Real Estate Investing Basics

How to Determine a Property’s Value Using Real Estate Comps

Expertise: Personal Development, Real Estate News & Commentary, Business Management, Personal Finance, Real Estate Investing Basics
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Real estate comps—the industry term for "comparable properties"—help banks and other companies determine home values. When determining real estate comps, there are certain guidelines that are expected to be met. First, you'll need to identify three sold and three active comparables.

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These comps can be a great tool for a beginning or seasoned investor to determine property value. The trick in coming up with an accurate value is by making proper price adjustments—for example, knowing how much value a swimming pool adds or detracts. Every house is different in some way, and making accurate adjustments is how to calculate what those differences are worth monetarily.

Before diving into real estate investing, make sure you understand how to compare markets and properties. Whether you’re trying to decide between investing in Boise or Sacramento—or you’re just comparing two similar homes—this guide will walk you through all the numbers you need to know. From calculating cash-on-cash return to running a comparative market analysis, the experts at BiggerPockets demonstrate the steps you need to follow and the statistics you must know with The Beginner’s Guide to Real Estate Market Analysis.

How to Choose Real Estate Comps

Here are the typical guidelines that most banks and appraisal companies require real estate agents to follow when completing real estate comps. While you can, informally, relax these guidelines—you're not a licensed appraiser, after all!—consider staying strict. That ensures the accuracy of your pricing.

  • Distance: Within one mile for any urban or suburban neighborhood.
  • Age: Built within 10 years of your property—unless the home is more than 50 years old (feel free to widen the age brackets a bit then).
  • Size/square footage: Only calculate above-ground square footage, which must be within 20 percent of the subject. Basement square footage is calculated separately.
  • Property type: Single-family detached homes must be compared to single-family detached homes, duplexes to duplexes, town houses to town houses, etc.
  • Bedroom/bathroom: Only count above-grade bedrooms and bathrooms—and the sample property can only be different by one bedroom or bathroom
  • Style: Try to use the same style of home: a two-story to a two-story, split level to split level, ranch to ranch, etc.
  • Sale date: Proper comps should have sold in the last six months, although many banks prefer three months.

how to choose appropriate appraisal comps

How to Find Comps

Once you have a subject property, you should set out to find comps. The easiest method is to use the MLS, but unfortunately, you have to be a real estate agent to gain access to it (or have an agent put together an analysis for you).

Luckily there are several other websites you can use—although it’s harder to specify your precise search terms. You’ll need to do a little more legwork. You can find comps without having a real estate license on websites such as:

  • Zillow
  • Redfin
  • Trulia
  • Realtor.com

Just make sure not to rely on the Zestimate or Redfin estimate; they are simply not accurate. Instead, find actual comps and put together your own estimate.

Related: Why Real Estate Investors Should Never Rely on Zillow

How to Adjust Real Estate Comp Values

Adjust the price of any comparable properties if they are superior or inferior to the property you’re purchasing. If a comp sold for $180,000, then you add or subtract adjustments to account for positive or negative features of your property. That helps you determine an exact price.

Calculating adjustments is a judgment call based on an individual market. There is no “across-the-board” figure for square footage, garages, or lot size. It is up to you to determine what the actual adjustment figures are—which is why it’s so important to familiarize yourself with your market.

It may cost $100 per square foot to build a home, but that doesn’t mean you add $100 for every extra square foot. The price of a new build or addition is determined based on the entire house. Comps factor in individual variables, like square footage, bedrooms, and baths—and market fluctuations.

Related: 3 Real Estate Deal Analysis Rules Investors MUST Know

Usually, you will see appraisal adjustments of $20 to $40 per square foot for above-grade square footage and less for basements. The higher range is usually for a more expensive house with higher build quality.

adjusting a property price
Based on the real estate comps, the subject property is worth $182,500.

A Quick Overview of Rental Comps

Rental comps are just as important as sales comps when purchasing a rental property. Knowing how to find comps and accurately assess them will directly impact whether you’re able to achieve profitable rental deals.

You'll be looking at many of the same features and factors for rentals as sales comps. Look at living area square footage, age, location, and bed/bathroom count. A wider variety of factors impact rentals, however, such as nearby gyms, pet groomers, and restaurants.

Finding Rental Comps

To find rental comps, you can use Trulia and Zillow, just like for sale comps. Rentometer.com is also a good option. It has a free tool for instantly getting a rough estimate of area rents and showing you where prices fall within the whole market.

But it’s also up to you to do your own research. There can be a huge difference between asking rents and actual rents. One house might be asking $1,500 a month. An identical unit next door could have just leased for $800. It’s hard to know online because this data isn’t provided like actual recorded sales comps.

If you see a rental that has been on the market 90 days, then that is a good indication the market is not willing to pay that. The market—aka renters—will always let you know whether a property is priced too high.

Pay attention to the number of rentals on the market. If there are too many, landlords are going to have to fight hard for any tenants and may have to come down a lot by making concessions.

If you can learn to accurately apply adjustments to comparable sale or rental properties, it greatly improves your—and ensure your continued real estate success.

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Questions? Comments? 

Join the discussion below.

Mark Ferguson has been a real estate investor and real estate agent/broker since 2002. He has flipped over 165 homes in that time, including more than 70 in the last three years. Mark owns more tha...
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    Samantha
    Replied about 7 years ago
    Good post. But what do you do when the comps in the area are weak, you can’t always get 3 solid actives and solds.
    Mark Ferguson
    Replied about 7 years ago
    Thanks for the comment Samantha. You have to use the most similar you can find and make adjustments. It’s gets tricky and tough to assign values for adjustments if they are really different, but all you can do is give it your best. An important part I left out is the range if the adjusted values. If they are within 10% that’s good. 20% okay. Any higher and rethink the values you have your adjustments or see if you missed something.
    David
    Replied about 7 years ago
    Good nuts-and-bolts article, Mark, your perspective as a practicing agent is invaluable. Are you saying that if the total “net adjustment” to the comp is more the 20% of the comp’s sales price, then that is a red flag and calls into question whether this is truly a good comp? In your example, adjustments are 19.5k, and the comp sold for 175k, so the adjustment is just over 11% of sales price, so this would be an acceptable comp, is that a correct assessment? Are the adjustments actually netted like that, or are the “absolute values” added up in making this determination. Obviously some can be positive and some negative, so it almost seems odd to just let all of that offset and conclude that the comp is fine, even though there are lots of offsetting differences in features.
    Mark Ferguson
    Replied about 7 years ago
    Hi David, actually what I meant is the total adjusted values for every comp should be with in 20%. 120k, 135k, 125k would be a great range. 110k, 140k, 150k would cause issues because there is su h a wide range of values.
    Michael
    Replied about 7 years ago
    Thanks Mark. You cleared up some questions on how BPO’s should be handled. Now I know who to call for an opinion when I disagree with a BPO. We had to challenge a few on the selling side and it creates a lot of unnecessary stress on all parties when you get a bad BPO by someone that just doesn’t know the dynamics to accurately pricing the homes value.
    Mark Ferguson
    Replied about 7 years ago
    Hi Michael, there are a lot of bad appraisals. Some bpo companies cause those themselves with the rules they out in place, just like appraisals. Some companies won’t let you use REOs or distressed sales when you are valuing a short sale. I have no idea how that makes sense.
    Michael Woodward
    Replied about 7 years ago
    Really interesting read Mark. I spend a lot of my time analyzing property values (ARV) for my flip projects. Do you have a spreadsheet (that you wouldn’t mind sharing) with the calculations you use to create the BPO’s or are you using some kind of proprietary software? I’m always looking for ways to speed up this time-consuming task. I’m also trying to figure out a way to analyze property data in bulk that I can use to quickly determine property values. Do have a process (spreadsheet, database, etc) for doing that kind of thing? Thanks for the article! Mike
    Mark Ferguson
    Replied about 7 years ago
    Hi Mile, thanks for the comment. I don’t have a spread sheet, because adjustments change for each property depending on size, location, etc. I will make much different adjustments for a 30k property versus a 300k property.
    Ray
    Replied about 7 years ago
    Great article. Can you provide some more information, references,or examples on how you would come up with the numbers for the 3rd column “Adjustment”? At this point, the numbers sound like they’re coming out of thin air. Reply Report comment
    Ray
    Replied about 7 years ago
    Great article. Can you provide some more information, references,or examples on how you would come up with the numbers for the 3rd column “Adjustment”? At this point, the numbers sound like they’re coming out of thin air.
    Mark Ferguson
    Replied about 7 years ago
    Hi Ray, thank you. The adjustments are different for each house and each market. That is where the expertise and work of the person doig the report come in. You’ve got to do research and figure out what the different characteristics mean monetarily in your market. It is very subjective.
    Karin DiMauro
    Replied about 7 years ago
    Hi Mark, Thank you for an informative article. Not to hammer on this too much – ok, I’m hammering – but I have the same question as Ray re:finding a way to put a number to those adjustments. When you talk about doing research, can you provide some guidelines on that? Would I research solds and figure out on average how much more a 4br sells for than a 3br, for example? Same for a garage, an extra half-bath, etc. And I’m guessing it even gets more specific, determining which parts of town benefit from which features, that kind of thing. I’d like to be able to make proper adjustments for those times when we need to make a case to an appraiser, or challenge a BPO, or whatever. And, while I feel we do a really good job with our comps, it would be great if my argument was all the more professional. Thanks again! Karin
    Mark Ferguson
    Replied about 7 years ago
    Do you have access to any appraisals or appraisers in your area? They are a great source to find out what typical adjustments are in your area. They do it every day.
    Mark Ferguson
    Replied about 7 years ago
    Hi Ray, thank you. The adjustments are different for each house and each market. That is where the expertise and work of the person doig the report come in. You’ve got to do research and figure out what the different characteristics mean monetarily in your market. It is very subjective.
    Lindsay Wilcox
    Replied about 7 years ago
    Oh man. I’ve had such a problem with comps on this purchase! It’s a triplex with legal non-conforming zoning in an area only zoned for singles and doubles and the bank is–wait for it–surprised there aren’t any triplexes nearby to comp. Duh? So then they’re upset because the duplexes have to be modified up and the one 4-plex just outside the zone has to be modified down. So frustrating! God forbid somebody who knows the area and the market just go out there and go, “Holy crap–this property is worth way more than she’s paying for it!”
    Lindsay Wilcox
    Replied about 7 years ago
    Oh man. I’ve had such a problem with comps on this purchase! It’s a triplex with legal non-conforming zoning in an area only zoned for singles and doubles and the bank is–wait for it–surprised there aren’t any triplexes nearby to comp. Duh? So then they’re upset because the duplexes have to be modified up and the one 4-plex just outside the zone has to be modified down. So frustrating! God forbid somebody who knows the area and the market just go out there and go, “Holy crap–this property is worth way more than she’s paying for it!”
    Mark Ferguson
    Replied about 7 years ago
    Yes. That is frustrating. Many banks get attached to their requirements and it takes a lot of convincing to get them to understand there are no other comps.
    Mark Ferguson
    Replied about 7 years ago
    Yes. That is frustrating. Many banks get attached to their requirements and it takes a lot of convincing to get them to understand there are no other comps.
    Matt Roe
    Replied about 7 years ago
    Great article Mark. I have 3 questions that I deal with every day when determining the ARV for my flips. 1. If there are not 3 sold and 3 active comps within a mile and 6 months….Should you look back further in time or should you look out wider than a mile? I tend to look back further to within the last year that way at least your staying in the same neighborhood. 2. How reliable is sold price per square foot? I try to use these figures a lot but when I end up in a neighborhood that doesn’t have many solds that were in nice or rehabbed condition. I do try to only look at sold comps +/- 100-200 sq ft and +/- 10 years is this acceptable and reliable? 3. Is the 10 year range acceptable when you have a subject property built in let’s say 93-97′ ? It seems like you can’t use a 07′ comp for a 97′ subject. Is this the case or is there a typical ruling when it comes to houses in this age range? Thanks again Mark, appreciate the article!
    Mark Ferguson
    Replied about 7 years ago
    Hi Matt, Great questions, 1. This really depends on how similar the neighborhoods are. If I know two neighborhoods have similar prices, but may be over a mile apart, I may tend to use the comp farther away, especially since we are in an appreciating market here. If there are not similar neighborhoods, then I will go back in time. 2. I don’t look at price per square foot at all. I don’t think that takes into account enough variables like garage, basement, condition, and other features. I will adjust for square footage, but I won’t look at price per square foot alone. 3. When you get up to houses built within the last 20 years, it is best to narrow your search down to a 5 year window if possible. Most of the banks and BPO companies do not require it, but it makes for a more accurate value.
    Matt Roe
    Replied about 7 years ago
    Awesome Mark, thank you for the insight
    Matt Roe
    Replied about 7 years ago
    Awesome Mark, thank you for the insight Reply Report comment
    Mark Ferguson
    Replied about 7 years ago
    Hi Matt, Great questions, 1. This really depends on how similar the neighborhoods are. If I know two neighborhoods have similar prices, but may be over a mile apart, I may tend to use the comp farther away, especially since we are in an appreciating market here. If there are not similar neighborhoods, then I will go back in time. 2. I don’t look at price per square foot at all. I don’t think that takes into account enough variables like garage, basement, condition, and other features. I will adjust for square footage, but I won’t look at price per square foot alone. 3. When you get up to houses built within the last 20 years, it is best to narrow your search down to a 5 year window if possible. Most of the banks and BPO companies do not require it, but it makes for a more accurate value.
    Gregg Foglia
    Replied almost 7 years ago
    With regard to adjustments they should be using paired sales analysis to determine , how much to adjust for one feature or another. this is all based on market actions and reactions. it should tell you what your typical buyer is willing to pay for one feature versus another.
    Mark Ferguson
    Replied almost 7 years ago
    Hi Greg, thanks for the comment. It is very hard to find properties that are exactly alike except for one feature. Real estate has so many variables that it is difficult to a buyer liked one house over another.
    jlWait
    Replied almost 7 years ago
    Mark, Obviously you are not an Appraiser. BPO’s are not a good basis for lending. BPO’s are exactly what it means[ BROKERS price opinion. Banks should not rely on BPO’S due to the risk involved. Do BPO”S comply to USPAP? No, because they are not appraisals. No Appraiser should be a participant in this atrocity, it’s an insult to the Appraisal profession. Your article is humorous. When comps are scarce give it your best. Nark, you mean wing-it? You have to have evidence to back up your adjustments. Appraiser’s should not participate in doing BPO’s or reviews of BPO’s. In my opinion realtors are trying to involve Appraisers to bolster BPO’S credibility. Bottom line- BPO’s ARE being completed by unqualified agents/brokers and are unreliable. Banks and other companies should not use BPO’S for any determination of value, only Appraiser’s are qualified and licensed to estimate market value.
    jerry c.
    Replied almost 7 years ago
    I agree with Gregg and jlwait….First of all it is only a definition of paired sales analysis for the properties to be “exactly alike except for the one feature”. It is obvious that that would be a rare occasion, so it is common sense that it would require an “appraiser” to analyze potential comparables taking the other differences into account. THAT is one of the differences between a BPO and Appraisal! That is only an example of the superior amount of analysis involved in an Appraisal as opposed to a BPO. (considering both are prepared properly by Brokers and Appraisers acting in a professional manor). Mark, your method may work for your purposes but as you said, “A BPO can be a great tool for a beginning or seasoned investor to determine values on properties”. The operative word is “tool”. There are many tools in preparing an appraisal so why would a certified appraiser spend the time to prepare a BPO?. In summary, BPO’s should be for the private sector for limited purposes. If lenders are willing to accept more risk to save some money, then that is on them….Bad and bogus appraisals paid enough of a part in the lending crisis as it is! I just wonder how much of it was due to BPOs:/
    Mark Ferguson
    Replied almost 7 years ago
    Guys, When did I ever say an appraiser should be completing BPOS? I also never said a BPO should be used for lending purposes and they almost never are. I am trying to teach basic guidelines for investors who want to value their properties. An investor can’t pay $400 for an appraisal every time they are interested in a property. Investors will need values on hundreds, if not thousands of properties a year. When I do BPOs for banks, they are used to estimate value for short sales, REO listings, loan mods, removing MI, or determining a portfolio value. Many times my values are accompanied by an appraisal the bank also orders and almost every time the bank or client orders multiple BPOs from different sources to compare values.
    Mark Ferguson
    Replied almost 7 years ago
    JWait, You are telling me an agent who has been licensed for 10 years, sold hundreds of homes has no idea how to value a home? An investor who has fix and flipped 70 homes in ten years has no idea how to value homes? Than anyone who wants to know the value of a home has to spend $400 to get a full appraisal done? Yes there are bad BPOs, just like there are bad appraisals. I have seen many more bad appraisals come in lately than bad BPOS. The appraisers are hand cuffed by the new system and are encouraged to come in below value on homes. I have homes receiving multiple offers over and over that aren’t appraising at value. The appraisers have to use sold comps and if the market is appreciating, that makes it very hard for an appraiser to justify a higher value when his entire value is based off of sold comps that sold 6 months ago when prices were 10% lower. I have appraisers use year old comps in appreciating markets and claim the market is stable to justify it. They ignore the 20% market increase over the last year. A BPO on the other hand allows for a lot more flexibility with regards to comps. I can base my value on listings, if I am able to justify it with commentary. If 80 homes sold in an area in the last 6 months and there are 2 for sale then that is a major factor affecting value. I never see those comments in an appraisal. I see so many appraisals from out of area appraisers who have no market knowledge and ignore major value indicators, like a 4 lane main thoroughfare or try to compare my completely remodeled home to a dilapidated REO without making any adjustments or adjusting $2500 for paint, carpet, appliances, holes in drywall, doors, windows etc. I see it all the time where condition adjustments are way off on appraisals. How do you come up with your condition adjustments? Do you itemize repairs needed on the subject like many BPOs do? Sorry for the rant and the tone, but you weren’t exactly pleasant.
    Lance
    Replied about 6 years ago
    I am a retired broker and I have recently purchased a home that is on a creek. I am wondering how you appraisers factor in creeks. The home is waterfront and only three other homes in the neighborhood share this. The home is in Georgia. Can I use another creekside home as comparable or use this as a reason to go outside the neighborhood or is there an adjustment and if so how much? I can hear the creek from the front porch. See it in the winter. This has to effect marketability as it was a determining factor in me purchasing the home. What do you think?
    Mark Ferguson
    Replied almost 6 years ago
    Lance, I am not an appraiser but it honk it should be adjusted for or similar comps used.
    Bob
    Replied over 5 years ago
    Mark, My question pertains to the spread between comps. I’ve been doing inner city comps and I find that sold comps may range over a period of 3 months, samples style home, as much as $40,000. Example a foreclosure of similar style homes sales for $40,000 less. When looking at the current comps, you only find comps with $40,000 or 50,000 spread. Should the comp extend past 1 year or 5 miles to find similar foreclosures to keep the spread between the subject and comparable around 20%. I hope this makes sense to you. Thanks for your feedback. Bob
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied over 5 years ago
    I would not go past 1 mile in the city and less if possible. This is where adjustments come in.
    Myra
    Replied over 5 years ago
    Question: If a seller on a comp has paid buyer’s closing costs of $5,000 should this be reflected as an adjustment? If so, is it a plus or minus?
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied over 5 years ago
    Yes, it would be negative to the comp making subject worth less.
    AL
    Replied about 5 years ago
    This property in FLorida : 6786 Brookline Dr Miami FL. 33015 was listed for $179,900 ?Condo ?Built in 1967 An Appraisal was done : $150,000… The Listing Agent did NOT disclose this fact to my BUYER’S Agent A Second Appraisal was done by my Financing Bank : $ 140,000 result , COMPARABLE METHOD was done My question : Why was there such a difference between both Appraisals and what is the depreciation adjustment that should be done for the YEAR BUILD when using the COMPARABLES method ? If you need a copy of the Appraisal, I can provide with a detail explanation of the need to see it.
    AL
    Replied about 5 years ago
    This property in FLorida : 6786 Brookline Dr Miami FL. 33015 was listed for $179,900 ?Condo ?Built in 1967 An Appraisal was done : $150,000… The Listing Agent did NOT disclose this fact to my BUYER’S Agent A Second Appraisal was done by my Financing Bank : $ 140,000 result , COMPARABLE METHOD was done My question : Why was there such a difference between both Appraisals and what is the depreciation adjustment that should be done for the YEAR BUILD when using the COMPARABLES method ? If you need a copy of the Appraisal, I can provide with a detail explanation of the need to see it.
    AL
    Replied about 5 years ago
    This SOLD 8/14/2015 6750 NW 189 Te Hialeah, FL 33015 Listed for $ 169,900 SqFt : 1,034 Year Build : 1986
    Steve Hill
    Replied almost 5 years ago
    It seems to me, quality, upkeep, and so forth no longer play much of a role, as long as you stay just above the “fixer upper” state, your home value is going to be the same as if you dumped 500K in improvements. I realizes HOAs have killed the market, turned homes into clones, and killed the “personality” of homes, but has it also killed off the ability to invest in improving your home? Are we to the point we believe only Square feet should matter, or how many rooms, regardless if those windows are storm or single pane? After all it’s just another house. Sure, I can see spending money makes it easier to sell, and as I love projects I will have no issue selling, but to be cursed with the same change in value as the lazy neighbors because they are unwilling to make their homes as nice, just seems ignorant. Come on people, your killing the economy by ignoring aesthetics. It is more than numbers, it is quality, design, style, personality. This is a home not an apartment, not a prison cell, a home.
    Anne M.
    Replied over 4 years ago
    Might I get your thoughts on what constitute a similarly sized home? My realtor is saying that my property is “comparable” to my neighbors. While it is similar in most ways, my house has 50% more SF above grade (1850 vs 1320). That is a lot of extra house to value at $20/SF. It implies that 1/3 of my $600K+/- home is only worth $10,000. As a buyer, that is very inconsistent with what I would value. Can you comment on what constitutes a similarly sized home, and how you adjust when the comparable are substantially different as in this case (50%)? Thanks
    Na Patel from Hanover, Maryland
    Replied over 3 years ago
    Thanks for the post! Really helpful. I’m sure I will have some clarifying questions once I apply it to the next few properties I am trying to evaluate.
    Jose Falconett Real Estate Investor from Ocala, Florida
    Replied about 3 years ago
    So how do we know what adjustment values to place if their is no across the board numbers. I understand they are individual market specific but how do I still acquire these numbers?!
    Nick Cocco
    Replied about 3 years ago
    Need some help here, I am a buyer and My first appraisal came in at 440000 on a single family detached home in cambria heights NY. My bank ordered a 2nd appraisal due to the fact that this is a flip home but it is a fully renovated home with everything new and now the 2nd appraisal came in at 395000 a 48000 difference. When I reviewed both appraisals the 2nd one the appraiser used attached homes as comps as well as not listing cost approach or taking into account that this home has been greatly updated as it is a fully renovated home. There are comps within that last 6 months and do not understand what they were not used. I am concerned only because the seller will not sell at 395000 and I know the first appraisal is more accurate then the 2nd. The appraiser did not want to change anything is was rather rude to my agent….. we decided to send our findings to my bank….. is there anything we can do here as this appraiser did not use Detached homes when comparing to the home I am buying….. ? any help will be welcomed and thank you.
    Diana Duncan Real Estate Investor from Miami / Fort Lauderdale, FL
    Replied almost 2 years ago
    Nice post Mark. Do you know if there Is there a list of average adjustment values of the most common property features that can be used as a guide?
    Michael Baran Rental Property Investor
    Replied about 1 month ago
    Saving this for future
    Colette Major Rental Property Investor from Chicago, IL
    Replied about 1 month ago
    I appreciated your article. Very timely!. We are interested in a SFH , but the listing price is 189K. The comps are obviously 90-105K. How can the asking price be SOOO out of the ball park? Afraid to offer so low, not wanting to insult. 11 DOM, at this point. Advice?