Real estate agencies maintain lists of comparables, which are average prices paid for recently sold homes. These statistics help agents determine the correct market values of properties currently for sale.
When calculating comparables, agencies first define a geographic area. This may include a specific neighborhood or district within a city. They then identify recently sold properties within the area with identical or similar physical characteristics. This may include the number of rooms, year of construction, or size of the lot.
Agents review the various purchase prices and determine an average market value. They provide the information to potential buyers and sellers to determine a reasonable price for newly listed houses.