Dropmodel Release: An Inside Look at Our Real Estate Sales Comparables Tool
Sales comparables reports are one of the most powerful tools in a real estate professional’s toolbelt. They are used to inform high-impact decisions around the most pivotal parts of a real estate investment: buying and selling.
With sales comps playing such a key role in real estate decisions, we knew we wanted this to be one of our very first tools. Our Sales Comparables Tool offers a pre-built template that makes entering and evaluating sales comparables easy, and features Dropmodel Comp Grading which flags properties with a user-defined, high-quality score.
In this article, we’ll explore our sales comps tool in detail and show you how it can be used to help investors, brokers and others real estate professionals make better, faster real estate decisions.
Want to skip straight to the sale comps tool?
Our models, calculators, and tools, strike a balance between level of detail and the power of results. Comprehensive inputs prompt you for as much detail about the property and scenario required. Near-instant results provide you with everything you need for informed decision-making, including project summaries, professional-quality visuals, sensitivity analyses, and more.
All of your properties and models are stored in your account and accessible from your custom dashboard, from anywhere, anytime.
An Overview of Sales Comparables
Sales comparables—also known as “sales comps” or even “comps”—are closed or pending (under binding purchase/sale agreement which may or may not close) real estate transactions involving properties that are similar to a subject property based on a set of transaction and property characteristics. These characteristics include date sold, location quality, distance from the subject property, square footage, year built, number of beds and baths, etc. In a sales comparables report, the properties provide important benchmarks which can be compared against the subject property to determine value (see “sales comparison approach” to valuation).
Real estate professionals “run a comp report” by running a search of properties using predefined criteria, selecting the properties they deem to be acceptably comparable, and adding them to a single source which compares them to the subject property. These reports often highlight the highs, lows, and averages of the quantitative criteria in the comp set.
Comp reports are used across many applications, with the most common centered around buying a property, including appraisals, seeking financing for a purchase or refinance, and making ongoing hold period decisions around selling or capital improvement plans and their impact on value.
In addition to the objective property criteria mentioned above, comp reports often include subjective commentary in a notes section, explaining why a property—whether the subject or a comp—might command a higher or lower value than the subject, or if special conditions about a property or transaction were/are present. For example, a report might include comments about curb appeal, the characteristics of a particular street or neighboring properties, property condition, details about transaction structure, proximity to amenities, etc. All of these comments and criteria are taken into account as a whole by the professional to determine a value or range of values for the subject property.
After a comp report is initially completed, it is often continuously updated—by adding new closed or pending transactions, or removing those that no longer fit the desired criteria—until the use-case no longer applies. By ensuring a comp report has accurate, up-to-date information, participants are equipped with a tool that justifies their pricing assumptions with defensible market data.
Is it a Comp or Did It Not Make the Cut? Using the Dropmodel Comp Grading System
The backbone of a high-quality, useful sales comparables report is having at least a few comparables that have sold recently, are located near the subject property, and share similar property characteristics.
One of the most powerful parts of the Dropmodel Sales Comparables Tool is our grading criteria. Grading criteria applies ranges or selections to several criteria, which are specified by the user. As sales comparables are added to the report, a comp will be awarded with an icon denoting “high quality” if it meets all of the specified grading criteria.
The Sales Comparables Tool
There are many types of resources used for real estate analysis, and often real estate participants will have different definitions and understandings of each. Here’s our breakdown:
Model: Thorough analysis using an abstract representation of one or several possible scenarios for a property. This type of resource usually consists of an input phase and a comprehensive presentation of results. Time to complete: 5-10+ minutes
Quick Calc: A simplified model or other calculator that requires fewer inputs than a model and presents fewer, often less detailed results. Quick calcs usually consist of single-figure results with less accuracy due to fewer inputs. Time to complete: 15 seconds to 2 minutes.
Tool: Any instrument that can aid a real estate professional and that is not used to construct a possible or past real estate scenario. Tools often support one or several inputs used in models or quick calcs, or help make other decisions related to a property or business case. Time to complete: varies widely based on the tool and use case.
The Sales Comparables Tool consists of three steps: entering the subject property info, entering individual sales comparables, and if desired, entering grading criteria. There are over a dozen property-related fields that can be used for each property entered, including the subject.
Within the comp property sections, some of the fields will show the property information and the variance when compared to the subject property. For example, if the subject property has four bedrooms, and the comparable property has three bedrooms, a “-1” will appear in the “# of bedrooms” field under the entry, which means the comparable has one less bedroom than the subject. This can be helpful when scanning the report, deciding which properties to keep or remove, and adjusting grading criteria.
At the bottom of the sold and on-market/pending sections, the tool shows a computed average, highest, and lowest figures for a particular criterion using all of the comps in that section.
The Map View allows you to see exactly where each comp is relative to the subject property.
Let’s Run the Comps
Sales comparables guide some of the most important and frequent decisions a real estate professional faces. The research behind a comp report can be time-consuming and involve hands-on research to discover more details about a transaction. Keeping each report saved and accessible can save investors time by preventing the need to start their research from scratch. Within Dropmodel, all previously run reports are saved and accessible via the dashboard.
We’re constantly adding new models, quick calcs and tools, enhancing existing ones, and adding helpful articles and tips from other professionals that are using Dropmodel to make better, faster real estate decisions. Sign up below to be included on future updates. We hope to hear from you soon!