What Is Comparable Sales (Comps)?
Comparable sales are recently sold properties used to value a subject property. Appraisers and investors find 3–6 comps within 0.5–1 mile, similar in beds, baths, square footage, and condition. Adjust for differences (e.g., +$15,000 for a garage, -$8,000 for dated kitchen) and derive an estimated value. In Memphis, a 1,200 sq ft three-bedroom might comp to $187,000, $192,000, and $179,000—adjusted average $186,000. Comps drive the sales comparison approach and support property valuation.
Comparable sales (comps) are recently sold properties similar in location, size, condition, and features—used to estimate a subject property's market value via the sales comparison approach.
At a Glance
- What it is: Recently sold properties similar to the subject, used to estimate value
- Why it matters: Primary method for valuing residential property; lenders require comp-based appraisals
- Selection criteria: Same area, similar size, condition, and features; sold within 6–12 months
- Adjustments: Add or subtract value for differences (garage, pool, condition, date of sale)
- Source: MLS sold data, county records, or appraisal reports
How It Works
Selecting comps. The ideal comp is the same property type (SFR, duplex, etc.), within 0.5–1 mile, similar square footage (±15%), same bed/bath count, and sold within the last 6 months. For unique or rural properties, expand the radius and time window. Toss outliers—a fire-sale or estate sale can skew the average.
Making adjustments. No two properties are identical. A comp with a finished basement gets a negative adjustment to the subject if the subject lacks one. A comp sold 8 months ago in a rising market gets a positive time adjustment. Appraisers use a grid; investors often use a simpler +/- approach. Document your logic.
Deriving value. After adjustments, you have adjusted sale prices for each comp. Weight the closest comps more heavily. The result is your market value estimate for the sales comparison approach. For income approach properties, comps still matter for ARV and resale.
Real-World Example
Ava's comp analysis in Atlanta. Subject: 1,450 sq ft three-bedroom, 2.5 bath, 1998 build, no garage. She pulled five comps from the MLS:
- Comp 1: 1,420 sq ft, sold $248,000, 4 months ago, +$5,000 for garage → $243,000 adjusted
- Comp 2: 1,480 sq ft, sold $255,000, 2 months ago, -$3,000 for newer kitchen → $258,000 adjusted
- Comp 3: 1,390 sq ft, sold $238,000, 6 months ago, +$4,000 time adj, +$2,000 size → $244,000 adjusted
- Comp 4: 1,510 sq ft, sold $262,000, 3 months ago, -$6,000 size → $256,000 adjusted
- Comp 5: 1,430 sq ft, sold $241,000, 5 months ago, +$2,000 time → $243,000 adjusted
Weighted average: $249,000. She used $248,000 as her property valuation for the offer.
Pros & Cons
- Industry-standard method for property valuation
- Lenders and appraisers use the same framework
- MLS and county data make comps accessible
- Supports CMA and offer pricing
- Transparent—you can show your work
- Lagging indicator; in fast markets, 6-month-old comps can be stale
- Selection bias—cherry-picking comps can justify any price
- Unique properties lack good comps
- Doesn't capture income approach value for rentals
Watch Out
- Cherry-picking risk: Use all reasonable comps, not just the ones that support your desired value
- Stale data: In rising markets, add time adjustments; in falling markets, comps may overstate value
- Apples to oranges: A fully renovated comp isn't comparable to a dated subject—adjust or exclude
Ask an Investor
The Takeaway
Comparable sales are the backbone of property valuation for residential real estate. Pull 3–6 solid comps, adjust for differences, and derive value. Don't let confirmation bias drive comp selection—let the data lead.