Understanding Comparable Sales

Why Comps Are Crucial for Off-Market Properties

Without an asking price to anchor your expectations, comps become your primary reference point for understanding market value. They answer the fundamental question: "What would a similar property actually sell for in today's market?"

Comps provide objective data that helps you:

• Avoid overpaying: See what similar properties actually sold for, not what sellers hope to get
• Identify opportunities: Recognize when a seller's expectations might be below market
• Negotiate confidently: Back your offer with concrete data, not guesses
• Understand market trends: See if values are rising, stable, or declining in the area

Finding Reliable Comps

Where to Look

Start with multiple sources to get a comprehensive view:

• MLS databases: If you have access (through an agent or subscription), MLS data is the most reliable source. It includes verified sales, listing details, and days on market.
• Public records: County assessor and recorder offices maintain searchable databases of property transfers. These are free but may have less detail than MLS.
• Real estate websites: Zillow, Redfin, and Realtor.com show sold properties, though data quality varies. Look for properties marked "Sold" with sale dates.
• Local knowledge: Drive the neighborhood and note "Sold" signs. Talk to neighbors or local agents who know recent transactions.

What Makes a Good Comp

A good comp meets these criteria:

• Location: Same neighborhood or subdivision (within 0.5 miles ideally, or same school district)
• Size: Within 10-20% of your target property's square footage
• Age: Built within 10-15 years of each other (similar construction era)
• Style: Similar architectural style (colonial, ranch, contemporary, etc.)
• Features: Comparable number of bedrooms, bathrooms, garage spaces
• Lot size: Similar lot size (within 20-30% if possible)
• Recency: Sold within the last 6-12 months (more recent = more relevant)

Pro tip: Start with 8-12 potential comps, then narrow down to the 3-5 most similar. Document why you included or excluded each one—this helps you defend your analysis.

Evaluating Comp Quality

Red Flags to Watch For

Not every sale is a good comp. Exclude or heavily discount:

• Distressed sales: Foreclosures, short sales, or estate sales often sell below market value
• Non-arm's length transactions: Sales between family members or related parties may not reflect true market value
• Unusual terms: Sales with seller financing, trade arrangements, or other unusual conditions
• Significantly different condition: A comp that's been completely renovated vs. your target that needs work
• Outdated sales: Sales older than 12-18 months may not reflect current market conditions

Understanding Sale Context

Dig deeper into each comp's sale circumstances:

• Days on market: How long was it listed? Quick sales might indicate strong demand or underpricing. Long periods might indicate overpricing or market resistance.
• Price changes: Did the seller reduce the price? Multiple reductions suggest initial overpricing.
• Listing vs. sale price: Did it sell for asking price, above, or below? This indicates market dynamics.
• Condition at sale: Was it move-in ready, or did it need work? This affects how you adjust.

Making Adjustments for Differences

No comp will be identical to your target property. You need to adjust for differences. Here's how:

Square Footage Adjustments

If a comp is larger or smaller than your target, adjust the price per square foot:

• Calculate the comp's price per square foot: Sale price ÷ Square footage
• Apply that rate to your target property's square footage
• Adjust for functional differences: Extra square footage in a finished basement vs. unfinished has different value

Example: A comp sold for $1.2M at 2,000 sq ft = $600/sq ft. Your target is 2,200 sq ft = $1.32M base value, then adjust for other differences.

Bedroom and Bathroom Adjustments

Each additional bedroom typically adds $10,000-$50,000 depending on the market. Bathrooms add $15,000-$75,000. The value depends on:

• Market demand (more valuable in family-oriented neighborhoods)
• Property size (extra bedroom in a 1,500 sq ft home vs. a 4,000 sq ft home has different impact)
• Quality and condition

Condition Adjustments

This is where many buyers make mistakes. Condition adjustments are significant:

• Excellent condition: Recently updated, move-in ready—add $20,000-$100,000+
• Good condition: Well-maintained, minor updates needed—no adjustment or small adjustment
• Fair condition: Needs moderate updates—subtract $20,000-$75,000
• Poor condition: Significant deferred maintenance—subtract $50,000-$200,000+

Key consideration: For off-market properties, you often can't fully assess condition until you get inside. Make conservative assumptions and build in contingencies.

Feature Adjustments

Adjust for differences in:

• Garage: 2-car vs. 1-car vs. no garage ($10,000-$50,000 difference)
• Pool: Depends on market and climate (+$20,000-$100,000+ or negative in some markets)
• Lot size: Larger lot may add value, but only if it's usable (+$5,000-$50,000)
• Updates: Recent kitchen or bathroom renovations can add $20,000-$100,000+
• Location within neighborhood: Corner lot, cul-de-sac, or premium street positioning

Market Timing Adjustments

If a comp sold 6-12 months ago, adjust for market changes:

• Check if prices have risen or fallen in the area
• Consider seasonal factors (spring/summer typically stronger than fall/winter)
• Adjust for economic conditions or market shifts

Example: If the market has appreciated 5% in the last 6 months, adjust older comps upward by 5%.

Common Mistakes in Comp Analysis

Mistake #1: Relying on Too Few Comps

Using only one or two comps is risky. Markets have variation, and a single comp might be an outlier. Use at least 3-5 comps to establish a range.

Mistake #2: Ignoring Condition Differences

This is the most common error. A comp that's been fully renovated isn't comparable to your target that needs work. Always adjust for condition.

Mistake #3: Over-Adjusting

Some buyers adjust so much that the comp becomes meaningless. If you're making adjustments totaling more than 20-30% of the comp's value, it's probably not a good comp.

Mistake #4: Using Outdated Sales

Markets change. A sale from 18 months ago might not reflect current conditions. Prefer recent sales, and adjust older ones for market changes.

Mistake #5: Not Considering Off-Market Dynamics

Off-market properties sometimes sell at different price points than MLS listings. If you have access to off-market comps, they can be more relevant than listed properties.

Building Your Comp Analysis

Once you've selected and adjusted your comps, organize them in a simple table:

Comp Analysis Template:

• Property address
• Sale date
• Sale price
• Square footage
• Bedrooms/Bathrooms
• Condition at sale
• Key features
• Adjustments made
• Adjusted value

This helps you see the range of adjusted values and identify outliers. Your target property's value should fall within this range, adjusted for its specific characteristics.

When to Leverage Professional Analysis

While you can do comp analysis yourself, professional analysis adds value through:

• Access to better data: MLS access and proprietary databases with verified sales
• Expert judgment: Years of experience in selecting and adjusting comps
• Local market knowledge: Understanding of neighborhood nuances and trends
• Condition assessment: Professional evaluation of property condition and needed adjustments
• Risk identification: Spotting issues that affect value but aren't obvious from comps alone

For high-value properties ($750K+) or complex situations, professional analysis is typically worth the investment ($300-$1,500). It can save you tens of thousands in overpayment or help you identify legitimate opportunities.

Final Thoughts

Comparable sales are your most reliable tool for valuing off-market properties. But finding the right comps and making appropriate adjustments requires careful work. Don't rush this process.

Take the time to:

• Find multiple comps from reliable sources
• Evaluate each comp's quality and relevance
• Make thoughtful adjustments for differences
• Document your analysis so you can defend your conclusions
• Consider professional help for complex or high-value properties

When done right, comp analysis gives you the confidence to negotiate from a position of knowledge—not guesswork. And in off-market purchases, where there's no asking price to guide you, that knowledge is invaluable.