What Is Adjustment Factor?
Adjustment factors are the tweaks you apply to sold-comps or rental-comps when the comp isn't identical to your subject. A comp with 100 more sq ft might get a −$5,000 adjustment (the comp is "worth" $5,000 less when adjusted to match your subject's size). For rental-comps, a comp with a garage when your subject doesn't might get −$50/month. The goal: make comps comparable so you can derive market-value or market-rent.
An adjustment factor is a dollar or percentage amount applied to a comparable sale or rental to account for differences between the comp and the subject property—such as size, condition, or features.
At a Glance
- What it is: Dollar or % adjustment to comps for differences
- Why it matters: Makes comps comparable; improves accuracy
- Common adjustments: Size, condition, garage, pool, location
- Direction: Add to comp if subject is superior; subtract if inferior
- Use it for: Sold-comps, rental-comps
How It Works
Sales adjustments. Subject is 1,500 sq ft; comp is 1,600 sq ft. If value is $100/sq ft, comp is 100 sq ft larger = $10,000 more. To make comp "equal" to subject, subtract $10,000. Adjusted comp value = sale price − $10,000.
Rental adjustments. Subject has no garage; comp has 2-car garage. Garages add ~$75/month in this market. Subtract $75 from comp rent. Adjusted comp rent = comp rent − $75.
Sources for adjustment amounts. Appraisal manuals, local agents, your own analysis of paired sales (two similar homes that differ by one feature—the price difference is the adjustment). Start with rules of thumb ($50/garage, $25/central AC) and refine.
Net adjustments. Sum all adjustments. If net adjustment is more than 15% of the comp's value, the comp may be too different—consider dropping it.
Real-World Example
Ava in Memphis. Ava had a 3-bed, 2-bath subject. Comp 1: sold $172,000, 1,450 sq ft (subject 1,400). At $100/sq ft, −$5,000 for 50 extra sq ft. Comp 1 adjusted: $167,000. Comp 2: sold $168,000, no garage (subject has garage). +$8,000 for subject's garage. Comp 2 adjusted: $176,000. Comp 3: sold $175,000, same size, subject has older kitchen. −$4,000. Comp 3 adjusted: $171,000. Average: $171,333. She used $171,000 for market-value.
Pros & Cons
- Improves comp accuracy
- Standard appraisal methodology
- Surfaces value drivers (garage, condition, etc.)
- Subjective—adjustment amounts vary
- Over-adjusting can distort
- Requires market knowledge
Watch Out
- Over-adjusting: Net adjustment >15% suggests the comp may not be comparable
- Circular logic: Don't adjust comps to get the value you want
Ask an Investor
The Takeaway
Adjustment factors make comps comparable. Use them for sold-comps and rental-comps. Keep adjustments reasonable; don't over-engineer.