Comparable sales, commonly called “comps,” are an important part of many residential appraisals. But choosing a good comp involves more than finding a nearby home with the same number of bedrooms.
A good comparable sale is a property that competes with the subject property in the same market and is sufficiently similar to provide meaningful evidence of value. Appraisers consider factors such as location, property characteristics, sale date, market conditions, and the circumstances surrounding the transaction. Differences between the comparable and subject property are then analyzed and adjusted when supported by market evidence.
Key Takeaways
- A comp is a property sale used as market evidence when developing an opinion of value.
- Location, similarity, recency, and transaction conditions are important considerations when selecting comparable sales.
- Comparable properties do not need to be identical to the subject property.
- Appraisers analyze differences and make market-supported adjustments when appropriate.
- The closest or most recent sale is not automatically the best comparable.
- Strong comparable sales help support a credible and defensible opinion of value.
What Is a Comp in a Home Appraisal?
A comparable sale is a property transaction that provides relevant market evidence for valuing another property.
In the sales comparison approach, an appraiser identifies properties that buyers would reasonably consider alternatives to the subject property. The appraiser then analyzes how those properties compare with the home being appraised.
Relevant characteristics may include:
- Location
- Property type
- Living area
- Age
- Design and style
- Condition
- Quality of construction
- Lot size and characteristics
- Bedrooms and bathrooms
- Garage and parking
- Renovations and improvements
- Views
- Accessory structures
- Other characteristics recognized by buyers in the local market
The goal is not to find an identical property. It is to find the most relevant market evidence available.
How Close Does a Comparable Sale Need to Be?
Appraisers generally prefer comparable sales from the same competitive market area, but there is no universal distance requirement that applies to every appraisal.
For a home in a subdivision with many similar properties, the strongest comparables may be only a few blocks away. Buyers in that market may strongly distinguish between neighborhoods, school districts, subdivisions, or even particular locations within the same neighborhood.
In rural areas or markets with limited sales activity, an appraiser may need to search farther away to find properties that are truly comparable.
A property five miles away that appeals to the same buyers can sometimes provide better market evidence than a property half a mile away that is substantially different.
The appraiser’s job is to understand the market area buyers actually consider, rather than simply drawing an arbitrary radius around the subject property.
How Similar Does a Comp Need to Be?
A good comp should be sufficiently similar that meaningful differences can be identified and analyzed.
Appraisers consider characteristics that buyers and sellers recognize as influencing value. Depending on the property, those differences might include square footage, condition, quality, lot size, location, garages, views, remodeling, or other features.
Perfect matches are uncommon.
For example, a comparable property may have a larger living area, an additional bathroom, a superior view, or a recently remodeled kitchen. Those differences do not necessarily make the property unusable as a comparable.
Instead, the appraiser determines whether the market recognizes those differences and whether an appropriate adjustment can be supported.
How Do Appraisal Adjustments Work?
Appraisal adjustments account for relevant differences between the subject property and comparable sales.
The important point is that adjustments should reflect market reaction, not simply the cost of adding or removing a feature.
For example, a bathroom might cost a certain amount to construct, but that does not necessarily mean buyers will pay that same amount more for a house with an additional bathroom. The appraiser analyzes market evidence to determine how buyers respond to the difference.
Adjustments may be considered for factors such as:
- Living area
- Condition
- Quality
- Location
- Site characteristics
- Bathrooms
- Garages
- Views
- Renovations
- Amenities
- Market conditions
A comparable requiring several adjustments is not automatically a bad comp. What matters is whether the property remains meaningful market evidence and whether the differences can be credibly analyzed.
How Recent Should Comparable Sales Be?
Appraisers generally prefer recent sales because they provide evidence of current market behavior, but there is no single time limit that makes a sale acceptable or unacceptable.
In a market with frequent sales of similar properties, recent transactions may provide abundant evidence. In rural areas, luxury markets, or neighborhoods with limited turnover, older sales may still be useful.
Market conditions also matter.
If prices have changed between the comparable’s contract date and the appraisal’s effective date, the appraiser may analyze whether a market conditions adjustment is appropriate.
An older sale that is highly similar to the subject property can sometimes provide better evidence than a recent sale that is significantly different.
Recency is therefore important, but it is only one part of comparable selection.
Does a Comp Need to Be an Arm’s-Length Sale?
Appraisers generally look closely at the circumstances surrounding a transaction to determine whether the sale provides reliable evidence of market value.
An arm’s-length transaction typically involves unrelated parties acting independently and in their own interests without unusual pressure.
However, a foreclosure, short sale, family transaction, or other atypical sale is not automatically excluded from an appraisal.
The appraiser investigates the transaction and determines whether its conditions affected the sale price. In some markets, distressed transactions may represent an important part of normal market activity and therefore cannot simply be ignored.
The key question is whether the transaction provides meaningful evidence of how the relevant market behaves.
Why Didn’t the Appraiser Use the House Down the Street?
The nearest property is not necessarily the most comparable property.
A nearby sale might appear similar but differ significantly in ways that matter to buyers. It could have:
- Superior condition
- Extensive renovations
- Different construction quality
- Significantly different living area
- A larger or more usable lot
- A different view
- Different zoning or property use
- An unusual sale condition
- A different property type or design
- A location influence not shared by the subject
An appraiser evaluates the entire transaction and property rather than selecting sales based only on distance.
This is also why homeowners sometimes identify a sale they believe should have been used while the appraiser selects another property farther away.
Are Active Listings Considered Comparable Properties?
Active and pending listings can provide useful information about current competition, although closed sales generally provide stronger evidence of what buyers have actually paid.
Listings can help an appraiser understand the property’s competitive position and current market conditions. Pending sales may also provide useful information, although the final transaction price may not yet be publicly available.
The relevance of listings depends on the assignment, property, and market.
What Makes a Comparable Sale Weak?
A comparable becomes less useful when its differences from the subject make it difficult to draw meaningful conclusions about value.
Potential concerns can include:
- A substantially different location
- Major differences in property type or design
- Significantly different condition or quality
- Unusual transaction circumstances
- Major differences in site characteristics
- A sale from a different market period without adequate market analysis
- Features that appeal to a substantially different group of buyers
No single factor automatically disqualifies a comparable. Appraisers consider the overall quality and relevance of the available market evidence.
Why Do Good Comps Matter in a Home Appraisal?
Good comparable sales provide the market evidence supporting the appraiser’s opinion of value.
When comparable properties reflect the same market and buyer behavior as the subject property, the appraiser can more effectively analyze how differences in location, size, condition, quality, and other characteristics influence value.
This becomes particularly important when an appraisal is being used for lending, an estate, divorce, litigation, a tax matter, or another situation where the value may receive significant scrutiny.
The objective is not simply to find sales that support a particular number. It is to identify and analyze the most relevant available market evidence and develop a credible opinion of value.
Need a Home Appraisal Based on Local Market Evidence?
Scientific Valuation, Inc. provides independent, data-driven real estate appraisals for homeowners, attorneys, lenders, investors, and other professionals.
Led by Certified Appraiser Clay Edwards, we analyze comparable sales, property characteristics, transaction conditions, and local market trends to develop well-supported opinions of value.
Whether you need an appraisal for refinancing, a pre-listing decision, divorce, an estate, litigation, a property tax matter, or another important financial decision, we provide appraisal reports grounded in relevant market evidence.
Frequently Asked Questions
What Is a Comp in a Home Appraisal?
A comp, or comparable sale, is a property transaction used as market evidence when valuing another property. Appraisers analyze how the comparable differs from the subject property and make appropriate market-supported adjustments when necessary.
How Far Away Can an Appraisal Comp Be?
There is no universal distance that applies to every appraisal. Appraisers generally prefer sales within the same competitive market area. In rural or low-volume markets, it may be necessary to search farther away for genuinely comparable properties.
How Old Can an Appraisal Comp Be?
There is no universal age limit for a comparable sale. Recent sales are generally preferred, but older transactions may provide useful evidence when sales are limited or the older property is particularly similar to the subject.
Do Comps Have to Be Identical to My Home?
No. Comparable properties need to be sufficiently similar to provide meaningful market evidence, not identical. Appraisers analyze relevant differences and make market-supported adjustments when appropriate.
Why Didn’t My Appraiser Use a Nearby Sale?
A nearby sale may differ significantly in condition, quality, size, design, lot characteristics, location influences, or transaction circumstances. Appraisers select comparables based on overall relevance to the subject property rather than distance alone.
Can an Appraiser Use a Foreclosure as a Comp?
Potentially. A foreclosure or other distressed transaction is not automatically excluded. The appraiser analyzes the circumstances of the sale and determines whether it provides meaningful evidence of market behavior.