When an investor client asks, "What is a real estate comp?" you shouldn’t just give them a textbook answer—you should provide them with an easily understandable, action-oriented process. In 2025's fast-paced lending market, properly evaluating comparables for loans can make or break transactions. With rates hovering around 6.8% and housing supply still constricted in most markets, nailing real estate comps is more essential than ever. A tiny error in a property's after-repair value (ARV) can be the difference between a profitable flip and a money-losing blunder.
The problem? Not all comps are equal. Although online automated valuation models (AVMs) from platforms such as Zillow or Redfin provide a rough estimate, they tend to overlook the subtleties important to real estate investors. In reality, a study conducted recently revealed that AVMs may be up to 10-15% off in fast-moving markets. That's why smart brokers are pushing beyond the algorithms and becoming adept at manual comp analysis—a skill that's gaining greater value in today's competitive lending environment.
At RCN Capital, we’ve helped thousands of brokers fine-tune their comp evaluation process to secure better deals and minimize risk. Whether you’re underwriting a fix-and-flip or sizing up a buy-and-hold rental loan, your skill finding comparables translates directly into better loan decisions, stronger client trust, and increased commission opportunities.
The following are five vital tips—backed by industry facts and experienced knowledge—to assist brokers with mastering how to determine what a home is worth and use comps to make more intelligent loan decisions.
Real estate comps (short for "comparables") are recent sales of comparable properties within the same market as a target home. Two-thirds of 2021 enterprise-backed mortgage appraisals included five or more comps, according to FHFA data. Brokers who exceed that standard can achieve even more accurate results.
Record your criteria upfront in a loan memo or underwriting file. Consistency not only enhances accuracy but also shows lenders and investors that your comps analysis is solid and reproducible.
No two properties are alike. A 1,500-sq-ft house with a newly installed kitchen warrants a premium over one that requires a full rehab. Fannie Mae statistics reveal appraisers commonly manipulate comp values by as much as 5–10% for major upgrades.
Develop a standard adjustment matrix in your underwriting tool. This accelerates analysis and keeps adjustments based on documented local market premiums.
Internet-based tools such as Zillow, Redfin, and CoreLogic can bring comp data to the surface in seconds, but they're only as accurate as their source public records. Brokers who use only automated estimates will risk 3–5% valuation mistakes that can cause loan approvals to fail.
Use technology complemented by boots-on-the-ground research. A 15-minute neighborhood drive will uncover recently changed development, such as new construction or zoning status changes, affecting comp validity.
For rental portfolio and DSCR financing, lenders pay attention to cash flow more than sales price.
Lead lenders to a side-by-side comparison table of 3–5 rental comps with rent, GRM, NOI, and DSCR metrics. This clearly illustrates cash flow feasibility, accelerating underwriting approval.
A list of figures in isolation is not enough. Brokers who present a compelling argument for their comps—blending charts, images, and a brief written report—gain lender trust and client confidence.
Utilize BLN Software’s Loan Origination System to gain access to streamlined templates for loan applications, including pieces for comps and market analysis.
Your ability to effectively evaluate real estate comparables is more than a useful skill, it gives you a competitive edge. Brokers who take the time to dig deeper into comps (beyond what Zillow provides) are the ones winning repeat business from investors. They’re also the ones avoiding costly valuation errors that can derail deals or lead to overleveraged loans. By creating stringent criteria, correcting for nuances, using technology and on-site checks, assessing rental comps for income loans, and arranging your findings in clear, visual presentations, you'll:
In the data-driven lending market of 2025, brokers who are top-notch at comps and can effectively communicate their analysis will be where it's at. Begin incorporating these five suggestions into your workflow today, and watch your investment-lending pipeline flourish.
To help your clients maximize the returns on their next investment, partner with a lender that can provide you with the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors and lending partners. If you are looking to offer real estate financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.