Comparables

Key Takeaways

• Comparables are recently sold properties similar to the subject in location, size, age, and features, used to estimate what the subject should bring.
• Adjustments are always applied to the comparable, never to the subject property.
• A comparable superior to the subject gets a downward adjustment; a comparable inferior to the subject gets an upward adjustment.
• Closed sale prices are the evidence. Active listing prices show what sellers hope for, not what buyers paid.

What It Means

Comparables, usually shortened to comps, are properties that have recently sold and that resemble the property being valued closely enough to say something useful about its price. The property being valued is called the subject. Similarity gets judged on location, lot and living area, age and condition, style, and features such as bedroom count, garage, or view.

No two properties are identical, so the analyst closes the gap with adjustments. The rule that trips students up is the direction of the adjustment. Adjustments are applied to the comparable, moving its known sale price toward what it would have brought if it had been the subject. A comp with a third bathroom the subject lacks is superior, so its price is adjusted down. A comp fronting a busy arterial when the subject sits on a quiet street is inferior, so its price is adjusted up.

A handful of well-chosen closed sales, adjusted this way, produce a supportable range rather than a single number. Wide raw prices narrow into a tight band once the differences are accounted for, and that band is the conclusion. The process is the Sales Comparison Approach, and it is the backbone of residential valuation.

How It Works in Washington

In Washington, comparables do the same analytical job in three settings that carry very different credentials behind them.

A licensed Broker uses comps to build a Comparative Market Analysis for a seller or a buyer. RCW 18.140.020(2) permits compensation for a broker's price opinion prepared by a real estate licensee under chapter 18.85 RCW, which is the statutory footing for that work. It is not an Appraisal. RCW 18.140.020(4) provides that a person who is not certified, licensed, or registered under chapter 18.140 RCW may not prepare any appraisal of real estate located in this state, so the credentialed appraiser is the second user, working the same comps to a different standard and for a different audience.

The county assessor is the third. RCW 84.40.030 directs the assessor to consider any sales of the property being appraised or similar properties made within the past five years, and to weigh whether those comparable sales reflect actual market demand for that type of property in that geographic area. Same tool, three users, and the credential is what separates the resulting documents.

Example

Broker Alina is pricing a Spokane rambler: three bedrooms, two baths, 1,800 square feet, attached two-car garage, quiet street. She pulls three closed sales from the last four months in the same neighborhood and adjusts each comp toward the subject, using $50 per square foot for size, $12,000 for a garage, and $10,000 for a full bath.

• Comp A sold at $412,000 and measures 1,860 square feet, otherwise a match. It is 60 square feet larger, so she deducts $3,000. Adjusted price: $409,000.
• Comp B sold at $398,000, has no garage, and measures 1,780 square feet. She adds $12,000 for the missing garage and $1,000 for the 20 square feet. Adjusted price: $411,000.
• Comp C sold at $425,000, has a third bath, and measures 1,820 square feet. She deducts $10,000 for the extra bath and $1,000 for the 20 square feet. Adjusted price: $414,000.

The raw sale prices spread $27,000, from $398,000 up to $425,000. After adjustment they sit inside a $5,000 band, $409,000 to $414,000, and Alina recommends listing at $412,500. Every adjustment moved a comparable toward the subject. The subject's own price was never touched, because it does not have one yet.

Common Mistakes and Exam Traps

• Adjust the comparable, never the subject. A question that asks you to add value to the subject property is testing whether you know the direction.
• Superior comp, subtract. Inferior comp, add. Students reverse this more often than any other rule in the sales comparison approach.
• Comparables are closed sales. Active listings and pending sales can bracket a range, but they are not evidence of what a buyer paid.
• A comparative market analysis prepared by a broker is not an appraisal, even when it uses the same comparables and reaches a similar number.