What Are Comparables?

Comparables, or comps as they are sometimes called, are a list of recent home sales that are nearby and similar, or comparable, to the home that is the subject of an appraisal. Typically, comparables are homes that have sold within the last 90 days - the more recent the better. But how do appraisers choose comparable homes?

comparables in real estate appraisals.

Appraisers pick at least three closed sales as comparables when completing a home appraisal. Keep in mind the best comparables are:

  • Similar in size
  • Not to distant from your location
  • In the same town/city
  • Have closed within the last 90 days
  • Have a similar lot size
  • Have similar location influences (like a view, on a busy street, abuts to a school or cemetery, etc.)
 

How Do Appraisers Use Active Listings and Pending Sales In An Appraisal?

In addition to listing three closed sales as comparables, appraisers can also list a few active or pending listings to illustrate current market behavior - which can have a big effect on a home’s value.

Pending sales give an appraiser an indication of what is happening right now in the market, as opposed to sales that have closed up to three months ago. This is important in a quickly appreciating or depreciating market like we saw in early and mid 2022.

To use pending sales as comparables, it is important to have up to six closed sales that range anywhere from six months to one month sold. For example, if these six closed sales all adjust to $100k, then look at two pending sales and make comparisons to show if date of sale adjustments are accurate, or if the market is turning.

 

What If There Are No Direct Comparables In The Same Zip Code?

What happens when a home has a unique feature unlike any other property sold in the same zip code in the last few years?

With no sales in the neighborhood with the same unique feature through the MLS, the next step would be to research if there are any that have not sold or sold privately. This would entail extensive research in county records in conjunction with examining the neighborhood via Google earth to locate any homes with a similar structure to determine if they exist. If they do exist then the next step would be to research the last sale of the property and extract a value that can then be adjusted to the current market.

If there are no sales the next step would be to look in similar neighborhoods throughout the area for sales of homes with this feature to locate any sales that can be used to extract an adjustment for the current home.

 

Can FSBO’s Be Used As Comparables?

Appraisers do look at FSBO sales but rarely use them as comparables because sales used in an appraisal must be verified as to the conditions of the sale i.e. non arms length, short sale, real estate owned etc. and it is rare that the seller of a FSBO can be located or questioned.

The one case where sales not included in the MLS are used is new construction in subdivisions that do not utilize the MLS. In this case the actual contract and HUD-1 would be reviewed from the developer's sales office and therefore are a verified sale.

At the end of the day, it’s up to the appraiser to find the most relevant comps that exist and deliver a credible opinion of value. That’s why it’s important to find a licensed appraiser who has experience in your area when looking for an accurate value for your home or property.

 

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