger than the other lots, so there is some validity for a higher asking price. But is it too much and do I want to buy the most expensive home in the neighborhood? To keep investigating, I’d zoom out a little to see even more red and yellow dots… See what I’m doing here?

You can click on any of those dots and most of the time you can see pictures (even for the sold homes). Occasionally you can’t, but that’s okay. Even without photos, this aerial market view provides a beneficial market “lens”. If you don’t know your market very well, this is a great learning tool you should explore.

Update- This feature is suddenly unavailable in certain locations. I’ve used this hack in Kansas City a lot over the years and when I recently tried it out for the Overland Park neighborhood, I was no longer able to see the yellow dots. Same with the St. Louis market. This is bad news for consumers because someone decided they don’t want homebuyers to see the sold comparables. I believe this is more gatekeeping at play. (Luckily this hack still works in IA, MN, MI, NE, OH, WI).

In addition to following the market and getting to know the comps online, I’d urge you to go into a few homes as well. If there are open houses, utilize those. Otherwise schedule a day with an agent to go into 5 or 10 homes (in one fell swoop).

Write notes. Compare them. Collect them.

There is always more than meets the eye on a price. One thing that these comp prices don’t tell you is if there was anything major found in the home inspection that called for a lower price. Or maybe it had been tastefully remodeled and demanded a higher price.

I hope this information helps you learn your market (which ultimately, should be your goal). It will give you the confidence you need to act quickly when the time comes.

I apologize if the information here is a bit jumbled; its a complex industry and this post may need a re-write (but today, I post).

If you made it this far, I’m curious-

Did you spend a lot of time getting to know your market before purchasing your home? I’d like to know your experience.

Thanks for reading,

HouseRat Zero


[1] Levitt, Steven D., and Stephen J. Dubner. Freakonomics. Harper Trophy, 2006.

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