What are real estate comps and why do you need them?
Real estate comparables or “comps” are recorded prices of properties similar to one that is on the market. They are used to estimate the value of the listed property since the prices paid by other buyers tell you a lot about how much you should pay as well.
If you are looking at a co-op or condo, ideally the comps will be in the same the building. Once you leave the building, a lot of variables change so only when there haven't been many recent sales should you go outside.
If you are looking at a house, the comps will be other houses in the neighborhood. Since we all know how important location is in real estate, they should be as close as possible. If you go a few blocks away, especially in NYC, the location can change significantly.
Without comps, it is extremely difficult to determine a property’s market value. Comps show you the prices buyers are willing to pay in today’s market and, conversely, the prices sellers are willing to accept.
Each comp allows you to leverage the work of the listing agent on that property. They brought it to market, tried to get the highest possible price and eventually accepted the reported price. If a buyer or seller is looking for a price that's materially different than the comps suggest, there should be a clear reason.
Where do you find real estate comps?
In NYC, all real estate comps come from the city’s Automated City Register Information System. You may know it by its acronym, "ACRIS." All sales transactions in Manhattan, Queens, Brooklyn and the Bronx are recorded there. Staten Island has its own system.
Rather than visiting ACRIS’ website, a more user friendly way of navigating comps is on Streeteasy. You will be able to easily see recent sales on each building's page.
In a perfect world, you would be able to trace all listings to the eventual sales price but that is not always the case. Sometimes the proper filing was never made and sometimes the listing agent didn't use the correct apartment number so it doesn't match the property record. For example, last year we represented the buyer of a unit listed as “Maisonette-C” but it’s legal name was #1C so they did not link to one another -
Most of the time you can sort these out as they'll have similar names, prices and dates but it does require a closer eye.
What you should look for in comps?
Remember that “comps” is short for “comparables.” If the properties aren’t similar, they’re not relevant. But what does comparable actually mean?
Say you are looking at a 4th floor walkup co-op in the West Village. Ideally you would be able to look directly across the hall at a mirror unit. That would be the best comp you could hope for as it is virtually identical.
In all likelihood, you're not going to have that comp, either because that identical apartment doesn't exist or it hasn't sold recently.
The next best comps would be recent sales in the building. Of course you'll have to make adjustments for size, condition, floor, layout, etc but a lot of variables like location, amenities and building finances are consistent.
If the building hasn't seen many transactions lately, you'll be forced to look externally but you still want to stay focused. You can't compare that 4th floor walkup to a brand new luxury condo a few blocks away.
What do you do if there aren’t comps?
There are two situations where comps are often unavailable.
We just touched on the first one - small buildings. If you’re looking at an apartment in an 8 unit building, there’s a good chance none of the other 7 have sold recently.
The second situation is when you’re considering a unique property. For example, maybe you’re looking at a unit with a huge patio. There have been sales in the building but none of them have patios. How much is that patio worth?
In both of these situations, you’ll be forced to look outside the building for comps. Maybe there was a sale with a big patio down the block that could help guide you. You should also look at other listings on the market. If you are set on a big patio and there are ten candidates on the market, check them out and see which is the best match for you.
How to get help with comps
While comps aren’t as scary as they may seem, there is a lot of information to process and working with a professional can certainly help. If you’re considering an offer and would like assistance with the comps, please call Yoreevo at 212-365-0151 or email me, James McGrath, co-founder of the company at james@yoreevo.com. Not only would we be happy to help with the comps but if you’d like to work with us on the transaction, we’ll save you up to an extra 2% with a commission rebate!
