Real estate comps can be very accurate, but it often just depends on how similar the properties are. After all, comps are a way to get a general sense of the real estate market. When someone is selling a home, looking at the sale prices of nearby homes that have similar features can help set the market value.
One way that comps increase accuracy is that they apply to actual sale prices, not listing prices. A person can theoretically list their home for any price that they want. But just because they list it for $500,000 does not mean they will get that much money. If the house actually sells for $200,000, the sale price is much more important to other potential sellers in the area.
When things get complex
Even comps can be rather complex, however, and may differ significantly. It is important to look for a home with similar square footage, a similar number of bedrooms and things of this nature.
But even when doing so, location can make a big difference. In an urban setting, for example, there can be a drastic difference in neighborhood amenities for two houses that may be within a mile of each other. They seem relatively close, and they may be in a rural community, but the value of those houses could differ dramatically based on their proximity to good schools, entertainment options, local parks and much more.
In other words, just because two homes are statistically similar does not mean they have the same market value. Location plays a major role, so it is important to find nearby comps from the same neighborhood to get accurate home values.
Negotiations over price are just one step to take during a real estate transaction. It can help to work with an experienced law firm while considering disclosures, contractual obligations and other fine details of any residential real estate sale.