What is a comparable sale?
A comparable sale is a recent sale of a similar property nearby, used to work out what your home is worth. Everything difficult about valuation lives in the word similar.
No two houses are alike, so a comparable is never a match. It is a starting point that has to be adjusted, and the adjustments are where one valuation separates from another.
The four things a comparable has to be close on
Location, size, age and layout. In practice almost no sale is close on all four, so every comparable set makes concessions on at least one and usually two.
A sale on your street with an extra bedroom is close on location and wrong on layout. A sale a mile away matching your house exactly is close on everything except where it is. Both are usable. Neither is free.
Timing is the fifth thing and it is often the one that gets ignored. A sale from nine months ago in a market that has moved since is not describing today's conditions, and a price is only evidence of what buyers were paying at the moment it happened.
What a comparable does not tell you
This is the part that surprises people.
A recorded sale price says what was paid for the house. It does not say what the buyer's circumstances were, what was included, or what the seller was dealing with.
A sale between family members is recorded exactly like any other, and the price may have been friendly rather than tested.
A new build sold at the end of a phase may carry a builder incentive, often a cheaper mortgage arranged in advance rather than money off the price. The recorded figure is the full price and the buyer paid less every month for years, and none of that appears anywhere.
A house sold to a buyer relocating on a deadline may have paid over the odds to be finished. Another sold as-is after sitting empty may have gone well under.
All four are real, recorded, arms-length sales. All four can mislead, and none of them looks unusual on a list.
Why the excluded sales matter as much as the included ones
An agent building a valuation looks at more sales than they use.
The ones set aside are set aside for reasons, and those reasons are the analysis. A seller shown six comparable sales is seeing a conclusion. A seller shown six sales plus the three that were considered and rejected, with a line on each explaining why, is seeing a decision.
It also matters practically. The sale an agent excluded is usually a house you know by sight, and it is the first thing another agent will mention. Better to meet it in your own valuation than in somebody else's kitchen.
How many comparable sales are needed for a valuation?
Usually three to six recent sales of closely similar homes. More is not automatically better, because adding weaker matches dilutes the set rather than strengthening it. What matters is how closely they match and how consistent they are with each other. Six sales that disagree wildly tell you less than three that agree.
How recent does a comparable sale need to be?
The more recent the better, and in a market that is moving, sales older than three to six months need treating with care. An older sale is not useless, but it describes conditions that may no longer exist, and it should be used with that stated rather than treated as equivalent to last month's evidence.
Can a comparable sale be wrong?
The price is rarely wrong, but what it represents can be. A sale between family, a new build carrying a mortgage incentive, a purchase made under time pressure, or a home sold as-is all record accurately and all describe something other than an ordinary transaction. Asking whether any comparable in your set was unusual is a fair question and a useful one.
What to ask about your own comparables
Two questions cover most of it.
Which sales did you use, and what did each one have to be adjusted for? That tells you where the concessions were made.
Which sales did you leave out, and why? That tells you whether anyone was paying attention.
A valuation is not a fact retrieved from a database. It is an argument built from sales that are all slightly wrong, and the quality of it depends entirely on how openly the wrongness was handled.
The Independent Agent
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Written by Nikola G.