Comps are used across the nation to help determine what a property is worth. There’s a knack to finding good ones in NYC. Let’s break down what a comp is and how to compare ‘em!
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‘Comp’ is short for comparable. Everyone talks comps—buyers, sellers, brokers. A comp is a point of reference and comparison—it is ideally very like the home being sold aka the subject property—and comparing it to the home being sold helps to understand that home’s value. A comp is a property that has recently been sold, it is not still listed.
Comps are useful for many reasons.
- Technically, appraisers use comps to evaluate and confirm the value of a given property.There is so much more to property value than a tax assessment. We’ll get more into that in a bit.
- Brokers are so interested in comps because they inform how to best set bothsale pricesand bid prices.They can change on a dime and a really good broker is going to eat, sleep, and breath this industry knowledge.
- Comps will also help you secure financing. Lenders want to know that they’re lending smartly—they will want to see good comps to prove this.
- Having killer comps is also just good research for your home-buying journey. Comps set your expectation regarding price. They prove what people are paying for very similar properties—in the same area, same type of building, similar layout & square footage, with similar interior finishes, monthly taxes and fees . With good comps in your back pocket, you will recognize good deals and bad, and can make more informed decisions.
So comps are awesome—but what makes a really good one? Onward!
Comps are used across the nation to help determine what a property is worth. There’s a knack to finding good ones in NYC.
Let’s break down what a comp is and how to compare ‘em!
Points of Comparison – Cast the widest net and go smaller from there.
- Look for comps in the exact same neighborhood as the subject property. Inwood and Tribeca are in the same borough, but they definitely aren’t the same neighborhood. A property is sometimes located along the defined border of a neighborhood and is influenced by its neighbor. So in that case, looking for comps located along the border similar to the subject property is key. When in doubt, talk to your Caliber broker—they know what’s up and can help guide you.
- A good comp is going to be in the same kind of building with the same kind of amenities. Condos for condos, co-ops for co-ops, condops for condops. If you want to buy a condo, you’re looking for comps in condo buildings. The buildings should be similar in age—comparing prewar with brand new is like comparing apples to oranges. Additionally—what amenities are offered? If your dream condo also comes with gym access and a doorperson—the comp should have those same or very similar amenities.
- Size is a biggie when looking for comps! Similar square footage to the subject property is essential. It can be hard to make the stars align for a perfect match in square footage. If you’re looking at a unit in a large building and can compare to similarly designed apartments that have recently sold in the same building—then you’re in luck. Appraisers and banks rely heavily on using square footage to compare ‘price per square foot.’This is especially key in NYC real estate where space is limited and commands a steep price.
- Layout is a major contributing factor to finding a good comp. A duplex is not a loft is not a prewar walkup. So finding comps with a very similar layout to the subject property is key. Even if a loft and that charming prewar walkup have the same square footage—they’re using the space differently. Let’s say that the subject property is a 2 bedroom duplex with 2 bathrooms. A sprawling loft with 1 bathroom would most likely not be considered a comp for it because the layouts are so different. And 2 bathrooms are going to have a different value than 1 because they offer more utility.
- Finishes may not seem that important when locating good comps, but consider: a gutted prewar co-op that is 10 steps behind even having a backsplash is in no way, shape, or form comparable to a brand new, fully-loaded, 1 bedroom in a brand new building with a wine cooler and on demand boiling water from the tap. Yes—that exists—and yes, it is the stuff that dreams are made of. SO, having similar finishes is important when zoning in on quality comps. Think: paint, flooring, lighting fixtures, cabinets, appliances, etc. Laundry facilities are another big one. Is there a washer/dryer in unit? In the building?
- Lower monthly upkeep costs increase a property’s valuation, and higher monthly upkeep costs decrease its valuation. The lower monthly costs make the property more desirable, which commands a higher price. Similarly, if a unit is under tax abatement for the next 3 years, that makes the property’s valuation go up. So comparing these figures will be very helpful in deciding if a property is a true comp or not.
There are a lot of elements to consider when finding good comps. And—your broker and the appraiser can use completely different comps! Your broker may use some to help set prices and the appraiser may use totally different comps to calculate valuation for financing.
If you’re selling: good comps help smooth the way for buyers to secure financing and seal the deal.
If you’re buying: good comps help you get that financing and let you know that you’re paying the going rate.
The market is constantly changing and property values keep inching upward. Don’t worry about finding the doppelgänger of your dream home, but about finding other properties that are headed the same way as the subject property i.e. being treated similarly moving forward.