Tips on Selecting a Sales Comparable

We’ve already talked about the difference between a comparable and a sale, and how it can affect the pricing when done wrong. For those who haven’t read the previous article, please don’t hesitate to go to the Blog page on our website.

Today we will share with you some tips on how to pick a comparable. These may look basic but if done and combined well, you’ll be sure to get your target listing price. As an experienced appraiser, I’ve already come across a lot of challenges when it comes to selecting a comp.  

Here are my 5 tips:

1. Correct Measurement

First, make sure you have the right square footage or GLA  of the property. This is, I think, the most important factor in pricing a listing. You may have the house plans as a good resource, but it’s always better to trust but verify.  When choosing comparables, ideally the size difference is not more than 15-20%. Meaning you may have some sales that are up to 20% smaller, and some sales that are up to 20% larger. 

1. Comp’s Location

The location of the subject and the comparables should all be in the same market area.  As we have all heard over and over – the first rule of real estate is location, location, location.  Sales taken from a different market are usually less than ideal and may not adequately represent all of the market drivers of value.

1. Quality, Condition and Property Features

It is also important to consider the quality and condition as well as any other  property features. The comparables chosen should reflect a similar market appeal in quality, condition and amenities.  Think of if you went into a representative sample of houses in the subject’s neighborhood, or market area. Would you find that marble counters and custom hardwood floors are the norm, or maybe a wood laminate and granite is more indicative. Consider the quality of the building materials used not just in the finishes, but in the structure itself.  The condition is best described as the “effective age”. How old does the property feel? Has it been recently updated or renovated or did you just enter a time capsule from 1955. Also look for sales that share similar amenities like a pool, double garage, or outdoor kitchen. Sometimes it helps to do a little research on what the drivers of market value are for a specific area in order to select better comparables.

1. Same Style

Here in New Orleans we have a gumbo pot of different style homes in every neighborhood, making it sometimes impossible to find sales of a similar style.  It is still important to look for similar styles, but if the best available sales are different, think about a typical buyer and whether that difference would likely factor into their decision making.    

1. Sold Recently

A more recent sale is always better.  In a perfect world, we would have an overabundance of closed sales in every market area to choose from, but this often is not the case, especially in the slower seasons of the year.  As an appraiser, I have gone back as far as five years in some instances to look for a comparable for a very unique property or one that is located in an area that has very few sales.  

Do you have questions on how to select a comp? Ask us!! Click here to shoot us a message.