Comparable sales are the sale prices of recently sold properties that share similar features, such as the location, size, and style. Based on the information collected, an estimated market value of a home that is up for sale is made. Comparable sales also serve as the basis for buyers who refuse to pay more than the value of a property that’s similar to what they are about to buy.
Homes being compared are usually within the same neighborhood or in close proximity with one another. Although comparables include properties that are still listed for sale, the comparison will not have as much weight as those properties already sold.
What factors are considered for comparable sales?
Not every similar property are taken into consideration for a comparable sale. There are several components that make a property qualified to be called “similar” with the property to be purchased.
Period of selling
How long was the previous estate sold? Is the value of the property in the past the same as today? Generally, appraisers use properties that have been sold 3 months prior as comparison. Due to the fact that market conditions change, comparables that have been sold a year ago is of little value.
Age of a property and material used
Old houses doesn’t really mean that they have lower value or vice versa. Property condition is taken seriously so comparisons made will have close results.
Size of a property
There should be a +/- 20% difference between the comparables to make a good comparison.
Comparables should be in the same neighborhood. In urban areas, they should be less than a mile radius.
A split-entry home should only be compared with a property with a similar style.
Comparables must be of the same conditions and/or finish levels.
Number of bedrooms and bathrooms
The bed & bathroom count between comparables should be similar. While an extra bed or bath is ok, two or three more are not.
Views and lot size
A waterfront property should only be compared with another waterfront property. The size of land should not have a huge difference either.