Key Takeaways
- The sales comparison approach is the primary residential valuation method based on the principle of substitution.
- Comp selection hierarchy: location > condition > size > features.
- Adjustments follow a mandatory sequence with net ≤ 15% and gross ≤ 25% limits.
- Use comp data to support offers, challenge appraisals, and make evidence-based investment decisions.
This recap consolidates the core comparable sales analysis concepts from Track 1. Review the selection criteria, adjustment methodology, and practical applications before advancing to applied practice in Track 2.
Key Selection Criteria
Comp selection follows the hierarchy: location first, then condition, size, and features. Ideal comps are within 6 months and 0.5 miles, with similar size (±15%), age (±10 years), and condition. Use a minimum of three comps; five is preferred. Expand search parameters systematically when ideal comps are insufficient. Only sold listings constitute valid comps—active listings serve as ceiling checks only.
Why it matters: Understanding this concept is essential for making informed investment decisions.
Adjustment Methodology
Adjustments follow the mandatory sequence: property rights, financing, conditions of sale, time, location, then physical characteristics. Use paired sales analysis or market-supported rules of thumb to derive adjustment values. Net adjustments should not exceed 15% and gross adjustments should not exceed 25% of the comp's sale price. Always adjust the comp to the subject—never the subject to the comp. Verify all comp prices against county deed records to catch errors.
| Step | Action | Key Consideration |
|---|---|---|
| 1 | Select 3-5 comps | Location > Condition > Size > Features |
| 2 | Verify sale prices | Cross-reference MLS with deed records |
| 3 | Apply transactional adjustments | Rights, financing, sale conditions, time |
| 4 | Apply property adjustments | Location, then physical characteristics |
| 5 | Check adjustment limits | Net ≤ 15%, Gross ≤ 25% |
| 6 | Reconcile adjusted values | Weight by reliability, not simple average |
Comp analysis workflow summary
Why it matters: Understanding this concept is essential for making informed investment decisions.
Key Takeaways
- ✓The sales comparison approach is the primary residential valuation method based on the principle of substitution.
- ✓Comp selection hierarchy: location > condition > size > features.
- ✓Adjustments follow a mandatory sequence with net ≤ 15% and gross ≤ 25% limits.
- ✓Use comp data to support offers, challenge appraisals, and make evidence-based investment decisions.
Sources
- Appraisal Institute — Sales Comparison Methods(2025-03-15)
- Fannie Mae — Appraisal Guidelines(2025-03-15)
Common Mistakes to Avoid
Treating the Comparable Sales Analysis topics as purely theoretical without applying them to actual markets.
Consequence: Knowledge without application does not improve investment outcomes.
Correction: Practice applying these frameworks to real properties and markets before making investment decisions.
Moving to advanced topics before mastering the foundational concepts covered in this track.
Consequence: Advanced analysis builds on fundamentals; gaps in foundation produce unreliable advanced results.
Correction: Ensure comfort with all core concepts before progressing to applied or advanced tracks.
Test Your Knowledge
1.What is the maximum recommended net adjustment as a percentage of a comp's sale price?
2.In the comp selection hierarchy, which criterion takes the highest priority?
3.A property sold for $380,000 with $12,000 in seller-paid closing costs. What is the effective sale price for comp purposes?