How to read comps for a flip or BRRRR
By Austin Frangoules | Updated | 7 min read
Read comps from the closed sales outward. Start with renovated, arm's-length sales close by and recent, compare each one to your house after the rehab feature by feature, and use active and pending listings only to see where the market is heading. A comp you cannot explain is not a comp.
Sold, pending, active and expired
| Status | What it tells you | Use it for value? |
|---|---|---|
| Sold (closed) | What a buyer actually paid | Yes. This is the evidence. |
| Pending | A buyer agreed on a price, not yet known | As support, once you can learn the price |
| Active | What sellers are asking | As a ceiling and your competition |
| Expired or withdrawn | What did not sell at that price | As a warning about too high a price |
Read each comp in this order
- Sale type. Leave out foreclosures, short sales, auctions and sales between relatives. They do not show what a normal buyer pays.
- Condition. For ARV, you want homes that sold renovated, like yours will be. Read the remarks and look at the photos.
- Location. Same subdivision or school zone first. Watch for highways, rail lines, commercial edges and water that change value block by block.
- Date. Recent beats far. In a moving market, an older sale needs a time adjustment.
- Size and layout. Living area, bedrooms and baths. A third bedroom or a second bath often matters more than a few hundred square feet.
- Features. Garage, lot, basement, pool and view. Price each difference instead of ignoring it.
- Concessions. Seller-paid closing costs inflate the sale price. Many appraisers adjust for them.
What price per square foot hides
Price per square foot is a fine first screen and a poor final answer. Smaller homes usually sell for more per square foot than larger ones nearby, so multiplying a small comp's number by your bigger house overstates value. It also ignores bed and bath count, condition and lot. Use it to find comps, then adjust each one.
- Comp sale price
- $262,000
- Comp has a garage, yours does not
- -$8,000
- Comp has 1 bath, yours will have 2
- +$10,000
- Comp sold with $5,000 seller credit
- -$5,000
- Comp is 120 sq ft smaller
- +$6,000
The adjustment amounts here are illustrative. Use what buyers pay for each feature in your market.
Reconcile to one number
After adjusting three to six comps, give the most weight to the ones that needed the smallest adjustments. Note the spread. If the adjusted values range from $240,000 to $290,000, your ARV is uncertain, and your offer should leave room for that. Read how to calculate ARV for the full method.
Red flags
- Every good comp is a flip by the same investor, at prices nobody else is paying.
- The best comp is across a big road or in a different school zone.
- You need sales more than a year old to make the number work.
- Active listings like yours are sitting for months while you assume a quick sale.
Questions
How many comps do I need?
Three to six good closed sales is a common target. Fewer is fine if they are very close matches; more does not help if they are poor matches.
How far back should comps go?
As recent as possible. Within 90 days is ideal and six months is common. Go back further only when you must, and adjust for time.
Should I use active listings as comps?
Not for value. Asking prices are not sale prices. Use them to see your competition and as a ceiling.
For education only. Not legal, tax, lending or investment advice. Loan programs and guidelines change and vary by lender; confirm current terms with your lender.