Appraisers choose comparable sales by finding recently sold homes that match yours in location, size, age, condition, and property type. I prioritize homes within your neighborhood that sold in the last 3-6 months, then adjust for differences to arrive at your value.
What Makes a "Comparable" Home
A comparable home should be:
- Similar in location — Same neighborhood or very close
- Similar in property type — Single-family to single-family, condo to condo
- Similar in size — Within 10-20% of subject property square footage
- Similar in age — Within 5-10 years (newer is better for comparison)
- Similar in condition — Comparable condition levels
- Recent sale — Sold within last 3-6 months (or longer in slow markets)
The goal is to find homes that are as similar as possible. The more similar, the less adjustment needed.
How I Find Comparables
County Records: I use county assessor data and MLS records to find recent sales in your neighborhood.
MLS Database: Multiple Listing Service has all recent sales, including price, date, and basic property details.
Public Records: County tax records, deed recordings, and assessment data.
Local Knowledge: After 33 years in Orange County, I know neighborhoods, price patterns, and where to find comparables in different areas.
Appraisal Software: I use database tools that compile all this information and flag potential comparables.
Selection Process
I'm looking for 3-5 strong comparable sales (sometimes more).
Here's my mental checklist:
- Location: Is it in the same neighborhood or comparable neighborhood?
- Condition: Is it similar condition to the subject property?
- Age: Is it a similar vintage?
- Size: Is square footage within reasonable range?
- Features: Does it have similar features (garage, pool, view)?
- Sale Price: Does it make sense relative to my other comps?
- Days on Market: Did it sell quickly or sit? (indicates pricing correctness)
- Motivation: Was it a normal sale or a distressed/motivated situation?
If a sale seems like an outlier, I might exclude it and find a better comp.
Adjustments for Differences
Perfect comparables don't exist. So I adjust for differences.
Example:
Subject Property:
- 2,200 sq ft
- Built 2005
- 3-car garage
- No pool
- Ocean view (partial)
Comparable 1:
- Sold for $600,000
- 2,100 sq ft
- Built 2004
- 2-car garage
- No pool
- No view
Adjustments:
- Add $10,000 for 100 sq ft larger (at $100/sq ft)
- Pool would subtract $40,000 if comparable had one (doesn't, so +$0)
- Add $30,000 for 3-car vs. 2-car garage
- Add $50,000 for partial ocean view
Adjusted Sale Price of Comparable: $690,000
Now I compare this adjusted comp to other comparables and form a value range for the subject property.
Market Conditions Adjustment
I also adjust for market conditions. If comps sold 6 months ago in a falling market, they might be worth less today.
If comps sold in winter when fewer homes are on the market, I might adjust for seasonal differences.
These adjustments are subtle but important.
Geographic Limitations
In tight-knit neighborhoods, I might have few comparables. In a sprawling area, I might have many.
Tight Neighborhood (Irvine master-planned community): I stay within that specific community. Homes are similar enough that outside comparables aren't needed.
Sprawling Neighborhood (scattered Costa Mesa): I might look at homes across a larger area because comparables are less dense.
New Construction vs. Resale
New construction homes sometimes have different values than resale homes (even if identical). I adjust for that.
A brand-new home might sell for a premium over a 3-year-old identical home. Or vice versa.
Special Circumstances
I exclude sales that aren't "arm's length" (fair market value) transactions:
- Probate sales — Estate sales often don't reflect fair market value
- Foreclosures — Distressed sales below market
- Family transfers — Often below market
- Short sales — Lender-approved but below market
- Development properties — Land sales don't compare to improved homes
I want sales that represent normal market transactions.
Data Quality
The better the comparable sales data, the better the appraisal.
In areas with lots of recent sales and good data, appraisals are easy. In areas with few sales, I have to work harder and use broader comparables.
Orange County has excellent data. Rural areas might have limited data, requiring wider comparables.
What Could Go Wrong
Insufficient Comparables: In a slow market or unique neighborhood, I might struggle to find 3-5 good comps.
Data Lags: MLS data can lag. I might not have information on a recent sale.
Comparable Selection Bias: If I'm not careful, I could unconsciously pick comps that support a certain value. That's why I use objective criteria.
How to Challenge Comp Selection
If you disagree with my comps, you can challenge the appraisal by showing:
- A more recent sale that's more comparable
- A sale I missed that better represents value
- Evidence that my comp selection was biased
This is legitimate. Good comps matter.
The Bottom Line
Comparable sales are the foundation of appraisals. Picking the right ones—similar in location, size, condition, and timing—is critical to accurate valuation.
I spend significant time on comp selection. It's where appraisal accuracy lives or dies.
That's why comparable sales are called the "market approach"—they're the market telling us what homes are actually worth.
I listen to that market signal carefully.