How to Accurately Run Comps on MLS: Tips from Industry Experts

The Multiple Listing Service (MLS) is the backbone of real estate industry analytics. To ascertain the value of properties effectively, understanding how to run comps on MLS is pivotal.

What is MLS?

‍MLS is a structured platform where real estate professionals register properties available for sale or lease. This database, with its expansive data, stands as an indispensable tool for accurate property valuation.

‍Accurate property valuation hinges on reliable comparables. Utilizing MLS comps provides a robust framework to gauge property values, ensuring stakeholders make informed decisions.

What Are Comps?

"Comps" is a term commonly used in the real estate industry, short for "comparables." Essentially, comps are recently sold properties that are similar in size, condition, location, and features to the property you're trying to value or sell. They serve as a basis for determining the current market value of a property.

‍MLS comps are properties listed in the MLS that closely resemble a given subject property. These serve as reference points, offering a spectrum of values within which the subject property likely falls.

‍To navigate the real estate market, it's essential to have a concrete reference system. MLS comps provide a rigorous and systematic approach, eliminating the guesswork in property valuation.

Learn How To Run a Comp (Step-By-Step Guide):

The process of running comps using the Multiple Listing Service (MLS) is fundamentally the same regardless of the location or region you're assessing. The foundational principles are universally applicable. However, the specificity of details, market trends, and external factors will naturally vary from one locale to another. For the purpose of providing a clear, step-by-step demonstration, we will utilize Cook County as our example. But remember, the methodology outlined here can be adapted to virtually any region or area with an active MLS system.

1. Access the MLS Platform: Ensure you or your real estate professional have access to the Multiple Listing Service (MLS). For Cook County, you'd want to be part of an association that provides access to the MLS relevant to the Chicago area.
2. Input Building Details: Once logged in, navigate to the search or "comparables" feature on MLS. Begin by inputting the address or the Property Index Number (PIN) of the Cook County building you're assessing.
3. Narrow Down Search Parameters: Adjust the search settings to match the characteristics of the building in question. This might include details like building type (e.g., commercial, residential), square footage, number of units, age, and location.
4. Search for Similar Listings: Once you've set your parameters, start your search. MLS will provide a list of buildings that match or closely resemble your specified criteria. These listings are your potential comps.
5. Review Comparable Listings: Analyze each of the returned listings, paying attention to their sale prices, sale dates, conditions, features, and any special notes or comments by listing agents.
6. Adjust for Differences: Since no two buildings are identical, adjustments are necessary. For example, if a comparable building has a recently renovated facade but the building you're assessing doesn't, you'd make a downward adjustment to your building's potential value.
7. Analyze Market Trends in Cook County: Using MLS’s market data tools, review the recent trends in Cook County, particularly in the neighborhood of the building. Are sale prices on an upward or downward trajectory? This can help you make more informed adjustments.
8. Compile and Calculate: Once you've reviewed several comparable listings and made necessary adjustments, calculate the average sale price of these comps. This average will give you a ballpark figure of the building's potential market value.
9. Evaluate External Factors: Take into consideration any current or upcoming changes in Cook County that might impact property values. This could be new infrastructure developments, zoning changes, or economic shifts.
10. Document Your Findings: Organize your research into a structured report. List out each comparable property, the adjustments made, and your final valuation estimate for the Cook County building.
11. Consult with Local Experts: MLS is a powerful tool, but local expertise can't be underestimated. Discuss your findings with local real estate professionals who have hands-on experience with Cook County properties. They may provide additional insights or point out any oversights.
12. Review and Refine: As new listings are added to MLS and market conditions evolve, regularly revisit and refine your comps to maintain an accurate and up-to-date valuation.

Guidelines for Precise MLS Comps

Upholding consistency in the evaluation process is important. It's vital to ensure that criteria remain consistent throughout. Any alteration to the parameters midway can compromise the integrity of the results.

Each variable involved in the assessment holds significant importance. A meticulous examination of all variables is essential, as it's crucial to understand the implications each has on the property's value. Due to the ever-changing nature of the real estate market, it's imperative to engage in periodic market monitoring. Being attuned to any shifts in the market is the only way to guarantee that the comps remain relevant and accurate.

Potential Pitfalls in MLS Comps Execution

While the MLS is undoubtedly a great resource in real estate, an excessive dependence on its data alone is not the best strategy. It's always wise to cross-reference its information with additional sources to ensure the highest degree of accuracy. Another common pitfall is overlooking the impact of property upgrades and renovations.

These improvements can considerably alter a property's value, and neglecting to factor them in can lead to substantial valuation errors. Furthermore, one must never underestimate the significance of a property's location. The value of a property is deeply intertwined with its location, and any oversight in accounting for location-based variables can distort valuation results.

Conclusion

MLS comps stand as an authoritative and systematic method for property valuation. Mastery over this tool empowers stakeholders to make data-driven decisions in the real estate sphere.

FAQs

What is the primary function of MLS?

MLS facilitates the listing of properties available for sale or lease, providing a consolidated data source for real estate professionals.

Why are MLS comps paramount in property valuation?

They provide an empirical and systematic approach to gauging property values, ensuring precision and reliability.

Is MLS the sole reference point for comps?

While invaluable, MLS should be used in conjunction with other sources for a holistic property valuation.

How timely should comps be?

Use properties listed within the last 3-6 months to ensure data relevancy.

How does location influence property value?

Location dictates factors like accessibility, desirability, and infrastructure, all of which impact a property's value.