BASIC GUIDELINES FOR COMPARABLE SALES:

A. SIZE

Comps should ideally be within 20% of the size of the subject property (unless no other comps are available). For example, appraisers usually cannot use a 1,300 sf comp for a 1,000 sf subject property. Likewise, appraisers cannot use a 700 sf comp for a 1,000 sf property. Appraisers also cannot simply employ a “price per square foot analysis” like some agents and homeowners often do; appraisers are required to correlate to similar sized homes.

B. DISTANCE

Comps should ideally be within one mile of the subject property, and not over any major barriers like a freeway, a river or railroad tracks.

C. SAME TOWN/CITY

Comps need to be in the same city as the subject property in most cases, even if a comp in another city is less than a block from the subject property.

D. CLOSED

The strongest indicators of current value are those comps which have closed within the past 90 days. Pending sales and listings are only used on the appraisal report to show what the current market is doing; appraisers do not consider these comps in their final opinion of value.

E. LOT SIZE

The appraiser must also consider the lot size and lot utility in the valuation. If the subject and all comps have flat usable lots, the appraiser will adjust for large variances in lot size. In areas where lots are sloped, appraisers will estimate a lot’s usable area or “utility” and adjust accordingly. The important thing to remember is that a 40,000 square foot sloped lot will often not have any more value than a 10,000 square foot flat lot.

F. ADVERSE INFLUENCES

If the subject is on a busy street or abuts a school, freeway, railroad, industrial area, cemetery, etc., the appraiser must include at least one comparable in the report with a similar location influence. This is necessary to determine if an adjustment is required for the adverse influence.

G. BRACKETING COMPS

Valid comps need to “bracket” the appraised value. Hence, at least one comp needs to be priced higher than the appraised value, and one should be priced lower. Additionally, the appraiser must “bracket” each amenity of the home with the comps. For example, the appraiser must include homes that are larger and smaller than the subject to “bracket” the size of the home.

H. CONDO COMPS

The appraiser should ideally include comps from inside and outside of the complex. If either are missing, underwriters often call for appraisal reviews.

I. VIEW

If the subject enjoys an unobstructed view of an ocean or a lake, for example, the appraiser must show the value of that view by using some comparables with a similar view and some with no view. Appraisers generally should not use “view comps” to support the value of a property with no view. This is also a good example of why appraisers do not use the “price per square foot” analysis. If two homes are identical and one has an ocean-view and the other does not, the one with the view will skew the analysis.

J. CLOSED DATE

Comparable sales must have closed prior the inspection date of an appraisal. Appraisers cannot use comps that close after the inspection date.

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