Key Takeaways
- Good comps share size, age, neighborhood, and recency with the subject property — use 3-5 closed sales.
- Only closed sale prices are reliable — not listing prices, online estimates, or tax assessments.
- Adjust comps for differences in size, bedrooms/baths, condition, lot size, and garage presence.
- Location adjustments are the most subjective and significant — local knowledge is essential.
Comparable sales analysis (comps) is the foundation of residential property valuation. This lesson teaches you to select, adjust, and interpret comps to determine accurate market values.
Selecting Comparable Sales
Good comps share key characteristics with the subject property: similar size (within 15% of square footage), similar age (within 10-15 years), same neighborhood or sub-market, and sold within the last 6 months (3 months in active markets). Ideally, use 3-5 comps to establish a value range.
Sold prices are the gold standard — not listing prices, not Zillow estimates, not tax assessments. Only closed sales reflect what a willing buyer actually paid a willing seller. In markets with limited sales volume, you may need to expand the geographic radius or time window, but note these compromises in your analysis. Wider search parameters reduce precision.
Making Adjustments
No two properties are identical, so comps require adjustments to account for differences from the subject property. Standard adjustments include: size ($30-$80/SF depending on the market), bedrooms/bathrooms ($5,000-$15,000 per additional bedroom/bathroom), age/condition ($10,000-$30,000 per quality tier), lot size ($1-$10/SF depending on market), and garage ($10,000-$25,000 per bay). Adjust from the comp to the subject — if the comp has a feature the subject lacks, subtract the value of that feature.
Location adjustments are the most subjective and potentially significant. Two homes identical in every physical attribute can differ by 20-30% in value based on school district, neighborhood, or proximity to amenities. Location adjustments require local market knowledge that cannot be derived from data alone — this is where relationships with local agents and appraisers become invaluable.
Key Takeaways
- ✓Good comps share size, age, neighborhood, and recency with the subject property — use 3-5 closed sales.
- ✓Only closed sale prices are reliable — not listing prices, online estimates, or tax assessments.
- ✓Adjust comps for differences in size, bedrooms/baths, condition, lot size, and garage presence.
- ✓Location adjustments are the most subjective and significant — local knowledge is essential.
Sources
- Appraisal Institute — Residential Valuation Methods(2025-01-15)
- Fannie Mae — Appraiser Independence Standards(2025-01-15)
Common Mistakes to Avoid
Using listing prices instead of closed sale prices for comparable analysis.
Consequence: Listing prices reflect seller aspirations, not market reality. Properties often sell 3-8% below listing, making listing-based analysis systematically inflated.
Correction: Use only closed (sold) transaction prices from MLS, county records, or data providers. Listing prices are marketing, not valuation.
Failing to make proper adjustments between comps and the subject property.
Consequence: Comparing a renovated 4BR home to an unrenovated 3BR home without adjustments produces a meaningless value estimate.
Correction: Apply standard adjustments for size, bedrooms/baths, age/condition, lot size, and garage. Document each adjustment with market-based reasoning.
Test Your Knowledge
1.What is the gold standard for establishing property value in comparable analysis?
2.How many comparable sales should you ideally use?
3.What type of adjustment is the most subjective and potentially significant?